Market Capitalization Largest Indonesian Conglomerates on 15 July 2014:

Group        Market Cap
 % of total market cap on IDX
Astra Group    IDR 474.74 trillion                     9.44%
Salim Group    IDR 172.03 trillion                     3.42%
Lippo Group    IDR 120.84 trillion                     2.40%
Sinar Mas Group    IDR 112.07 trillion                     2.23%

Source: Investor Daily

A number of reasons explain why the Astra Group tops the list. Firstly, this group not only has a relatively large number of listed subsidiaries on the IDX, but these subsidiaries also show solid growth and are engaged in rapidly expanding sectors given the current economic context in Southeast Asia’s largest economy. The group benefits considerably from the recent and ongoing automotive boom in Indonesia as per capita car ownership is still low (although several issues are expected to curb further expansion, such as the country’s weak infrastructure and tighter monetary policy of the central bank resulting in declining loan disbursements for car purchases, as well as recent rupiah depreciation which limits Indonesians’ purchasing power). Listed subsidiaries of the Astra Group include Astra Agro Lestari, Astra Otoparts, Astra Graphia and United Tractors. As the group is engaged in most sectors of the Indonesian economy (automotive, agribusiness, heavy equipment, mining, energy, financial services, information technology, and infrastructure and logistics), it can be called the ‘barometer’ of the Indonesian economy. Secondly, the group has a proven track record of good corporate and financial management leading to continuous long-term expansion and thus becoming the ‘darling’ of foreign investors.

The Salim Group is engaged in the agribusiness and consumer products sectors in Indonesia. The two most valuable assets to the group are Indofood Sukses Makmur and Indofood CBP Sukses Makmur, both focus on food manufacturing and distribution. With a large (250 million) and expanding population in combination with rapidly rising per capita GDP, these companies have good prospects to maintain high profits. Another valuable asset to this group is palm oil producer PP London Sumatra Indonesia.

The Lippo group is supported by its property and media businesses. In recent years, the property sector in Indonesia expanded considerably as demand for housing grew amid a bourgeoning middle class segment. However, this year profits have been curbed by general slowing economic growth and the central bank’s tighter monetary policy (involving a higher benchmark interest rate and loan-to-value ratio). However, analysts still see room for improved growth next year and beyond. The group’s media businesses (print and electronic media) have also shown good profitability. Most important assets to the group are listed property firms Lippo Karawaci and Lippo Cikarang.

The Sinar Mas group obtains its profits from the property and palm oil businesses. Although commodity prices have generally declined sharply in recent years due to the global slowdown and specifically reduced demand from China, palm oil prices have shown a better performance in 2014. This immediately translates to a better financial performance of the group’s palm oil producing asset Sinar Mas Agro Resources and Technology. The group taps the property business through Bumi Serpong Damai. This property developer has ample room for growth as it still contains a large land bank.

Meanwhile, the conglomerate which has recorded the largest growth in market capitalization in the period 30 December 2013 to 15 July 2014 is the Ciputra Group. In this period, market cap of the group (a property developer) grew 55.50 percent to IDR 27.63 trillion.

However, with 25.84 percent of total market cap, state-controlled listed companies (SOEs) still account for a larger share of market capitalization on the Indonesia Stock Exchange compared to privately-held conglomerates. Combined, the market cap of these listed state-controlled companies have shown impressive growth in 2014, expanding over 33 percent (30 December 2013 - 15 July 2014). Examples of listed SOEs are Bank Mandiri, Telekomunikasi Indonesia, and Bank Rakyat Indonesia.

One of the large conglomerates that has tumbled significantly this year is the politically-connected Bakrie Group. This group has various debt-ridden assets such as Bumi Resources and Bakrieland Development. Besides weak corporate and financial management, the Bakrie Group is also too involved in the country’s politics (Aburizal Bakrie being the Chairman of Golkar, the country’s second-largest party, and close ally of controversial presidential candidate Prabowo Subianto). As an illustration, TVone (a television news station controlled by Bakrie Group’s Visi Media) only reported a quick count score that indicated Subianto as winner of the presidential election (on 9 July 2014), whereas all credible quick count agencies showed a win for rival Joko Widodo. As a result, shares of Visi Media plunged in the following week.

Similar to the Bakrie Group, shares of companies linked to the MNC Group have also weakened after the presidential election due to the group's support for Subianto. Moreover, the MNC Group has been eagerly conducting private placements and rights issues since last year, implying that shares held by the public become diluted.

Regarding individual listed companies on the IDX, Astra International tops the list based on largest market capitalization. The company controls 52 percent of Indonesia’s car sales market.

Top Market Capitalization on 15 July 2014:

Company   Market Capitalization
Astra International       IDR 307.68 trillion
HM Sampoerna       IDR 304.62 trillion
Bank Rakyat Indonesia       IDR 283.30 trillion
Bank Central Asia       IDR 278.26 trillion
Telekomunikasi Indonesia       IDR 267.62 trillion
Bank Mandiri       IDR 243.70 trillion
Unilever Indonesia       IDR 239.39 trillion
Perusahaan Gas Negara       IDR 138.78 trillion
Gudang Garam       IDR 102.07 trillion
Semen Indonesia       IDR 100.39 trillion

Source: Investor Daily