SG shares jump after JSX lifts suspension

Rendi A. Witular, Jakarta

Shares in giant cement producer PT Semen Gresik (SG) skyrocketed on Thursday, after the Jakarta Stock Exchange (JSX) lifted the suspension on the trading of the shares early in the morning session.

SG shares rose by Rp 550, or 7 percent, to Rp 8,550.

A stock broker with a state-owned securities firm said the surge was fueled by heavy speculation, as investors could not make a complete assessment of the value of the company, following audit problems with its 2002 and 2003 financial accounts.

"The rise is mostly driven by speculation, because the decision to buy the shares was not based on a full assessment of Gresik's shares, following an audit problem at its subsidiary PT Semen Padang," said the broker.

Several analysts had previously warned that buying SG shares was like "buying a cat in a sack" as investors could not fully appraise the shares, due to the lack of data on Semen Padang's finances.

Semen Padang assets and net profit accounts for 26.77 percent and 16.75 percent of SG total assets and net profit respectively.

The analysts said that SG 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 pulled out.

The JSX suspended the trading of SG shares on June 28, after the firm's auditor, PricewaterhouseCoopers (PwC), issued disclaimers for the 2002 and 2003 accounts, as the company could not obtain the audited financial figures of SG's West Sumatra subsidiary, Semen Padang.

SG, the country's largest integrated cement producer, has been facing difficulties in finalizing its 2002 financial statements, which in turn has affected the completion of its 2003 statements. This is largely due to problems with the rebellious Semen Padang, which has demanded that it be hived off from its parent company. The previous management of Semen Padang, supported by local politicians, had opposed the government's plan to sell a controlling stake in SG to Mexican cement giant Cemex SA, which now has a 25.5 percent stake in SG.

Elsewhere, JSX listing director Harry Wiguna told The Jakarta Post in an interview over the phone that the suspension was lifted after SG managed to come up with reasonable explanations for its accounting problems.

"We have received clarification from SG, and consider it sufficient. Another consideration is that SG and its subsidiaries operate as usual, and are not disturbed by the audit problem," said Harry.

Harry added that, in order to avoid another suspension, SG had pledged to submit an audited version of its consolidated financial report, which would be approved by PwC. The latter is expected to complete its audit of Semen Padang in October.

The government controls 51 percent of SG shares, Cemex 25.5 percent, and the investing public, 23.5 percent.