Merry Christmas & Happy New Year 2014

WELCOMING THE YEAR OF EXPANSION, CMNP ISSUED BONDS WORTH RP2 TRILLION

In the midst of the global market which is still volatile, there are not many companies on the stock exchange who took corporate action such as issuing debt securities (bonds). This is a great project to welcome the year 2014.

Maybe because it has received input and consideration from the underwriters, finally PT CITRA Marga Nusaphala Persada Tbk (CMNP) intends to take corporate action in the form of bond issuance worth at least Rp 2 trillion in March 2014. Proceeds of the sustainable public offering (PUB) will later be used to finance business expansion of this construction company next year.

Finance Director of CMNP, Indrawan Sumantri, said that the implementation of PUB, the Company will appoint 4 underwriters. The four securities companies are Ciptadana Securities, Indo Premier Securities, Trimegah, and Sucorinvest Central Gani.

The company will issue two types of bonds, namely conventional bonds and sharia bonds (sukuk). The portion is probably equal. The tenor of the bond is five years. “Its value is greater than the initial plan,” said Indrawan in his office on Monday (December 9).

Previously, this flyover construction company plans to issue bonds worth Rp1.2 trillion. However, the plan was never realized because it did not obtain shareholder approval. The bonds will be issued in two types, namely conventional bonds and sharia bonds (sukuk) with a portion of 50% conventional bonds and 50% sharia bonds.

The Company plans to issue sharia bonds. According to CMNP, securities which are more attractive are sharia bonds. Proceeds of the bond issuance will be used for the company’s expansion next year that reached Rp2.26 trillion, where the company is preparing an investment of nearly three times larger than this year.

The projects that will be worked on include the Jakarta Intra Urban Toll Road (JIUT) and Depok-Antasari toll road as well as Serpong – Balaraja toll road. For the Jakarta Intra Urban Toll Road (JIUT) project, the company allocated around Rp1.5 trillion next year. CMNP intended to widen the bottleneck on this road.

Total fund needed reached Rp3.6 trillion. Construction is estimated to complete in 2016. Currently, CMNP is awaiting a permit from the government for the construction. “If the permit can be issued this month, in May next year we will have started construction work,” said Indrawan.

The next project is Depok-Antasari toll road. The company is working on land acquisition up to 60% this year. Thus, in the first quarter of 2014, the company was able to begin construction. CMNP controls toll roads of 21.5 kilometers (km) length through PT Citra Wasphutowa (CW). While, the funds, which will be allocated to the subsidiary company, including the CW, reaches Rp613.4 billion.

Then, around Rp120 billion will be prepared for affiliate loan, especially for PT Citra MArgatama Surabaya (CMS). According to Indrawan, a subsidiary which has a concession for Waru-Juanda toll road cannot be used to finance the operations of CMS,” said Indrawan.

The reason, he added, that creditors requested that CMS operating revenues be used to accelerate debt payments. Thus, CMS, where 94.7% of its share are owned by CMNP still require fund injection from the company. Another project which is being targeted is the Serpong-Balaraja toll road. CMNP has passed the pre-qualification stage for the toll road with 36.3 kilometers (km) length. If it wins the bid, then, the company has set aside around Rp 1 trillion for the first year. The funds will be taken from the company’s internal cash.

On the many expansions next year, Indrawan continued, one of the options taken is issuing bonds. Indrawan believed that the bond rating will be positive. So, the bond interest will not overburden the company. CMNP had been rated single A minus (A-) for two times by Pefindo (PT Rating Agency of Indonesia).

The Company will use the September 2013 audited financial statements. The company will conduct a mini expose to the Indonesia Stock Exchange (IDX). After that, it will submit  an application for the issuance of bonds to the Financial Services Authority (FSA). “Not later than March 2013 we heve been able to issue bonds of the first phase”, said Indrawan.

Meanwhile, result of a feasibility study in detail conducted by CMNP showed that they canceled the plan to develop new business in the field of mining infrastructure because the transaction in this industry is considered increasingly sluggish. The management decided to pull up on the business plan. Indrawan acknowledged that the project is actually very good, but the community does not support it at this time, the price of coal continues to decline.

CMNP management projected a net profit of Rp358,752 billion in 2014. The target is less than the 2013 profit forecast at Rp404.30 billion. Revenue is potential to reach Rp1.50 trillion, up from the Rp1.05 trillion based on 2013 forecast. This is an official statement of the company.

Operating expense is estimated at Rp650.11 billion and operating profit at Rp851.44 billion. While, EBITDA (earnings before interest, taxes, depreciation and amortization) in 2014 is estimated at Rp756.21 billion compared to 2013 EBITDA estimates at Rp615.25 billion. The company, in 2014, set capital expenditure budget at Rp2.17 trillion, far exceeding the capital expenditure of this year at Rp877.39 billion. The company’s performance up to June 2013 reached Rp472.35 billion revenue, with net profit at Rp204.46 billion. 

