The four largest privately-held Indonesian conglomerates that have assets listed on the Indonesia Stock Exchange (IDX) are the Astra Group, Salim Group, Lippo Group, and Sinar Mas Group. Combined, all listed companies controlled by these four groups account for 17.50 percent of total market capitalization on the IDX (total market capitalization on the IDX was IDR 5,027.27 trillion or USD $430 billion on 15 July 2014). Currently, the largest listed firm on the IDX is Astra International, the ‘vehicle’ of the Astra Group.
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