Massive buy into Astra

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.