A subsidiary of Tiga Pilar Sejahtera Food (namely rice distributor Indo Beras Unggul) is suspected of selling the cheap government-subsidized rice in packages that are labeled as premium rice. Last week, Indonesian police raided a warehouse and confiscated more than 1,000 tons of rice.

Read more: Stock Alert Indonesia: Shares Tiga Pilar Sejahtera Food Under Pressure

After hitting rock bottom at IDR 905 a piece around 09:30 am local Jakarta time, shares of Tiga Pilar Sejahtera Food started to recover. Indeed its shares have become very cheap and therefore attractive for the longer-term investor. After all, despite this scandal, the company is considered by all analysts to have strong long-term fundamentals.

For the short-term, however, the two questions are whether operations previously conducted by Indo Beras Unggul can be shifted to another subsidiary (and become fully in line with existing laws) in order to safeguard operational and financial figures. Another question is whether the Indonesian consumer will avoid Tiga Pilar products on the short-term after this scandal. We assume it will take some time to regain consumer trust.

By 10:38 am local Jakarta time, Tiga Pilar shares had risen to IDR 1,190 a piece, recovering quite a bit. However, this is also a great opportunity for traders to engage in quick profit taking.

So, for long-term investors Tiga Pilar Sejahtera Food has become a bargain. For short-term investors there remain plenty of risks. The investigation into this case and the possible following law suits can take months.

In 2016 Indonesian listed property developer Agung Podomoro Land also experienced a corruption case. Ariesman Widjaja, then-General Director of Agung Podomoro Land, was found guilty of bribing a legislator of the Jakarta provincial assembly with the aim to influence the outcome of deliberations on two draft bills concerning Jakarta's Zoning Plan and Coastal Northern Territory (RZWP3K) for the period 2015-2035 and the North Jakarta Strategic Area Regional Spatial Plan (Agung Podomoro Land has great interest in these plans). Widjaja was sentenced to three years imprisonment. When this case hit the news it led to plunging Agung Podomoro Land shares. It took about three months for the company's shares to recover from this issue.