Indonesians to buy more Singapore firms
Indonesians to buy more Singapore firms
SINGAPORE (Reuter): Indonesian investors are likely to buy
more Singapore listed companies to safeguard their assets in case
of political crisis at home, analysts said yesterday.
The Stock Exchange of Singapore (SES) has seen a slew of
corporate takeovers by Indonesian companies over the last few
months, coinciding with a surge in tension between President
Soeharto's government in Jakarta and an opposition party.
In mid-August, part of Indonesia's third biggest conglomerate,
Sinar Mas, agreed to buy and transform troubled trading and
property group Amcol Holdings Ltd and inject US$2.0 billion in
assets.
The same week, Putera Sampoerna, who runs clove cigarette-
maker PT Hanjaya Mandala Sampoerna, made a takeover bid for
trading and telecommunications firm Transmarco Holdings Ltd.
Analysts said they detected a clear pattern in these and other
bids by Indonesian interests and that the size and pace of the
takeover trend appeared to be increasing.
"I think these takeovers will continue for a while,
particularly at this time when the Indonesian situation is
looking uncertain," said Yang Sy Jian, head of research at RHB -
Cathay Securities in Singapore.
"It pays for Indonesian conglomerates to look for an
alternative base to diversify earnings as a back-up if the
political scene gets worse than expected," he added.
David Toh, analyst at ING-Barings, said the riots in Jakarta
in July involving supporters of opposition leader Megawati
Soekarnoputri, daughter of Indonesia's former leader Sukarno, had
highlighted possible future risk for Indonesian firms.
Safe, stable and very close, Singapore provides an ideal
refuge for companies wishing to expand out of Jakarta.
The city-state has low interest rates and open financial
markets allowing easy financing of mergers, and has the added
bonus of a stock market that has underperformed its regional
competitors for the last two years.
Analysts say Indonesian buyers tend to look for firms that are
inexpensive and fairly diverse so that there can be no objection
by the SES to the new owners injecting new businesses into
existing Singapore firms.
"The typical target would be small, or an underperformer, or
an under-capitalized firm with businesses which are no longer
viable or uncompetitive," said Toh. "And the existing owners must
want to sell out."
A dealer with a large local bank said such targets might
include a retail company finding Singapore's high wage and rental
costs difficult to cope with, or a manufacturer which had failed
to diversify successfully into new areas.
Singapore stores group Metro Holdings Ltd, pharmaceutical firm
Haw Par Brothers or packaging group Carnaudmetalbox Asia Ltd,
part of French group Carnaudmetalbox SA, could be possible
targets, he said.
Michael Tan, research director at brokerage Lee & Co, said the
Indonesian takeover trend was likely to be intermittent but
involve more and more Jakarta-based firms over time.
"There will be hiccups, but it will continue," he said.
"What's interesting is that the players involved are getting
bigger over time, and some of the biggest Indonesian groups are
not here yet."