Thu, 28 Oct 2010

From: The Jakarta Globe

By Faisal Maliki Baskoro
Jakarta. Like many fund managers and analysts, Robert Levitt is bullish on Indonesia, so much so that he now has more money invested in the country than in China.

With Indonesia’s economy heating up and access to Chinese markets getting difficult, Levitt, the internationally known founder of Levitt Capital Management, started investing in Indonesia just a year ago, and it’s been full steam ahead ever since.

He told the Jakarta Globe he was especially taken with Indonesia’s consumer, media and real estate sectors and had invested $100 million in them.

“We have more money invested in Indonesia than in China - around 17 percent of our total investment,” Levitt said. “Financial performance has been stronger in Indonesia than in China.”

Levitt, who manages a $450 million portfolio, said more companies were listing on Chinese markets, making them less available to foreign investors.

“China’s Shenzen and Shanghai markets are only open to domestic investors - only in a limited way are they available to foreign investors,” he said.

“China has more money, so companies can raise all the money they need from companies in China. They don’t need foreign investors or a listing in Hong Kong, where we used to access them.”

So with China becoming saturated and inaccessible, Levitt has diverted much of his focus to Indonesia.

“Valuations are low, and the way Indonesia seems to be playing out, it’s a land grab,” he said, gushing about Indonesia’s explosive consumer sector.

“Companies are trying to expand. Retailers like Alfamart built 1,500 stores this year, and next year they are going to build 1,000 more. The bigger you get, the more distribution you have and the lower the cost.

“The consumer sector is terrific because it’s just beginning - just moving from traditional stores to modern stores. Modern retail is increasing, and it’s going to continue.”

Levitt’s belief in Indonesia’s consumer sector also informs his optimism for Indonesian media, because consumer brands drive media ad revenue.

“Advertisers are growing because they can reach a wide audience,” he said. “Television is by far the No. 1 place to advertise. It is the most important investment for us, because building a brand is huge.”

He noted Indonesia’s unique media situation, in which free-to-air television still dominates, unlike in many other countries.

“Indonesian is very brand-oriented,” Levitt said. “Big companies like Mitra Adi Perkasa are getting bigger by building brands and building distribution. TV is hugely popular and it’s what’s getting money now.”

Levitt’s firm has invested in media companies like SCTV, MNC and Indosiar, and there are plans to expand the portfolio.

Real estate is the third element in Levitt’s investment trinity, and even his confidence in property is driven in part by his apparent faith in the power of consumption.

“Developers like Summarecon and Bumi Serpong Damai are developing residential neighborhoods some distance away from the business district,” he said. “You have developers bringing in middle-class consumers, but they can’t move forward unless big retailers like MAP come in.”

Given his appetite for Indonesia, it may be surprising to learn that Levitt categorically avoids palm oil production, one of Indonesia’s most salient industries.

“We’re staying away from palm oils because it’s not a profitable sector,” he said.

“The plantations are mature, and growth is more dependant on CPO prices rising than on companies being able to dramatically increase their size and amount of production. Also, we’d rather not invest in companies run by politically wired people.”

Levitt said that when he started investing in Indonesia a year ago it was still on the fringes of investors’ radar. But its popularity had grown ever since, and the outlook remained positive.

“The stock market has risen dramatically over the last seven months - we have enjoyed investments that have been doubling in the last couple of months,” he said.

“Indonesia will probably still do better next year because stability here is built in, and any stock market decline would be an opportunity for us to add to our position here.”