Author: yosefardi.com

When Berau Coal Turned into Loss

Berau Coal Energy (BRAU) has just released its first half financial results. The company posted net loss of US$39.42 million against net profit of US$89.2 million in the corresponding period of 2011, mostly attributable to the squeezed margins. Berau Coal reported sales revenue of US$770.45 million in the first half, an increase of 5.6% only from the first half of 2011, while cost of goods sold grew 19.5% to US$515 million. As a result, Berau Coal’s gross profit dropped 14% to US$255 million. Both selling & marketing and general & administrative expenses grew substantially in the period, leaving Berau Coal with 26% fall in operating profit to US$181.98 million. Combined with higher finance costs at US$75 million and impairment of available-for-sale financial assets of US$47 million, Berau then booked net loss of US$39.4 million against net profit of US$90 million in the first half of 2011. That means Berau Coal suffered substantial weakening in the second quarter of 2012, because it booked net profit of US$17.3 million in the first half of 2011. The company only produced 9.6 million tons of coal or about 42% of its initial whole year target of 23 million tons. First half output was only 5.5% above Berau’s output in the first half of 2011. Coal sales, meanwhile, inched up 2% to 9.8 million tons in the first half, while FOB average selling price...

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Thirsty For Beer

Heineken and Kindest Place, a company controlled by son-in-law of Charoen Sirivadhanabhakdi (owner of Thai Beverage) are competing to control Asia Pacific Breweries, the maker of Tiger beer. Charoen companies’s $3 billion purchase of stakes in F&N and APB has prompted Heineken to bid $6 billion for F&N’s interest in APB. We’re not going to discuss the battle here. Let’s talk about performance of two major breweries in Indonesia: Multi Bintang (MLBI) and Delta Jakarta (DLTA). APB controls MLBI, while San Miguel owns majority shares in DLTA. Interesting that while beer is considered ‘haram’ in Indonesia, breweries MLBI and DLTA are probably the most profitable breweries in the world. Multi Bintang, for example, generated net profit of Rp372 billion in the first half of 2012. This already represents return on equity of 94%. If the company generates the same amount of profit in the second half, Multi Bintang would report ROE of 188%. Where else in the world a brewery could post such a huge ROE. In about one semester, your investment repaid and the second semester you can book profit about the same with equity you put in. Delta Jakarta, meanwhile, generated net profit of Rp102 billion in the first half, representing ROE of 21%. Annualized, Delta could generate ROE of 42%. How many companies could post such ROE? Profit margin of the business is substantially big. Delta,...

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Keppel’s Investment in KrisEnergy

In late 2009, KrisEnergy acquired Kambuna and Kutai production sharing contracts (PSCs) from Serica Energy. In April 2010, the company secured a US$150 million acquisition finance facility from Standard Bank Plc, which enables the leveraged acquisition of oil and gas-producing assets in Indonesia and Thailand. Earlier in 2009, First Reserve Corp acquired a 99% interest in KrisEnergy Holdings Ltd, a Singapore-based oil and gas exploration and production company for a US$500 million in a leveraged buyout transaction. On Monday, July 9, 2012, Keppel Corporation Limited, subscribed for new shares in KrisEnergy Ltd for a total consideration of US$115 million. The consideration amount was injected as new capital into KrisEnergy, and Keppel Corporation now holds 20% of KrisEnergy’s enlarged share capital. That means, KrisEnergy is valued US$575 million at the enlarged share capital. That also means the value of First Reserve’s investment in KrisEnergy is now below the initial US$500 million, right? Currently, KrisEnergy operates six out of the 14 licences they hold in Cambodia, Indonesia, Thailand and Vietnam, covering a gross acreage of more than 63,000 sq km. With certified proven reserves of 14.4 mmboe (million barrels of oil equivalent), as of 31 December 2011, its portfolio has three offshore producing assets: the Kambuna gas-condensate field in Indonesia and the B8/32 and B9A oil and gas blocks in the Gulf of Thailand. The other 11 contract areas comprise a...

