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MSKY’s profits drop despite boost in subscriber growth

Publicly listed pay TV provider PT MNC Sky Vision (MSKY) saw its net profits plunge last year although its revenue grew steadily on the back of new subscribers.

In an unaudited financial report, MSKY announced Rp 43 billion (US$4.39 million) in net profits in 2012, a 34 percent drop compared to Rp 65 billion in the same period last year.

The company attributed the decline to unrealized foreign exchange losses of Rp 165 billion (US$17 million) from its $165 million bonds that will mature in 2015.

Despite declining net profits, MSKY reported solid business growth with its revenue jumping 37 percent to Rp 2.38 trillion in 2012 from Rp 1.74 trillion a year earlier. 

Its operating income stood at Rp 491 billion, surging 39 percent from Rp 353 billion in the same period last year.

A growing number of subscribers contributed to the surge in revenue.

The company said that it had a total of 1.72 million subscribers at the end of last year, a 48 percent increase from 2011’s figure of 1.16 million. 

In 2012, MSKY managed to attract 558,000 new subscribers, or an average of 47,000 new subscribers per month.

Despite a growing number of subscribers, the company saw its average revenue per user (ARPU) remain stable at Rp 123,000 per month.

MSKY, a subsidiary of media group PT Global Mediacom, which is controlled by media tycoon Hary Tanoesoedibjo, now has 116 local and international channels, 26 of which are exclusively offered via three pay TV brands — Indovision, Top TV and Okevision.

“Going forward with plans to enhance our product offerings and services, we are confident of achieving strong subscriber growth and strengthening our position as the biggest pay TV provider company in Indonesia,” MSKY president director Bambang “Rudi” Rudijanto Tanoesoedibjo said in a written statement.

Rudi said that MSKY had 85 offices across the country as of the end of last year, which contributed to the increase in the number of subscribers.

The country’s pay TV industry is expected to grow by between 10 and 20 percent this year, according to analyst Kiswoyo Adi Joe of PT Investa Saran Mandiri.

“The main factor for growth is the country’s growing number of middle-class consumers. MSKY’s business has good prospects as it has the largest network. It also has the most number of channels,” Kiswoyo said.

“However, the company needs more variety in its programs and new channels to maintain its subscribers,” Kiswoyo said.

Shares in MSKY slid 2.92 percent from Wednesdays close at Rp 2,050 to end at Rp 1,990 apiece on Friday. 

The price of the company’s shares has increased by around 31 percent since its initial public offering in July last year, when the firm sold shares at Rp 1,520 apiece.

Cosmetics key to growth for Martina Berto

Major cosmetics producer PT Martina Berto (MBTO), part of the Martha Tilaar Group, expects that the rising buying power of the nation’s growing middle-class will help the company achieve its target of a 15 percent increase in total revenue and net profits this year.

The publicly listed company relies on middle-class consumers as most of its products are targeted at that demographic, according to Martina Berto president director Bryan Tilaar.

“Our business is in the consumer goods sector, which is quite an appealing sector right now, considering Indonesia’s strong domestic consumption. The rise of the middle class will have a positive impact on our sales,” he said during a telephone interview on Friday.

The company’s growth is predicted to be higher than that of the overall cosmetic industry, which is estimated to rise 7 percent in 2013, Bryan added.

Martina Berto manufactures color cosmetics, skin care, body care, hair care and herbal products under several brands, such as Sariayu, Caring, Biokos, PAC, Rudy Hadisuwarno and Dewi Sri Spa. 

It is expected that their color cosmetic and skin care products will be major contributors to the projected growth in 2013.

According to Bryan, all of the brands have introduced new product variants, including Sariayu with its annual color trends. In 2013, Sariayu is opting to promote the colors of Central Java’s northern coastal region.

In total, this year’s new variants will reach about 100 stock keeping units (SKUs) and will add to the 1,000 SKUs which Martina Berto currently has.

To support the growth, the company will open between three and five new outlets in Indonesia. It also plans to establish its flagship store in Malaysia in 2013. 

At the moment, Martina Berto operates around 16,000 outlets across the country and two retail outlets under the Martha Tilaar brand in Singapore, and partners with a number of overseas suppliers.

“We mainly export herbal products. Foreign markets only contribute 2 percent or 3 percent to our total sales right now. We hope to increase the figure to 5 percent by 2016,” Bryan said.

It expects subsidiary PT Cedefindo to play a bigger role in reaching this year’s target. Besides cosmetics for Martina Berto, Cedefindo manufactures products for other brands, such as Kosé, Sara Lee, Oriflame, Chicco and Rohto. Third-party products account for between 15 percent and 20 percent of total sales.

