Author: yosefardi.com

GOLD RUSH & RIOTS (2)

Newcrest Mining Ltd, controlling owner of Gosowong mine—Indonesia’s third largest gold producer behind Freeport and Newmont, has decided to pull out from a partnership with Southern Arc Minerals Inc in the development of Taliwang project in West Nusa Tenggara. Southern Arc shares dropped 5.48% on TSX Venture following the news. Southern Arc provided no further information behind Newcrest’s decision. Some might have speculated with depressing report about Arc Exploration‘s situation in Bima, West Nusa Tenggara. Southern Arc and Newcrest Mining have earlier reached a heads of agreement to explore the Taliwang Project whereby Newcrest can earn a 63.75% interest (21.25% Southern Arc, 10% Indonesian Regency Government, 5% PT Puri Permata Mega) by funding project expenditures through to a maximum of US$50 million or completion of a bankable feasibility study. Southern Arc is the operator of the Taliwang Project. Located adjacent to Newmont’s world-class Batu Hijau copper-gold mine, the Taliwang property covers 31,200 hectares prospective for gold, silver and copper mineralization. Surface exploration activities during 2011 have focused on detailed lithological and alteration mapping of epithermal and porphyry prospect areas, as well as clay spectral analysis studies. Phase 2 drilling is planned for 2012. This is interesting, especially because Southern Arc had actually ‘engaged’ with local administration as shareholder in the project. Equally important because Southern Arc is also working with world’s second largest mining company Vale SA in Sabalong...

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Truba, Altitude, & Zephyr

Share price of engineering firm PT Truba Alam Manunggal (TRUB) Tbk stays at Rp50 since September 2010. Average trading in the past three months was less than 1 million shares per day. Its fundamentals have worsened substantially in the past few years. At Rp50 per share, Truba currently has market capitalization of Rp790 billion or about 50% of its equity. The company’s equity dropped 24% in nine months of 2011, while liabilities slashed 38% to Rp2.76 trillion or about US$300 million. Cash in hands reduced substantially by 78% to Rp54 billion as of September 2011. Truba also recorded net loss of Rp152.7 billion against net profit of Rp23 billion in nine months of 2010. It is true that sales revenue declined 14%, but the company’s operating profit slashed 58% in nine months of 2011. Operating margin has worsened substantially, right? Looks like that most creditors have left the company. ANZ Panin Bank, Bukopin, BPD Kaltim, Bank Jabar Banten Syariah, Bank Danamon Indonesia, Bank Mega, and Panin were no longer creditors of Truba as of September 30, 2011, leaving only three major creditors: BNI, BII/Maybank, and Bank Mizuho Indonesia. But this might be related to de-consolidation of several subsidiaries (PT Central Daya Energi, PT Menamas Mitra Energi, PT Ranyza Energi, etc) and divestment of heavy equipments at PT Truba Jaya Engineering (Rp172.5 billion). Other than bank loans, debts to ‘thirdy parties’...

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Infrastructure Projects Stalemate

Cikampek-Palimanan toll road, Kalibaru Port, Umbulan Water Project, Jakarta-Airport railway, Central Kalimantan coal railway, East Kalimantan railway, and Makassar New Port are major projects regularly talked, but yet to progress substantially. Why? CIKAMPEK – PALIMANAN TOLL ROAD July 2nd, 2012 is the deadline for financial closing of this project handled by PLUS Expressway and Saratoga Investama. People close to the project financing believe financial closing will be done as scheduled. “The problem was because Bank Mandiri pulled out from the lead. We heard because of its full support for Jasa Marga (state toll road operator), which keens to takeover the project,” one government officer said. BCA takes the lead, and managed to attract China’s ICBC and other banks. “The delay was more of a business competition issue. BCA would get benefit from seizing the opportunity,” one banker commented. Jasa Marga reportedly secured support from SOEs minister Dahlan Iskan to takeover this project. Ordering Mandiri to backoff? KALIMANTAN RAILWAYS The likelihood is that East Kalimantan and Central Kalimantan governments move in separate ways regarding the railway projects. East Kalimantan governments prefer to give the railway project to private investors, which reportedly secured financing from Russian Development Bank. “Ideally, the railways in Central and East would connect, but both sides can’t tone down their ego,” one government officer said. Central Kalimantan government insists to build the railway down south, not to...