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Indofood + Asahi Group =

Indofood CBP, subsidiary of giant food processor Indofood Sukses Makmur (INDF), has signed a joint venture agreement with Asahi Group Holdings Southeast Asia Pte Ltd, subsidiary of Asahi Group Holdings. Their partnership would heating up competition in the beverage business here. The plan is to establish two joint venture companies to produce and distribute non-alcoholic beverages in Indonesia. In the manufacturing JV, PT Asahi Indofood Beverage Makmur (AIBM), Asahi Group will hold 51% shares, while Indofood CBP 49%. In the distribution JV, PT Indofood Asahi Sukses Beverage (IASB), Indodood CBP will have 51% shares, while Asahi 49%. This is an indication that the two giants want to share their competitive edge: Asahi in manufacturing, while Indofood in distribution. They clearly see opportunity in the growing middle class society, which might account to 50% of the country’s population. The Indonesian beverage market, which is around 400 billion yen as of 2011, has been growing at CAGR of 15% over the last five years. This is an interesting partnership to watch, especially because Indofood is a major player in consumer brands, but not in the beverage business, despite the fact that Salim Group is partner of Pepsi in PT Indobeverages. Salim is controlling shareholder of Indofood. Asahi Group, meanwhile, is famous with its beverage brands like Mitsuya Cider (carbonated drink), WONDA (instant coffee), and Asahi Juroku-cha (ready to drink tea). Asahi...

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Indonesian Coal Prices

Pretty much as predicted, Indonesian coal reference price for July 2012 dropped further by 9.5% to US$87.56 per ton. This is the lowest price in two years. Bear in mind that the price is a benchmark for coal quality 6,322 Kcal/Kg GAR with total moisture of 8% (ARB), total sulphur of 0.8%, ash content of 15%, and delivery FOB vessel. Bayan Resources (BYAN)’s Gunung Bayan I coal has price marker of US$94.04 per ton because of its higher calorie (7,000 Kcal/Kg), but Adaro Energy’s Envirocoal has US$64.02 marker. Kaltim Prima Coal’s Prima Coal is at US$93.56, while Indominco’s IM_East at US$71.55/ton. Kideco Coal is US$66.25, while Golden Energy’s Borneo BIB at US$32.73 per ton. While July reference prices were only 9.5% below June, they are actually 25.9% below July 2011 and 31% below their peak in February 2011 at US$127.05 per ton. Overall, the average reference price for January-July 2012 is US$103.7 per ton or 12.4% below 12-month average of 2011. In the case of Envirocoal from Adaro, its average price in seven months of 2012 is US$74.3/ton or 10.7% below April-December 2011 average price. Envirocoal’s average price in Q2/12 was US$72.86 or 13.6% below the same period of last year (US$84.3). July 2012, meanwhile, is 23.4% below the same month of 2011. Take a look at the following tables: Indonesian 2012 2011 Change Coal Price (US$/ton) (US$/ton) (%)...

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Junior Coal Player: LG Group

LG is famous for its electronics. But, LG is a conglomeration with diversified business interests in energy, non-ferrous metals, petrochemicals, and steel. So, it’s not surprising to see LG Group’s entry into Indonesian coal industry three years ago. LG’s investment in coal business is dated back to 1983 when it participated in the Enshamm project in Australia. Ten years later, Ensham mine started producing bituminous coal sold to Japan, China, etc. In 2008, LG joined the bid to develop Wantugou bituminous coal in Inner Mongolia, China, which started production last year. Three years ago, LG started full-swing commercial production of MPP coal project in Kalimantan, Indonesia. LG has 40% interest in MPP project, while PT Mega Prima Persada owns the balance of 60%. MPP uses an open-air mining method to produce 1.5 million tons of coal in the concession located near Samarinda, capital city of East Kalimantan province. The concession was small with around 1,014 hectares and 16 million tons of recoverable reserves. MPP’s production has reportedly been ramped up to 2 million tons per annum, while Tutui (PT Tutui Batubara Utama) mine entered commercial production in 2010. PT Tutui Bara Utama generated revenues of 11.16 billion won in 2010 but with net loss of 1.24 billion won. PT Batubara Global Energy (BGE)/MPP project, meanwhile, generated sales revenue of 402.25 billion won in 2010 and net profit of 13.94...

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Murdaya & Bribery Allegation (3)

Hartati Murdaya, business woman and member of advisory board of President SBY’s Demokrat Party, defended her innocence in the bribery allegations saying “it was a donation, not a bribe.” She indirectly admitted of giving certain amount of money to Buol Regent Amran Batalipu, who was arrested Friday (July 6) related to graft case of PT Hardaya Plantations. Tempo interviewed Hartati with the following excerpts: Q: Tell us the activity of PT Hardaya Inti Plantation in Sulawesi. A: I’ve started investment in the area back in 1995. I was invited by then Central Sulawesi governor (Abdul Aziz Lamadjido) to develop remote areas like Buol. It was a forest area. Buol has developed into a regency. As the largest company in the area, Hardaya was asked to contribute to local administration. Why such donation is considered bribe? Q: What donation? A: Well, actually just to maintain relationship with employees and people. The area has developed and there was local election. As the largest company, if we’re asked to (donate) but don’t entertain, it’s just an ignorance. Q: But why? A: There were security issues that threatening the company, and then strike. Out of 3,500 workers, some went on strike. Others, however, were not dare to work normally because of threats. We then looked for ‘help’ from people. Q: What people? A: Not local people, but certain people. Police can’t handle and...

