Semen Gresik shares 'like cat in a sack'

The Jakarta Post, Jakarta

Shares of state-controlled PT Semen Gresik (SG), the country's largest integrated cement maker, will continue to be viewed as overly speculative by investors because there is not sufficient information to assess the value of Gresik's shares.

Stock analyst Hendra Bujang of Mega Access Capital Securities said on Tuesday that buying SG shares was like "buying a cat in a sack" as investors could not fully appraise the shares following an audit problem at the company's rebellious subsidiary PT Semen Padang.

"Investors are unable to asses SG's shares because Semen Padang has not yet finished its audit. The shares will always remain a subject of speculation ... For conservative investors SG shares are worth being avoided," said Hendra.

Hendra explained that the shares had often increased when bad news was reported as speculators would try to lift the share price to lure other investors to buy the stocks before they themselves pull out.

The ensuing fire sale by the speculators will cause heavy losses to inexperienced small investors or newcomers.

The Jakarta Stock Exchange (JSX) suspended trading in shares of SG on Monday after the firm's auditor issued disclaimers for its 2002 and 2003 financial accounts.

SG auditor PricewaterhouseCoopers (PwC) refused to give an opinion on the firm's financial accounts due to unaudited financial figures from the company's subsidiary, PT Semen Padang.

Gresik's shares were last traded at Rp 8,000 before the JSX halted trading during the morning session.

The JSX said the shares would be suspended until SG's annual shareholders meeting on June 30 or until SG received a satisfactory opinion from PwC after completing the audit of Semen Padang.

SG has been facing difficulties in finalizing its 2002 financial report, which in turn affected the completion of its 2003 report, due to problems with the rebellious West Sumatra- based Semen Padang, which has demanded that it be separated from the parent company.

The government controls 51 percent of SG shares, 25.5 percent is owned by Mexico cement giant Cemex SA and 23.5 percent by the public.

Due to the delay, the government is currently planning to change the composition of the company's current management, which will be discussed during the company's shareholder meeting.

A source at the Office of State Ministry of State Enterprises said that the government was likely to maintain SG's current president director Satriyo, and would probably dismiss other directors following the audit problem.