Listed firms enjoying earnings recovery
Listed firms enjoying earnings recovery
Rendi A. Witular
The Jakarta Post
Jakarta
The country's publicly-listed companies are enjoying better
sales and operating profits this year on the back of improving
macroeconomic stability and lower operating costs.
This improvement should raise hopes that the corporate sector
is on the verge of a revival after being decimated by the late
1990s economic crisis.
Danareksa Research Institute's chief economist Raden Pardede
said that the sales and operating profits of most companies in
the third quarter of this year on average increased by between 10
percent and 11 percent respectively compared to the same period
of last year.
"On average, most listed firms this year are experiencing
improved sales and operating profits. This is what investors want
to see in order to measure the companies' business prospects for
next year," Raden said.
He explained that this year's improvement in macro economic
conditions, and the relatively lower cost of sales and operating
expenses had contributed to the increase.
The central bank reduced its benchmark interest rate further
to an historic low of 8.42 percent on Dec. 10, down from around
13 percent earlier in the year, on the back of continued easing
in inflation.
Many have predicted that inflation will also be at an historic
low level of around 5 percent by the end of the year.
The relatively calm political and economic situation following
the recent bombing of the JW Marriot Hotel in Jakarta has also
supported foreign investor confidence, Raden added.
Meanwhile, thanks to capital inflows, the rupiah remains
stable despite dollar demand from importers. The local unit is
hovering at between Rp 8,400 and Rp 8,500 per U.S. dollar.
However, on average, listed companies are still suffering from
negative net profit. This is a result of previous burdens as the
companies have to repay debts (both principal and interest) and
taxes.
But to fairly measure the performance of companies, one needs
to look at their operating profit and sales performances as net
profit figures are biased by earnings from currency gains and
extraordinary transactions, which do not result from the
companies' main business operations.
"The decline in net profits will of course impact on dividend
payments. But investors tend to look at their sales and operating
profits so that they can make forward estimates," Raden said.
Several companies with large market capitalizations have
indeed enjoyed a surge in operating profits but a decline in net
profits during the first nine months of this year.
State-owned telecommunications company PT Telekomunikasi
Indonesia, the largest counter on the Jakarta Stock Exchange,
recorded a jump in operating profit in the third quarter of this
year to Rp 9.57 trillion (US$1.12 billion) from Rp 7.67 trillion
a year earlier. Its sales also soared to Rp 19.9 trillion from Rp
15.6 trillion.
However, its net profit declined to Rp 4.37 trillion from Rp
7.56 trillion due to the absence of the extraordinary earnings it
enjoyed last year.
Food processor PT Indofood Sukses Makmur is another example.
The company booked a surge in operating profit to Rp 1.36
trillion from Rp 1.32 trillion, and in sales to Rp 12.9 trillion
from Rp 11.8 trillion. However, its net profit declined to Rp 453
billion from Rp 651 billion.
According to Danareksa, the best performing listed companies
this year in terms of earnings are those engaged in the mining
sector, followed by the property sector, the basic industries
sector and the infrastructure sector.
For example, PT International Nickel Indonesia (Inco), a unit
of the world's second biggest nickel mining company, said its
sales for the first nine months had skyrocketed by 61 percent to
$131 million from $81.6 million in the same period of last year
on higher nickel prices.
The company's stock price also soared more than sevenfold to
Rp 27,000 on Dec. 12 from Rp 3,625 early this year.
As for next year, listed companies are projected to perform
better despite the general election.
Raden estimated that sales of listed companies would surge by
around 15 percent next year on the basis that the country's
economy would grow by 4.8 percent and inflation at 7 percent.
The companies would also enjoy lower cost of sales and
operating expenses as the government had decided not to raise
utility prices and wages, he said.
He expected that companies operating in the consumer goods and
telecommunications sectors would be the stars next year,
benefiting from the hype over the general election.
The Jakarta Composite Index has increased by more than 50
percent since early this year.
The Index jumped to a four-year high of 656.74 on Dec. 12, up
from around 410 early this year, because of positive sentiment on
the country's macroeconomic situation and the privatization of
three state-owned companies; Bank Mandiri, Bank Rakyat Indonesia
and gas utility PT Perusahaan Gas Negara.
As for next year, many analysts predict that the Index will
soar to more than 700, assuming that there are no security
disturbances before, during and after the general election.
Eyebox
Stock index performance by sector
Sector Index Change
2002 2003 (Dec. 9)
1. Mining 94.87 243.72 157%
2. Property 24.33 44.59 83.3%
3. Basic industries 36.92 62.00 67.9%
4. Infrastructure 129.41 198.76 53.6%
5. Consumer goods 135.47 200.55 48.0%
6. Finance 51.03 75.01 47%
7. Miscellaneous industry 88.13 118.69 34.6%
8. Trade 107.61 139.30 29.4%
9. Agriculture 144.36 181.88 26%
Composite 424.95 644.46 51.6%
Source: Danareksa Research Institute
Eyebox
10 biggest firms by market capitalization
Stock Market capitalization
2002 2003 (Dec. 9)
Telkom Rp 38.80 trillion Rp 60.98 trillion
Gudang Garam Rp 15.97 trillion Rp 26.93 trillion
Unilever Indonesia Rp 13.88 trillion Rp 24.79 trillion
Bank Central Asia Rp 14.88 trillion Rp 20.18 trillion
Bank Mandiri - Rp 18.81 trillion
HM Sampoerna Rp 16.65 trillion Rp 18.56 trillion
Astra International Rp 8.21 trillion Rp 18.45 trillion
Indosat Rp 9.57 trillion Rp 13.61 trillion
Bank Rakyat Indonesia - Rp 11.93 trillion
Indofood Sukses Makmur Rp 5.63 trillion Rp 7.31 trillion
Source: Danareksa Research Institute
Summary of listed company financial results
Sector 9 months '02 9 months '03
Percentage
Consumer goods
Sales Rp 58.3 trillion Rp 62.5 trillion 7%
Operating profit Rp 8.5 trillion Rp 8.3 trillion -3%
Net profit Rp 5.6 trillion Rp 5.0 trillion -10%
Operating margin 14.6% 13.3%
Cyclical and
telecommunications
Sales Rp 59.7 trillion Rp 70.4 trillion 18%
Operating profit Rp 13.7 trillion Rp 17.2 trillion 25%
Net profit Rp 13.3 trillion Rp 11.2 trillion -16%
Operating margin 23% 24.4%
Others (bank,
resources,
miscellaneous)
Sales Rp 121.9 trillion Rp 134.3 trillion 10%
Operating profit Rp 24.0 trillion Rp 26.6 trillion 11%
Net profit Rp 19.2 trillion Rp 16.5 trillion -14%
Operating margin 19.7% 19.8%
Source: Danareksa Securities