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Juniper Network & NIX Conspiracy Allegation

Juniper Network is an ICT company based in Sunnyvale, California. The company’s product is now implicated in allegation of ‘fishy deal’ with people at ministry of information and communication in relation to the giant Nusantara Internet Exchange (NIX) project. Koran Tempo published an article on Tuesday, January 3rd, based on a letter published by anonymous person at popular social media Kaskus. The author alleged a conspiracy between participants of NIX tender and the tender committee at BP3TI, an agency below ICT ministry. BP3TI is alleged of engineering the specification of NIX, which would benefit one ICT vendor. The author pointed to tender documents, where 90 participants put the name of Juniper Networks in the suggestion form for router, switch, and network security. “Why other products like Cisco, Alcatel, Huawei, Ericsson, HP, Extreme were not suggested, was related to the ‘locked specification’,” the letter alleged. More than that, the tender committee reportedly asked for 15-20% ‘fee’ for each package (total of Rp1.2 trillion or about US$130 million). Both ICT Minister Tifatul Sembiring, former chairman of Prosperous Justice Party (PKS), and Santoso Serat, head of BP3TI, dismissed the allegations. Koran Tempo source alleged old player at ICT ministry, winner of other projects, is behind the letter. The source pointed to one of winners of MPLIK project at ICT Ministry (FYI: There were six winners of MPLIK project: PT Multidata Rancana Prima,...

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Political Agenda for 2012

Century, Nazaruddin, and Nunun cases might be carried over to 2012, and as usual, will influence the political dynamics. Gayus and tax related issues have been temporarily buried, but might be reopened by new leaders of the Corruption Eradication Commission (KPK). While SBY said last year’s cabinet reshuffle was the last for his second term, some might try their luck again this year. There are, however, issues that might direct this year’s political talks. New Laws There are at least 64 bills scheduled for deliberations into law this year, including political laws (amendment of Law No 10/2008 about election of legislators and Law No 42/2008 about election of president and vice president). Deliberation of these political laws might dominate this year’s political talks and debates, including efforts from civil society groups to push for independent candidates, for example. This could be the last chance for darlings of civil society groups like Sri Mulyani Indrawati or Mahfud MD to support their 2014 presidential bid through non-political party route. The political bills will also test cohesiveness of SBY-Boediono’s ruling coalition, especially because of conflict between big and small parties about parliamentary threshold, election system (open proportional system vs closed proportional system), etc. Regarding the election system itself, PDI-P, PKB, PKS, Gerindra, and PPP have reportedly expressed their support for a closed proportional system, while Demokrat, PAN, and Hanura support the open...

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When Indonesian Coal Flooding the Market

Canadian publication The Globe and Mail published an article titled A Cautious Optimism for Coal Tuesday (Jan 3rd) where it highlighted concerns about slowing down of consumption in China, the world’s largest consumer of thermal, coking coal, and iron ore. But that’s not the reason we write this article. We want to talk more on easier access to Indonesian coal, which were initially controlled by few major players like KPC, Adaro, Kideco, Arutmin, Berau Coal, Bukit Asam, Bayan Resources, etc. This year alone, we will see new players entering the market. They are entering the market with the range of 100,000 tons to 3 million tons of production. Medco Group, for example, might enter the market with 500,000 tons this year. Delma Mining, controlled by Risjad Family (previous owner of Berau Coal), might also start with the same level of output. Jiangxi’s Kusuma Raya Utama will also start Bengkulu production in April with 600,000 tons per annum capacity. Pakar Coal, now controlled by Kangaroo Resources/Bayan Group, will also entering the market in a more substantial volume. The target was to produce 15 million tons per annum. Other new and substantial players are Essar/Aries Coal, Indomobil Group, Bhakti Energy Persada, STX Coal (South Korea), LG International, Awesome Coal, Apple Coal, Apuah Coal, Balangan Coal, Adavale Resources, Inovisi, Orpheus Energy, Renuka Coal (Jambi), India Cement, Indo Setubara, Agritrade Resources, Victory West,...