Business News - December 11, 2013

RUPIAH WEAKENED, COMPANIES’ PERFORMANCE FELL

Trading in the last few day recorded that companies’ performance has decreased due to the weakening of the Rupiah. The negative sentiment hit Indonesian stocks. Economic downturn ahead of general election gives a bad signal to the Indonesian economy in 2014.

Bank Indonesia has raised its benchmark interest rate six times. As of January 10, 2013, BI rate stands at 5.75%, and until 12 November 2013 Bank Indonesia has set BI rate 7.50%. The increase in the benchmark interest rate drastically this year actually indicated that the Indonesian economy is increasingly sluggish.

The weakening of the Rupiah also has an impact on Indonesia’s foreign debt, which automatically increased as a result of this situation. “Trading in the stock exchange weakened as the flow of money out of Indonesia is quite large”, economist of the University of Indonesia, Syarifuddin, told Business News (December 6).

The export rate is very significant to offset the balance sheet due to imports. “The people are the one who is mostly affected by the decline in the Rupiah.” But the government seemed to relax seeing this situation. The government should undertake strategic measures. Currently, the government cannot find solutions to the problem of the market depends on the trend, so the measures taken by the government is considered as a sign of giving up on saving the Rupiah.

Government not seeking to control the fall of the Rupiah has an impact on market psychology. Investors will consider that investment climate in Indonesia is unfavorable due to decrease of investment and Indonesian stocks which were hit by the negative sentiment.

Meanwhile, a source of Business News at PT Timah in Bangka, said that there was confusion in Article 13 of Regulation of the Minister of Trade No. 32/2013. So that PT Timah increasingly be inconducive. Regulation of the Minister of Trade ideally would apply export through a one-stop service, namely PT Timah. The impact is that unconventional mining activities or commonly known as artisanal mining will be disciplined. One-stop export service would also streamline tin trade in the domestic market. During this time, tin bars and other forms before being exported shall be traded through a tin exchange. While, the international tin market in Indonesia is part of a futures exchange. “Price of tin at the LME (London Metal Exchange) is approximately USD 23,000. While, its price in the country is around Rp. 11,000. In addition, sales in Singapore, the State Electricity Company (PLN) is still not inconducive. Tin sales were minimal, “the source told Business News a few days ago.

Regulation of Minister of Trade No. 32/2013 is still far from expectations. Central Government and Provincial Government (of Bangka Belitung) still have to do lot of things for controlling artisanal mining. In addition, the Regulation is not strict. There are ambiguous clauses. For example, the provisions on Mining Authorization (KP) which is at risk of overlapping with the rules on protected forest. “In the past, it is the central Government who issued Government Regulation (PP) No. 57, then Government Regulation No. 798 is issued. In all Government Regulations, there is no definition of protected forest, Mining Authority, and others. But in practice, there are many interpretations.”

Size of Mining Concession area of PT Timah Tbk on land is approximately 360,000 hectares or approximately 35 percent of the land area of Bangka Island. This state-owned enterprise also has acreage in Mining Concession in Belitung Island which is approximately 126 455 hectares or 30 percent of the land area of Belitung Island. “PT Timah should also be smart in searching for land. We only got KP, and not protected forests which are actually owned by other miners.”

Among miners, there was a discourse about partial submission of Mining Authority of PT Timah to small-scale miners. Because PT Timah has most of the Mining Authority, while artisanal miners continue to gain tin. This discourse is expected to reduce social phenomena such as unemployment, poverty, and crime rate in Bangka. “Because up to 70 percent of the economy in Bangka still relies on tin, including artisanal mining.” 

Business News - December 11, 2013

BANK INDONESIA’S ANNUAL BUDGET 2014 APPROVED

Commission XI of Househad approved Bank Indonesia’s Annual Budget 2014 in accordance with report of Commission XI. Chairman of Commission VI of House, Olly Dondokambey said, the ratification Annual Budget 2014 was expected to inject positive stimulus to BI’s performance in stabilizing national economy through monetary policy. The approval was conclusion of technical meeting between Commission XI of House with Governor of BI Agus Matrowardojo and his management team in Parliament Building.

The Working Committee XI of House reported that by 2014 operational budget income of Bank Indonesia was allocated at Rp12.6 trillion, or down by 24.6% against 2013 at Rp16.7 trillion. Meanwhile operational budget expenditure rose to Rp4.8 trillion in 2014, an increase of 23.55 percent against 2013 at Rp3.8 trillion.

