Lippo E-Net denies shifting core business

JAKARTA (JP): Publicly listed Lippo E-Net's president Billy Sindoro dismissed on Thursday media reports that the company had changed its core business from insurance to internet services.

"No, we haven't yet changed our core business (to Internet services) as reported by the media," Billy said at the company's public announcement at the Jakarta Stock Exchange (JSX) office.

Billy's dismissal was contradictory to the current perceptions of the media, analysts and investors about the company.

Lippo E-Net, formerly known as Lippo Life, recently transferred its life insurance portfolio to its non-listed affiliate life insurance company PT Asuransi Jiwa Lippo Utama (AJLU) following the purchase of the life insurance company's 70 percent stake by American International Group, Inc. (AIG) early this year.

Billy said that the company still focused most of its business activities on life insurance and the full switch to Internet- related business was just a choice.

"It is the company's choice of new investment. It is not a change of core business," he said arguing that Lippo E-Net still ran the life insurance business through its 30 percent ownership in AJLU.

Lin Che Wei, the head of research department at SG Securities, said investors should not fall into the confusion of whether Lippo E-Net had changed its core business.

"What is important is the value driver of the company. For the case of Lippo E-Net, it is easier to understand that the company will have internet business as its value driver as most of the company business will mostly be in internet business," he said.

Lippo E-Net earlier said it would invest as much as Rp 1 trillion in the internet business, which it claimed has bright prospect.

The main source of the Rp 1 trillion would be from proceeds of the company's planned private placement. Other sources are from the company's internally generated cash, according to Billy.

He said management was currently doing a preliminary study for the Rp 1 trillion planned investment to determine the length of time to reach the Break-Even Point (BEP).

"We are in the preliminary stage of our study. We will announce the result to the public within six months," Billy said.

Commenting on the above planned investment, equity analysts attending the public announcement placed strong doubts as Lippo E-Net, belonging to Lippo Group, was known for its inconsistency in its long term business focus.

"They were focusing on the banking business, then property, life insurance and now the internet business," an analyst said on condition of anonymity.

"The internet business has a long investment horizon, Lippo company cannot stay that long," he added.

As with the attending journalists, most equity analysts at the announcement declared their dissatisfaction with the explanation from Lippo E-Net's plan to focus on the internet business.

"How can Lippo E-Net raise internally generated cash, when all Lippo Group operating companies are in the red?" questioned Che Wei. (udi)