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Chaotic Implementation of PPP

Government officers were enthusiastic in announcing the so-called public-private partnership (PPP) for infrastructure sector. They are, however, less motivated to sort out problems in the implementation stages for various reasons. The most common is, of course, conflict of interests. Bisnis Indonesia published two interesting headlines this morning. First about the delay in Makassar New Port project, and the second on uncertainties surrounding the Kalibaru Port project in Jakarta. Makassar New Port: The initial plan was to start commercial operation of this port in South Sulawesi by 2015. Environmental studies for the project have been completed two years ago. Unfortunately, until now, central government has yet to decide who will build the port. Port Authority of Makassar (Pelindo IV) has actually signed a memorandum of understanding (MoU) with International Container Terminal Services (ICTSI) in Manila, the Philippines in April 2012. ICTSI is controlled by San Miguel Corporation. Pelindo IV expects government’s support for the US$700 million project. The problem, local administration of South Sulawesi expects government support for port project in Barru Regency, South Sulawesi. South Sulawesi governor even asked central government to move export and import activities to Barru Port instead. The so-called Garongkong Port is one of the PPP projects. Tender to select investors for this project has also been delayed several times. Kalibaru Port Jakarta: Last year, Pelindo II, the port management company, signed an agreement with...

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Duta Anggada & Sinarmas

Duta Anggada Realty (DART), like other property stocks, has gained 120% since December 2011, even though its performance actually weakened substantially in the first quarter of 2012. In the first three months of 2012, Duta Anggada only posted net profit of Rp4.9 billion, insignificant compared to its equity and “assets”. The company’s revenues also slipped to Rp91.8 billion, mostly derived from rental and service fees, because no strata title units sold in the period. Building operation costs, meanwhile, surged to Rp51 billion from only Rp28 billion in the same period last year. As a result, Duta Anggada’s operating profit slashed 40% in the period. Angkosubroto family is still in the company through Hartadi (president commissioner) and Randy (director). The shares of Duta Anggada, meanwhile, are mostly held by banks. Deutsche Bank AG, Singapore, for example, holds 33.73% shares, while ABN Amro 11.56%, and RBS Coutts Bank 8.12%. This might be related to DART’s loans to these banks. At Rp540 per share, DART currently has market cap of Rp1.54 trillion. Value of shares held by Deutsche Bank is around Rp521 billion. In July 2007, Deutsche arranged a syndication loan of US$160 million to finance the St Regis project in Jakarta. The facility carries LIBOR + 5.5% due July 2012. The balance of this facility as of March 31, 2012 is US$69.76 million, secured with funds in the escrow accounts and...

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Jakarta Election: A Race to Enjoy

Boring with President SBY’s complaints and melodramatic statements? Well, we still have interesting stories to tell. Jakarta gubernatorial election, scheduled July 2012, is one of them. We have provisionally six pair candidates competing, including two independent candidates (Faisal Basrie and Hendrajit Supandji).

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M & A Journal

Olam International Ltd rallied from around S$1 in late 2008 to as high as S$3.3 in late 2010, but then steadily declined to S$1.57 on Monday. As if ignoring negative reports about the company, Temasek Holdings decided to invest more. Also in this report: Noble Group‘s investment in Indonesia. At the current price, Olam only has market cap of S$3.7 billion despite endless of maneuvers, including acquisitions in Indonesia in recent years. On Monday, the agriculture trader announced a renouncable underwritten rights issue comprising US$750 million 6.75% of US$ denominated bonds due 2018 with 387 million free warrants on shares of the company. Upon conversion of the warrants, Olam will raise up to an incremental US$500 million of proceeds. Banks supporting the transaction include Credit Suisse, DBS, HSBC, and JP Morgan, who will underwrite this transaction in full. “Further, Temasek has Temasek has undertaken to take up their rights entitlement and have also committed to subscribe for all Bonds and Warrants that are not subscribed for under the Transaction, underlining Temasek’s support for Olam and the Company’s announced  strategic plan,” Olam said. Well, let’s see whether Temasek makes the right decision. The company currently has 16% stake in Olam, which has some operations in Indonesia. Another commodities player Noble Group Limited, meanwhile, has acquired more shares in PT Henrison Inti Persada (HIP), lifting its ownership from 51% to 94.9% with aggregate consideration of US$13.17 million. As at October 31, 2012,...

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