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Market Snapshots

The region started the week in negative territory. KOSPI and Nikkei 225 opened the week’s trading with 1.1% and 0.96% correction, while Australia’s All Ordinaries down 0.64%. Nymex crude oil is also traded substantially lower by 3.18% to US$84.4 per barrel. In this report: (1) Motorcycle sales; (2) Gas Export Restriction; (3) Summarecon H1 MOTORCYCLE SALES: Sales of motorcycles dropped 10% to 550,468 units last month from 611,251 units in May 2012. Motorcycle sales slashed 16% from June 2011 (658,817 units) due to effective implementation of new down payment policy. According to data from Indonesian Motorcycle Industry Association (AISI), sales in the first half reached 3.72 million units, down 8.5% from the same period last year. AISI predicts whole year sales would drop 20% to 6.4-6.5 million units from last year’s 8 million units. This is a healthy correction for the society and stocks related to motorcycle such as Astra International (ASII) and consumer financing companies. GAS EXPORT MORATORIUM: The government plans to impose moratorium on gas export to secure domestic supply. The policy will apply to new contracts. This could be a good news for domestic users of natural gas, such as PLN, Krakatau Steel (KRAS), fertilizer producers, and ceramics. Domestic industrial customers’ demand for natural gas soared from 2.7 TCF in 2004 to 10.18 TCF last year. The moratorium might affect giant gas projects like Masela Block...

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India & Indonesian Coal Plays

India has been targeted by Indonesian coal producers as the main export market. They mostly expect India would replace China as dominant player for seaborne coal in the region. Energy companies from India have also acquired substantial coal concessions in Indonesia in recent years. Progress? ESSAR ENERGY Essar Energy Plc acquired a 100% interest in the Aries coal mine in April 2010 for US$118 million. THe mining concession comprises approximately 5,000 hectares located in the West Kutai region of East Kalimantan. A JORC compliant resource assessment estimates that the block contains approximately 64 million tons of mineable reserves with an annual potential production of 4 million tons of coal with an average GCV of 5,400-5,500 Kcal/Kg. The concession has just received final forest use (Pinjam Pakai) approval. As the company has commenced construction of supporting road and port infrastructure, Essar expects first coal from Aries mine within 9-12 months. The mine will secure coal supply for Essar’s Salaya I (1,200 MW) coal-fired power plant in Gujarat, India. PUNL LLOYD Sembawang Engineers and Constructors Pte Ltd, subsidiary of Punj Lloyd, has acquired 50% shares in a thermal coal company in Central Kalimantan last year. The mining company holds a coal IUP license and is located in Barito Utara District with estimated resources of 134 million tons and potential in situ reserves of 57 million tons. The initial plan was to...

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Duta Anggada & Farpoint Realty

Property developer Duta Anggada Realty (DART) is among top gainers in the last few weeks of 2011. The stock surged from below Rp200 to Rp485 as of January 13, 2012. At this price, DART has market capitalization of Rp1.3 trillion or about 1.67 x equity as of September 30, 2011. The company booked net profit of Rp54 billion in nine months of 2011, surged almost 50% from the same period in 2010 on higher sales revenue. Sales revenue increased 28% to Rp318.8 billion in nine months of 2011, while operating profit surged 55% to Rp141 billion. Deutsche Bank AG, Singapore is listed as largest shareholder of the property developer with 33.73% shares. This might be related to loan facility provided by Deutsche Bank to DART of US$160 million few years ago. The company’s operation, however, is still in the hands of Angkosubroto Family (Gunung Sewu Group). Hartadi Angkosubroto is president commissioner of the company, while his son Randy Angkosubroto is director. Deustche provided US$160 million loan at LIBOR + 5.5% in July 2007, reportedly to finance St Regis project in Jakarta. Duta Anggada and Starwood did sign management agreement in 2007, but construction delayed substantially. Have you checked progress of this project lately? In January and November 2010, DART accelerated payment of Deutsche facility of US$93 million, leaving the balance of US$66 million. How? Well, Bank Panin provided US$60...

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