Several sectors perform well on the JSX

JAKARTA (JP): The Jakarta Stock Exchange (JSX) remains attractive for investors as most companies listed on the market posted significant increases in net profits last year and promised better growth this year.

PT Vickers Ballas Tamara said in its Corporate Earning Review 1995 that the growth rate of the earning price per share will reach approximately 26 percent this year, while the market is trading on the price earning ratio of 15 times.

Vickers Ballas tracked 69 companies, or 30 percent of the 238 listed on the JSX, which contribute about 86 percent of the market capitalization, in its research for the report.

"They (69 companies) recorded a strong 38 percent of after tax profit growth in 1995, which is in line with our forecast," the review said.

The predominant sectors last year were pulp and paper, textiles, glass and ceramics, infrastructure, (well-diversified) conglomeration and cement.

Pulp and paper

The integrated pulp and paper producers pushed the sector's profits up by 149 percent through aggressive capacity expansion and higher pulp and paper prices.

The net profits of the sister companies, PT Indah Kiat Pulp & Paper and PT Pabrik Kertas Tjiwi Kimia grew by more than 200 percent to Rp 469 billion (US$208.7 million) and Rp 169 billion respectively last year, from Rp 147 billion and Rp 51 billion in the previous year.

Indah Kiat is the biggest pulp and paper producer in the country and one of the lowest cost pulp producers in the world. Tjiwi Kimia produces high margin paper and stationary.

The earnings growth of 139 percent recorded by PT Inti Indorayon -- from Rp 65 billion in 1994 to Rp 135 billion last year -- was caused mainly by increases in pulp and rayon prices. Indorayon has switched its pulp production to dissolving pulp as the raw material of rayon.

"The outlook for the integrated companies looks favorable as they control the biggest market share and procure raw materials at low costs," the report said.

It added that the integrated companies' profit margins are above 35 percent, higher than the 30 percent margins of non- integrated companies such as Fajar Surya Wisesa, Surabaya Agung Industri Pulp & Kertas and Suparma.

Vickers Ballas forecasted that Indah Kiat's net profits would rise to Rp 534 billion this year, Rp 636 billion next year and Rp 756 billion in 1998, while Tjiwi Kimia's profits would increase to Rp 198 billion, Rp 236 billion and Rp 280 billion respectively.

Indorayon's net profits are estimated to drop to Rp 124 billion this year before recovering to Rp 141 billion next year and Rp 165 billion in 1998.

Textiles

The textile sector's steep profit increase of 88 percent was due to capacity expansion, corporate restructuring and improved selling prices.

The 198 percent increase of Polysindo Eka Perkasa's impressive net profits to Rp 211 billion last year from Rp 108 billion in 1994 was driven by the company's divestment of subsidiary Texmaco Engineering, which contributed 95 percent to its earning growth.

Indorama Synthetics' earning of Rp 120 billion last year, up from Rp 62 billion in 1994, included contributions from its resin plant, which produces raw materials for polyester.

"The outlook, however, is not promising. Indonesia has lost its competitive edge vis-a-vis its competitors from China, Pakistan and India," the report said.

The government recently made some tax concessions to encourage textile and garment exports. It also plans to introduce a new package of deregulations next month to boost exports, including from the textile sector, which has been the backbone of the country's non-oil exports for a long time.

Vickers Ballas estimated that Polysindo's net profits would increase to Rp 247 billion this year, Rp 286 billion next year and Rp 321 billion in 1998. Indorama's profits are expected to surge to Rp 131 billion, Rp 146 billion and Rp 164 billion respectively.

Glass and ceramics

The glass and ceramics sector recorded a 71 percent increase in profits last year from increased production capacity, as well as strong domestic and foreign market demand for their products.

The sector's strong growth last year was boosted by the strong performances of both Asahimas Flat Glass and Mulia Industrindo.

Asahimas' 65 percent increase in net profits to Rp 74 billion last year from Rp 45 billion in 1994, was helped by its higher sales volume and increases of prices across the board.

Mulia's 78 percent increase in net profits to Rp 68 billion last year from Rp 38 billion in 1994 resulted from its capacity expansion.

"The outlook is promising. Demand for the sector's products will not only be boosted by the domestic construction sector, but also exports. Indonesian producers are the lowest cost producers in the region," Vickers Ballas' report said.

Vickers Ballas estimated that Asahimas' net profits would increase to Rp 92 billion this year, Rp 107 billion next year and Rp 124 billion in 1998, while Mulia's would rise to Rp 127 billion, Rp 209 billion and Rp 260 billion.

Infrastructure

The infrastructure sector is represented by one firm -- the politically-well connected toll road developer Citra Marga Nusaphala Persada, which recorded a 63 percent increase in net profits to Rp 95 billion last year from Rp 58 billion in 1995.

"We expect good earnings growth prospects from the cash-rich Citra Marga," Vickers Ballas said in its report. It predicted that Citra Marga's net profits would increase to Rp 113 billion this year, Rp 139 billion next year and Rp 160 billion in 1998.

Vickers Ballas said Citra Marga's earnings would rise in accordance with the rise in traffic volume and toll tariffs, as well as the completion of its new toll road projects in Jakarta.

