HM Sampoerna's Local Currency Credit Rating Raised

HM Sampoerna's Local Currency Credit Rating Raised

Bloomberg Jakarta

PT H.M. Sampoerna, Indonesia's biggest cigarette maker by market value, had its local currency credit rating raised two levels to 'BB' by Standard & Poor's, two levels below investment grade.

The rating company reiterated its B+ rating for Sampoerna's foreign currency debt, four levels below investment grade.

Net income at Surabaya-based Sampoerna rose 43 percent to Rp 1.73 trillion (US$192 million) in the first nine months of this year after it raised prices and demand for its 'A Mild' brand increased.

"Despite intense competition, Sampoerna is the third-largest cigarette company in Indonesia, with a 19 percent share of the domestic market," S&P said in the statement. "The company has also closed in on market leader, PT Gudang Garam, narrowing the gap in market share to 10 percent, from 27 percent in 1997."

"Its focused marketing strategy is evident in its success of capturing a large share of the low tar-low nicotine and affluent urban smoker segments, which generally are less sensitive to price changes," the rating company said.

At the end of September, Sampoerna was in a net cash position, compared with a net debt to net capital ratio of 7 percent at the end of 2003, S&P said.

S&P maintained a 'stable' rating outlook for the company.

Sampoerna in October sold 1 trillion rupiah of five-year bonds.

S&P today also affirmed its 'B+' long-term rating on PT Excelcomindo Pratama, Indonesia's third-largest provider of cellular phone services with a 15 percent market share.

"The company's customer base has expanded at a compounded annual growth rate of over 50 percent in the past four years to 4.2 million subscribers," said S&P credit analyst Yasmin Wirjawan.

"With a population of 230 million and cellular market penetration of only 12 percent, there are good growth prospects for Indonesia's wireless market," she said. "Excelcomindo stands to benefit from this opportunity as an existing player, but will continue to face intense pricing competition from existing cellular and fixed wireless service providers."

PT Telekomunikasi Indonesia, the largest company on the country's stock exchange, and smaller rival PT Indonesia Satellite, had their local currency rating raised two levels to BB by S&P, two levels below investment grade. The rating company reiterated its B+ rating for both companies' foreign-currency debt, four levels below investment grade.

Telkom shares rose Rp 100, or 2 percent, to Rp 5100, matching a record reached on Nov. 24. Indosat shares fell Rp 50, or 0.9 percent, to Rp 5700.