Business Times - 15 Jul 2005
Rising from Jakarta's financial graveyard By SHOEB KAGDA IN JAKARTA A LITTLE over a year ago, Bakrie & Brothers would have attracted minimal attention from international investors given the company's past and the negative sentiment attached to Indonesian conglomerates. Today, however, the company is on the verge of being a darling of the investing community having cleaned up its house, pared down its debt significantly and positioned itself to ride Indonesia's coming infrastructure boom. Over the past two weeks alone, the company's stock price has risen from 113 rupiah a share to close at 145 rupiah yesterday, a gain of nearly 25 per cent. Market analysts told BT the stock has a lot more upside and could possibly cross the 200 rupiah a share mark over the next few months if it wins a number of large infrastructure projects and continues to do well in the other two sectors the company has significant presence in - plantations and telecommunications. Calling a buy on the counter, a recent report on the company by CLSA Indonesia noted that Bakrie & Brothers is one of the few remaining companies on the Jakarta Stock Exchange with the ability to stage a reasonable comeback. Last month's 1.9 trillion rupiah (S$330 million) rights issues has enabled the company to clean up its debt, although at a deep discount, and strengthen its balance sheet. The net debt to equity ratio, as a result, will fall from 127 per cent at end 2004 to under 20 per cent by the third quarter of this year, reducing the company's risk profile considerably. 'It is definitely an emerging story,' noted Michael Chambers, head of Research at CLSA Indonesia. 'It is a potential infrastructure play and it's not far away from getting some contracts for pipelines in the oil and gas sector.' According to Dileep Srivastava, vice-president, Group Business Development at Bakrie & Brothers, the company took a strategic decision in 2004 to grow its pipeline business, both onshore and offshore and is today the only company in the country with the ability and capacity to build large oil and gas pipelines. Having invested in building the capacity to produce 567,000 tonnes of pipelines a year, Bakrie & Brothers now accounts for a third of the national capacity in this sector. At the moment, it is only running at 30 per cent to 35 per cent of its full capacity. 'We see gas as the lifeline for the future of the country and we took a strategic decision in May 2004 to focus on this sector,' said Mr Srivastava. 'The government is now studying ways to speed up the transportation of natural gas from the production areas to the consumption areas through pipelines, and we are well positioned to tap into this growth.' The company is also bidding for a number of toll roads and power projects under the government's US$150 billion infrastructure development programme. At present, it has 60 per cent market share of all steel bridges in the country. Apart from infrastructure, the company has also re-entered the plantation sector after having to sell off most of its plantation assets in the late 1990s to pay off its debts. Bakrie & Brothers successfully bought back 55 per cent of its former plantation holdings in January this year and now controls 51,000 hectares of palm oil and rubber plantations in Sumatra and Kalimantan. 'We see rubber in the long term as being stable and buoyant while palm oil also has long term demand,' he said. 'We intend to continue to invest and grow in this sector and to gradually increase our land bank by between 50,000 and 100,000 hectares.' The third area of business Bakrie & Brothers will focus on under its new blueprint is telecommunications where it holds a CDMA licence. Although this sector is still in its nascent stage, Mr Srivastava said that it offered tremendous growth prospects. 'We view CDMA as a major sunrise investment for ourselves,' he noted. 'Indonesia is a country that offers tremendous potential given the low penetration and its large market size,' he said. If all the company's plans bore fruit, not only would it turn a handsome profit this year but it would nearly triple in revenue in five years, according to Mr Srivastava. It hopes to record an increase in turnover from 1.2 trillion rupiah in 2004 to 2.5 trillion rupiah this year. 'We intend to be a 7 trillion rupiah company by 2009,' said Mr Srivastava. Bakrie & Brothers will be mindful of not over leveraging as the investor community would be watching its every step, he said. http://business-times.asia1.com.sg/sub/news/story/0,4574,162552,00.html? Post message: [EMAIL PROTECTED] Subscribe : [EMAIL PROTECTED] Unsubscribe : [EMAIL PROTECTED] List owner : [EMAIL PROTECTED] Homepage : http://proletar.8m.com/ Yahoo! Groups Links <*> To visit your group on the web, go to: http://groups.yahoo.com/group/proletar/ <*> To unsubscribe from this group, send an email to: [EMAIL PROTECTED] <*> Your use of Yahoo! Groups is subject to: http://docs.yahoo.com/info/terms/
