BEST SMALL CAP COMPANY
Tiga Pilar Sejahtera Food
Many of Indonesia’s small cap companies have ambitious growth plans. Tiga Pilar Sejahtera Food stands out for its ability to deliver on them.
One key advantage enjoyed by Tiga Pilar is the fact that it owns its own power and oil supplies. This has allowed it to become more efficient and helped it aggressively expand, primarily through acquisitions.
In 2008 the noodle-maker bought three companies: biscuit manufacturer Poly Meditra Indonesia, cooking oil manufacturer Bumi Raya Investindo and power company Patra Power Nusantara. The purchases cemented Tiga Pilar as a serious consumable goods company and it has worked hard to expand further ever since. Then in 2010 it bought five oil palm plantation companies and a rice trading company.
In 2011 Tiga Pilar raised IDR690 billion (US$71.9 million) through a rights issue and used the funds to pay off debts and to buy Taro Snack from Unilever Indonesia for more than IDR200 billion. The purchase, which took effect in January 2012, was a controversial move according to analysts.
“Normally you would see a hiccup when a small company does such a big acquisition. At the beginning of this year there was a lot of doubt whether they could execute such an aggressive diversification move in one go, but since then the company has consistently shown a very good financial performance,” says a Jakarta-based equity analyst.
Sales are expected to rise by 88% during the whole of 2012 to IDR3.3 trillion and net income to increase to IDR212 billion, according to Sjambiri Lioe, the company’s finance director.
Tiga Pilar has continued to gain traction with investors too. Its stock price has more than doubled from IDR490 a share on January 2, 2012 to IDR1,120 on December 4.
Furthermore, CEO Joko Mogoginta has announced plans to issue IDR1 trillion bond issue in the first quarter of 2013, to finance the development of low price snack products, particularly biscuits and crackers. Tiga Pilar Sejahtera Food is one to watch in 2013.
BEST MEDIUM CAP COMPANY
Kalbe Farma
Despite some trying market conditions, Kalbe Farma has thrived over the past year. Analysts argue that the dairy producer successfully managed the cost pressures of imports throughout 2012 despite the weakening value of the rupiah.
It has also kept innovating in order to remain ahead of the game in terms of market share. “Competitors often copy [Kalbe Farma] but they have always been able to come up with a new product to maintain their market leadership,” says a senior equity analyst.
As a particular strength, commentators flag the company’s move into nutritional health products, including Diabetasol, milk for sufferers of diabetes and Prenagen, milk for pregnant mothers. This astute insight into the consumer market set it apart from competitors, and Kalbe is fully capitalising on this advantage.
In July the company set up a subsidiary called Kalbe Milko Indonesia, a joint venture between Kalbe Farma (with 51% ownership) and Milko Beverage Industry, which will focus on nutritional health products. It is valued at IDR100 billion-IDR150 billion and is expected to commence operations during the near year.
In addition, Kalbe bought a 100% stake in health beverage company Hale International in June and is looking into acquiring two other health drinks companies next year, the names of which are undisclosed.
Backing up the company’s moves to gain market share are the strong profit growth figures for the first nine months of the year. Kalbe’s net income rose by 17% to IDR1.4 trillion compared to the same period last year, and revenues rose by 26% to IDR9.69 trillion.
The largest segment of this growth came from the company’s nutritional product division, which added 22% to Kalbe Farma’s total revenue.
The company’s stock price has reflected its well-managed finances, transparency and ability to remain one step ahead of competitors, rising from IDR685 per share on January 2, 2012 to IDR1,040 on December 4.
BEST LARGE CAP COMPANY
Unilever Indonesia
Contenders for 2012’s best managed large cap company in Indonesia included previous winner Astra International as well as Bank Mandiri. Mandiri particularly stood out for its move into the higher margin small and medium enterprises (SME) sector and ability to grow its loan books without incurring a higher cost of credit.
But this year’s award goes to the company that managed to maintain profit margins as well as gaining market share amid fierce competition. Unilever Indonesia doubled its revenues in Indonesia between 2007 and 2011 to US$10.8 billion and is mid-way through plans to double in size again before 2014.
According to analysts, this decision to expand aggressively was of the utmost importance in order for Unilever to maintain its competitiveness in a market where rivalry is growing increasingly intense. On the revenue front too, it has been a success.
The consumer company posted a net profit of IDR3.65 trillion over the first nine months of 2012, up 21% year-on-year. Due to its strong brand name it has consistently been able to pass on cost increases without suffering volume loss.
This year, despite the average selling price rising by 5.5%, sales volumes continued to increase and the company posted revenue growth of 17%.
The firm continues to launch new products aggressively. One of its most recently launched hair care products, TRESemmé, is gaining strong market acceptance, according to Kim Eng Securities.
In addition, Unilever is gaining strength in the food and beverage market, particularly in ice cream, after having reinforced its distribution channels. Analysts argue that it is the company’s constant innovation that has allowed it to continue to increase market share and capture more “money in the pockets of consumers” than any of its competitors.
The company’s ongoing growth has been reflected in its share price, which has risen from IDR18,550 on January 2, 2012 to IDR26,250 on December 4.
BEST EXECUTIVE
Zulkifli Zaini, CEO of Bank Mandiri
Bank Mandiri has continued full steam ahead in its transformation from local institution to international player. Leading the charge is CEO Zulkifli Zaini.
By 2014 the bank intends to achieve a market capitalisation of IDR225 trillion, a market revenue share of 16%, an return on assets of around 2.5% and a return on equity of 25%, while maintaining a gross non-performing loan ratio of less than 4%.
It also intends to be ranked within the top five banks in the Asean region by the end of 2014. As part of such plans Zaini vociferously stated his intentions to enter the Singapore market in 2012.
“We want to accommodate our loyal customers that have investments in Singapore...If Singaporean banks have the flexibility to do M&A in Indonesia and have more than 100 branches throughout [the country] we are just asking why can’t we do the same in Singapore?” he told Bloomberg on April 26.
Zaini’s goals (which include making Mandiri one of the top three banks in Southeast Asia by 2020) may be ambitious, but analysts think that they may just be achievable.
His team has been described as very dynamic; an impressive achievement given largely state-owned nature of the lender. In addition Bank Mandiri’s corporate governance is frequently championed in a country where management scandals are not uncommon.
Zaini has been a Mandiri man since it was founded by the Indonesian government in 1998. He was managing director of commercial banking between 2006 and 2010 before being promoted to fill the CEO position left vacant when the admired Agus Martowardojo moved to become Indonesia’s finance minister.
“[Zaini] had very large shoes to fill, but the bank has done very well. It is nothing like a lot of the state banks which are slow moving, and as well as all these moves the share price has outperformed,” says one head of equity research.
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