Meanwhile, the company is also looking to complete the construction of its new herbal factory in Cikarang, Bekasi, West Java, between September and October. It will have a production capacity of around 280 tons and 290 tons per year. Currently Martina Berto produces its herbal products at a rented factory in Bogor, West Java. It will cease production in Bogor following the completion of the Cikarang plant.

Bryan said that the company’s 2012 unaudited financial report showed Martina Berto managed to reach 98 percent of its revenue and net profits targets, which were set at Rp 713.21 billion (US$73.96 million) and Rp 46.92 billion, respectively. 

It recorded that its total assets stood at Rp 583.99 billion as of September 2012. It has liabilities of 
Rp 158 billion, while its equity amounts to Rp 425.99 billion. Martina Berto’s shares closed at Rp 415 on Friday, up 5.1 percent from Wednesday.

Economist: Euro crisis could erupt again this year

A top US economist is warning that the eurozone debt crisis could erupt again this year if European leaders do not move faster to solve their problems.

Barry Eichengreen says recently calm eurozone financial markets "have swung from undue pessimism to undue optimism."

He warns that the crisis in the 17-country currency group "is going to heat up again in 2013." He spoke at the World Economic Forum in the Swiss Alpine resort of Davos.

Eichengreen, a professor at the University of California, Berkeley, says markets need to see quicker action to set up a banking supervisor at EU level, along with a centralized way to restructure failed banks.

That would keep bad banks from bankrupting governments through bailouts. Leaders are still debating how to implement it.

Royalty hike ‘will not dent’ Unilever income

Consumer goods producer PT Unilever Indonesia has said that the recent hike in royalty fees payable to its Anglo-Dutch parent company, Unilever NV, will not dent the Indonesian subsidiary’s earnings.

PT Unilever Indonesia has announced that, as of Jan. 1, it will have to submit at least 5 percent of its earnings as a form of royalty payment to utilize trademark, technology and services owned by its parent company.

The increase in royalties, the company added, would occur gradually over a three-year period. Previously, Unilever Indonesia paid royalties equivalent to 3.5 percent of its earnings.

However, Sancoyo Antarikso, spokesman for PT Unilever Indonesia, said that the higher royalty payments would not dent Unilever Indonesia’s earnings. “This will instead ensure that innovation keeps on flowing into Unilever Indonesia,” he told The Jakarta Post.

He added that innovative input would further boost the firm’s sales volume in the market.

As of the third quarter last year, Unilever Indonesia booked Rp 20.3 trillion (US$2.09 billion) in net sales, 17.4 percent more than the same period in 2011. Profit for the period climbed 20.7 percent to Rp 3.6 trillion while gross profit went up by 16.6 percent to Rp 10.3 trillion.

Executive column: High logistics costs hinder cement market

The country’s third-largest cement producer, PT Holcim Indonesia, the local unit of Zurich-based Holcim Ltd., wants to maintain focus on distributing cement to the housing sector, which has seen growing demand from members of the burgeoning nation’s middle class. Holcim Indonesia president directorEamon J. Ginley recently talked with The Jakarta Post’s Raras Cahyafitri to discuss the firm’s plans for the future. Below are excerpts from their interview.

Question: How do you see the Indonesian cement market?

Answer: Market growth has been very strong. In 2012, [growth rates] hit around 14 to 15 percent 
and Holcim Indonesia managed to maintain its share of that growth. This year’s outlook varies. We 
foresee industry growth of about 8 to 10 percent.

The driver of growth is the familiar story of the emerging middle class, pushing housing demand. It’s not necessarily infrastructure, as 80 percent of cement in the nation goes to housing and 20 percent to infrastructure.

Meanwhile, Indonesia’s macroeconomic picture looks quite strong. Combined with demand coming from the housing sector, this ensures that growth targets will be easily reached. In next 10 years, we will see demand for cement double. This year, the market will finish around 55 million tons and in 10 years time, I imagine somewhere between 90 and 100 million tons.

Will there be more opportunities to provide cement for an increasing number of infrastructure projects ahead of the election in 2014?

Infrastructure is increasing. We forsee an increase in such projects, as in airports, power plants and toll roads. Whether it gives an additional kick or additional emphasis, let’s wait and see. It would be great for the country to get more infrastructure in place and also good for cement sales.

Infrastructure is incredibly important for Indonesia. It’s one of the key elements needed to ensure that we can exceed 6 percent [annual] GDP growth. Indonesia could and should book up to 8 or 9 percent in GDP growth. Infrastructure is the key. It unlocks the ability to get to ports, makes business more competitive and lowers costs in terms of logistics. There is figure saying that every dollar spent on infrastructure will generate three to four dollars for the economy.