The breakdown of BI’s operational income was: income from forex asset management Rp12 trillion, invoice of BI’s ex-liquidation credit was Rp24 billion, and Rp200 billion from administration income. The breakdown of Logistics Expenditure Rp 668 billion, expenditure for operational budget for supporting activities Rp452 billion, Social Program Expenditure Fund and empowerment of the real sector Rp154 billion; budget for tax expenditure consisting of tax Rp591 billion and Reserve Budget Rp140 billion.

Commission XI of House approved management expenses for 1,159 BI employees assigned to the Monetary Service Authority with budget amounting to Rp737 billion. They also approved budget for recruitment of 989 new BI employees in 2014 with fund amounting to Rp198 billion. In addition to that Commission XI of House had also decided to approve ATBI which included main performance indicator [IKU] financing and operations including IKU of the Board of Governors.

Business News - December 11, 2013

IN THE ASEAN REGION, SOME MACHINERY INDUSTRIES BELONG TO THE SENSITIVE CATEGORY

In anticipating the formation of AEC 2015 particularly on the Fee trade Agreement side, the Government felt it necessary to pay special attention on some machinery industries like boiler, pump products, agro equipments and electrical equipments, so in terms of import tax those products were still in the list of sensitive category.

As disclosed by the Director of Machinery Industry and Agro-machinery of the Ministry of Industry Teddy C. Ciantury in Jakarta on Friday [6/12], the regulations were applied on industry which were expected to develop higher at home, so the average applicable tax income would be around 5%-10%. The Government was promoting development of agro equipments at home including turbine industry.

The said industry was today already in Indonesia, so all the Government needed to was to strengthen them. And naturally the industries were expected to be more competitive against imported products.

Therefore, one of the Government’s program was to scheme up a masterplan for building Machine Tools Center in Banung, West Java. The Government was expecting that the Tool Center would be a strategic project which would determine the future course of development, particularly in tools machines which were at present still dominated by imported products.

Other efforts of the Directorate of Machinery through theirs policy was to set up a standard of competence to evaluate the human resources potentials such as knowledge in engineering which would soon be entrusted to local technicians. However it was still necessary to formulate the plafform to be applied and it might be necessary to coordinate with the Ministry of Manpower and Transmigration, particularly the National Board of Certification, which would hold the authority to issue the certificate.

Through formation of the Indonesia National Manpower Competence Standardization [SKKNI] establishment of standard of competence in machinery industry was already set up, i.e. for the machines and welding instruments. The policy was soon be elaborated further, whether to be managed by the Ministry of Manpower or the Ministry of Industry.

To step up Competitive Edge

In the effort to strengthen competitive edge of national industry, especially toward AEC to be effective in December 2015, Minister of Industry Mohammad S. Hidayat stated in Bali on Thursday [5/12] that formation of AEC was common agreement among Asean leaders at the 9th Asean Summit Meeting in Bali in 2003, with the objective to set up Asean as single market and integrated production based, whereby there would be free traffic flow of goods, services in this region with tax exemption to be applied be inter-Asean trading.

Realizing the importance of external trading with countries outside Asean, some characteristics had been defined as key factors for AEC 2015, i.e.

1.       Single market and production base

2.       Highly competitive Economic Region

3.       A region of equitable economic development and

4.       A region fully integrated into global economy

These key characteristics were features of AEC which was outward looking in facing competition from countries outside Asean.

Beside the initiative to liberate the market of goods, service and investment, ASEAN also had the initiative to integrate production in ASEAN in the form of Asean Production Chain; better know as Priority Integration Sectors [PIS].

[PIS was divided into 2 forms, i.e. goods sector and service sector PIS included:

1.       Agro-based products

2.       Automotives

3.       Electronics

4.       Fisheries

5.       Information & Communication Technology [ICT]

6.       Rubber-based products

7.       Textile & apparel

8.       Wood based products

PIS of the service category included :

1.       Healthcare

2.       Air Travel

3.       Tourism and

4.       Logistics Services

 

“Although by nature PIS was onward looking, i.e. as ASEAN form of cooperation in facing competition from China and other emerging among Asean members themselves” Hidayat remarked. The inter Asean competition could mean fight for the leader position: who would play greater role in Asean production base. 

As implementation of the 12 PIR Sector concept, the Ministry of Industry played their role in setting up integrative steps for 7 [seven] PIS sectors to be part of ASEAN Production Chain, i.e.

1.       Agro based product

2.       Automotives

3.       Electronics

4.       Information & Communication Technology [ICT]

5.       Rubber based products

6.       Textile & apparels and

7.       Processed Wood Products

In the integration of Asean Product Chain, Indonesia was expected to play an important role not just as supplier of raw materials and end result products but also as production base. The integration process must involve businessplayers especially State Owned Enterprises [BUMN] amd national private companies to build production bases in Asean where Indonesia was expected to play their role. 

Business News - December 11, 2013