Conglomerate

The conglomerate sector is represented by Bakrie & Brothers and politically-well connected Bimantara Citra, which contributed largely to the sector's earnings growth of 58 percent last year.

Bimantara's net profits shot up by 148 percent to Rp 118 billion last year from Rp 48 billion in 1994. The high profit increase was resulted from the combination of the write-off of Rp 52 billion in 1994 of television equipment, and interest income in 1995 which was boosted by the proceeds from its initial public share offering.

Bakrie & Brothers' net profits increased moderately by 17 percent to Rp 120 billion last year from Rp 103 billion in 1994. The increase was boosted by the contribution of its telecommunications division.

"The outlook is favorable for Bimantara, with contributions from media and broadcasting, automotive and chemical sectors, while Bakrie will see the continued progress of its infrastructure support, plantation and telecommunications divisions," Vickers Ballas' report said.

It forecasted that Bimantara's net profits would rise to Rp 155 billion this year, Rp 199 billion next year and Rp 229 billion in 1998, while Bakrie & Brothers' would also surge to Rp 150 billion, Rp 183 billion and Rp 211 billion.

Cement

The cement sector's earnings rose by 54 percent, mainly from Semen Cibinong and state-owned Semen Gresik.

Semen Gresik's strong profit growth of 197 percent to Rp 163 billion last year from Rp 55 billion in 1994 was due to the three-month inclusion of contributions from acquired companies Semen Tonasa and Semen Padang -- both of which are state firms.

Semen Cibinong's 73 percent increase in net profits to Rp 92 billion last year from Rp 53 billion in 1994 was boosted by increases in production capacity, utilization rate and cement prices.

Indocement Tunggal Prakarsa, the country's largest private cement producer, recorded net profits of Rp 476 billion last year, up from Rp 368 billion in 1994.

The outlook is promising, Vickers Ballas said. The government has allocated about 60 percent of its budgeted development expenditure for the current 1996/1997 fiscal year, or Rp 20.7 trillion, for infrastructure.

Vickers Ballas projected that cement demand in Java will continue to be buoyant, accounting for over 40 percent of the country's total need for cement.

According to Vickers Ballas' estimates, Semen Gresik's net profits will surge to Rp 286 billion this year, Rp 351 billion next year and Rp 453 billion in 1998. Semen Cibinong's profits are also expected to rise to Rp 110 billion, Rp 137 and Rp 176 billion respectively. Indocement's profits are predicted to shoot up to Rp 570 billion, Rp 688 billion and Rp 822 billion respectively.

Tobacco

The tobacco sector's profits jumped by 46 percent last year. Gudang Garam's net profits rose by 47 percent to Rp 367 billion last year from Rp 249 billion in 1994 because of ex-factory price increases of 7.6 percent in hand-rolled and 16.1 percent in machine-made cigarettes.

H.M. Sampoerna's net profits increased by 45 percent to Rp 352 billion last year from Rp 243 billion in 1994 due to ex-factory price increases of 4.9 percent in Dji Sam Soe cigarette brand and 18.3 percent in A-Mild.

Gudang Garam's market share in hand-rolled cigarettes rose slightly to 19.4 percent last year from 18.6 percent, while its machine-made cigarettes share was maintained at 60.1 percent.

Sampoerna increased its share of the hand-made cigarette market from 18.3 percent to 22.8 percent and doubled its machine- made cigarette share to 5.5 percent.

The recently introduced excise tax categorizes the four major producers -- Gudang Garam, Sampoerna, Djarum and Bentoel -- in one tier. Gudang Garam is believed to benefit most from the new structure.

"Our estimate shows that Gudang Garam's excise and value-added tax, as a percentage of costs, will drop from 55.3 percent to 52.8 percent in 1996. The impact for Sampoerna, however, is not significant," Vickers Ballas said.

It predicted that Gudang Garam's net profits would rise to Rp 548 billion this year, Rp 658 billion next year and Rp 789 billion in 1998, while Sampoerna's would increase to Rp 428 billion, Rp 525 billion and Rp 635 billion respectively.

Heavy equipment

The heavy equipment sector's earning growth stood at 42 percent last year, with Komatsu Indonesia's net profit increasing by 81 percent and United Tractor's by 28 percent.

Komatsu's good results, from Rp 18 billion in 1994 to Rp 32 billion last year, were mainly attributed to the 28 percent growth in the sales of heavy equipment and a 9 percent price increase.

United Tractors' net profits reached Rp 59 billion last year, up from Rp 46 billion in 1994.

The main push for the sector's growth came from four main sectors, namely the construction industry, which grew by 55 percent, the forestry sector by 23 percent and the mining and the agriculture sectors by 22 percent.

The government's 1996/1997 budget for infrastructure development benefits the heavy euqipment sector.

Vickers Ballas estimated that Komatsu's net profits would increase to Rp 38 billion this year, Rp 45 billion next year and Rp 52 billion in 1998, while United Tractors' would rise to Rp 69 billion, Rp 83 billion and Rp 100 billion. (rid)