Although Indonesia's benchmark Jakarta Composite Index has risen 4.81 percent since the start of 2016 (thus being among the world's best-performing benchmark stock indices so far this year, especially if the 5.17 percent appreciation of the rupiah is included into the calculation), not all Indonesian blue chip stocks, or big caps, have risen. Several examples are Blue Bird, Bank Pan Indonesia, Bank Permata, Global Mediacom, Surya Citra Media, and Sarana Menara Nusantara. Why did these stocks not rise so far in 2016? We zoom in on three cases.
Blue Bird Group
Shares of Indonesia's largest taxi operator Blue Bird have declined 13.73 percent so far this year despite the company's improving financial performance. Blue Bird's net profit is estimated to rise to about IDR 800 billion in 2015 from IDR 735.1 billion (approx. USD $56 million) in 2014. The disappointing performance of Blue Bird's shares could be explained by investors' concerns about fierce competition from online applications such as Uber and GrabTaxi. These online services have become increasingly popular in Indonesia. However, Blue Bird has the best brand in Indonesia's taxi services industry and remains the clear market leader. Therefore it should be strong enough to withstand the arrival of these newcomers. The impact should be bigger on other taxi services companies.
This year, Blue Bird has prepared IDR 1.6 trillion for capital expenditure (fully financed through bank loans). These funds will be used for further business expansion, including the purchase of new cars (rejuvenating its taxi fleet) and the development of new vehicle stations.
Stock Quote Blue Bird - BIRD:
Surya Citra Media
Shares of Surya Citra Media, one of Indonesia's leading media companies (focused on free-to-air television channel broadcasting, mass media consultation, in house production and other multimedia services), have fallen 6.45 percent so far in 2016.
Its poor performance is related to slowing economic growth of Indonesia (although this slowdown is expected to have ended in 2015). Indonesian companies active in media have been plagued by slowing revenue and profit growth because demand for advertisement has been curtailed. According to global marketing research firm AC Nielsen, spending on advertisement in Indonesia has only grown 7 percent (y/y) in 2015.
Given Indonesia's solid Q4-2015 GDP growth figure, economic growth should accelerate this year, primarily supported by enhanced realization of government spending. This should also be a boost for Surya Citra Media, the firm that is the second-largest television operator in Indonesia (owner of SCTV and Indosiar) after market leader MNC Group. Surya Citra Media's price-to-earnings ratio (P/E ratio) is currently 28.2 times, not too cheap but also not too expensive. For example, the P/E ratio of competitor Media Nusantara Citra is 26.4 times.
Stock Quote Surya Citra Media - SCMA:
Indocement Tunggal Prakarsa
Shares of Indocement Tunggal Prakarsa, Indonesia's second-largest cement producer, have fallen 8.17 percent so far this year, partly due to sluggish growth in Indonesia's cement industry. In 2015 domestic cement sales only grew 1.8 percent (y/y) to 61 million tons, the slowest growth pace since 2009 as Indonesia's property and construction sectors slowed amid slowing economic growth. In the first nine months of 2015, Indocement's net profit fell 13.8 percent (y/y) to IDR 3,218.4 billion.
Another problem is that Indocement is producing cement at 100 percent production capacity, implying that sales cannot grow. In 2014 the company's production capacity stood at 18.5 million tons of cement, while sales reached 18.7 million tons. It is the only major cement producer that cannot boost sales. However, the company's cement production capacity will rise to 25 million tons after the its new factory in Bogor (West Java) will come online in mid-2016.
Supported by government-led infrastructure development, the Indonesian economy is expected to accelerate in 2016. Rising production capacity in combination with enhanced infrastructure development should manage to boost the performance of Indocement in the period ahead.
Stock Quote Indocement Tunggal Prakarsa - INTP: