Massive buy into Astra

The identity of buyers of large shares of PT Astra International, Indonesia's largest automobile company, came to light yesterday when tobacco tycoon Putera Sampoerna, as required by stock exchange regulations, reported all his deals to the Capital Market Supervisory Agency (Bapepam).

Sampoerna's report to Bapepam on Monday about his 9.81 percent acquisition of Astra through transactions between June and Sept. 24 failed to shed light on large trading in Astra shares from Sept. 25 to Sept. 27. Yesterday's disclosure about an additional purchase of 2.85 percent of Astra seems to answer the question.

Separate from the 9.81 percent acquisition by Sampoerna and his son, the latest purchase of 2.85 percent was by Sampoerna Investment Corp., the Virgin Islands-based subsidiary of the publicly listed PT Hanjaya Mandala Sampoerna cigarette company, which is also controlled by the Sampoerna family. With an ownership of 12.66 percent of the US$7.46 billion company, the deals worth an estimated $242 million automatically make the Sampoerna family the largest single shareholder of Astra.

Details as to which of the Astra shareholders sold their shares to the Sampoernas may not come to light until the Sampoernas register their shares with the Astra securities administration bureau, or the sellers voluntarily disclose their sales.

However, judging from Sampoerna's letter to Bapepam, the acquisition was made for investment purposes which, we think, are quite rational even though the new investment looks too far away from his core business-- cigarette manufacturing. Assuming that his deals were really motivated by investment, that move is a smart one in view of the promising outlook of Astra and the assessment by most analysts that Astra's share price has largely undervalued for some time.

Most securities analysts are indeed bullish about the long- term prospects of Astra in view of its well-planned and executed business diversification programs. Though the automotive division still contributes more than 66 percent of Astra's income, the proportion has declined sharply from the 80 percent of a few years ago.

Instead, the contributions of its heavy equipment, agribusiness and financial service divisions have been increasing steadily. Its latest diversification into the high-growth telecommunications sector has also been hailed as quite strategic in coping with any negative impact from the keener competition posed by the Timor car, which is being sold at a far lower price than Astra vehicles due to duty and tax exemptions. It is precisely its rational business diversification which has made most securities analysts optimistic about the long-term outlook of Astra despite the fiercer competition in the car market.

On top of its good business prospects, Astra also boasts perhaps the best management team in the country. The team has succeeded in leading Astra to win numerous awards both from international institutions and the Indonesian government. Its human resources development is seen as one of the most excellent in the country's corporate world and the quality of its transparency is praised greatly by investors and analysts. No wonder the new shareholders, who entered Astra after the majority owner Soeryadjaya family had to sell their stake in 1992, have decided to maintain the old management team which was built up by William Soeriadjaya, Astra's founder.

Apart from the rosy outlook, doubts still linger over the future ownership of Astra. Amid the large acquisition by the Sampoerna family, there have been strong rumors that a politically powerful business group is also moving in to acquire a large stake in Astra. Several informed sources have confirmed the rumors, saying that group will take over the 10.61 percent equity currently held by state-owned banks and their pension funds. Prajogo Pangestu. currently the second largest shareholder with 10.68 percent, is also rumored to be pressured by financial needs to divest of his equity in Astra.

We are not saying the entry of a politically well-connected investor would be bad for Astra, but the fact is that Astra's benign distance from any political connections since its founding in 1957 has been praised by investors as quite positive for its long-term prospects.