What might hinder growth for cement makers?

Logistics costs have been very high. Indonesia is an incredibly diverse archipelago and therefore ports are very important. We need to improve port infrastructure to make sure that cement can get out there and be distributed.

Will Holcim Indonesia keep focusing on housing?

That’s certainly a key market for us. We have initiatives such as the Solusi Rumah [housing solution], which is a franchise system. We now have more than 400,000 Solusi Rumah outlets, mainly in Java.

Nobody buys a bag of cement because they really want a bag of cement; they want something else. We’re bundling Solusi Rumah with access to financing and insurance.

We have a new factory, Tuban I, in East Java, which will enable us to reap substantial savings in logistics costs. We prevoiusly supplied [East Java] by transporting cement from our plants in West Java or Central Java.

We have no plans to build fully integrated cement plants on other islands yet. We expanded about two years ago into Riau and Batam with small silos and packing plants to better service our customers there. However, the real focus is on Tuban I — a big project with big investment. We are in negotiation process for Tuban II. I’m hopeful that in a couple of months we will have something agreed to and will be able to start construction sometime early next year.

We need Tuban I to enter production. We’re completely sold out. The Tuban I cement mill will come online in quarter two, and then the clinker line will come online by the end of November or December.

We are not one of the big two cement companies. We’re simply not big enough and can’t afford to be absolutely everywhere. We’ve been based in Java, historically. It’s a matter of consistency. It’s a matter of being able to reliably supply our partners, distributors and customers. We must look at our customer base and ensure that we’re satisfying their demands before going to chase new demand. Otherwise we might lose our credibility with our existing partners.

How does Holcim’s Indonesian unit support the firm’s global network?

Holcim Indonesia is very important. The growth story in Europe and the United States has been flat or negative in some cases. Growth is happening in Indonesia. All companies need growth stories and Indonesia is one of the countries to look at for that. 

If we look back to 2011, we contributed about 4 percent of net sales globally and our EBITDA [earnings before interest, tax, depreciation and amortization] was under 6 percent of the global total.

It is also increasingly important to develop skilled people in the cement business. We are a global company, so we have a need for well-trained people. It’s not only about the financial. It’s also about human resources.

Tokyo adds 5 new sponsors to support 2020 bid

Tokyo has signed up five more Japanese companies to sponsor the city's bid to host the 2020 Olympics, a move organizers say adds to the economic stability of its campaign to bring the games to the Japanese capital.

The five new companies backing the bid are Marudai Food Co., EH Inc., a private-label manufacturer, amusement corporation Maruhan Corp., travel agency TOPTOUR and Daiwa House Industry, Japan's largest homebuilder.

The addition of the five companies brings the total number of corporate sponsors to 16. Companies that previously signed up include ASICS Corp. and Mizuno Corp., two of Japan's leading sporting goods manufacturers, as well as All Nippon Airways and Japan Airlines.

"It is clear that our bid enjoys widespread support in the Japanese business community," Tokyo 2020 bid president Tsunekazu Takeda said.

Tokyo is bidding against Istanbul and Madrid. The IOC will select the host city at its meeting in Buenos Aires on Sept. 7.

The announcement by Tokyo organizers came just four days after Istanbul signed up seven leading Turkish companies to support its bid.

Tokyo, which hosted the 1964 Olympics, is bidding for a second straight time after finishing third in the IOC vote for the 2016 Games, which went to Rio de Janeiro.

The Japanese capital is boasting its safety, advanced infrastructure and convenience as reasons why it should host the games.

Indonesians backing Bali condotel market

A study by hospitality consulting firms Horwath HTL and C9 Hotelworks states that domestic buyers, mostly from Jakarta and Surabaya, dominate 80 percent of the condominium hotel (condotel) or residential hotels market in Bali.

“We expect the trend to continue,” Bill Barnett, C9 Hotelworks’ managing director, told The Jakarta Post recently.

The condotel is a real-estate concept that sees hotels selling units to function as vacation homes to the public. When not in use by the buyer, the units are rented as hotel rooms.

Barnett added that property laws in Indonesia that prevent foreigners from owning land had contributed to the trend. Foreigners are prohibited from owning land, and therefore, property. However, the Building Ownership Certificate (SKBG) allows foreigners to own condominiums for 60 years, extendable by an additional 60 years.

Moreover, European buyers were still feeling the pinch of the financial crisis and had backed down from investing in property in Bali, Barnett added.

The penny-pinching European is in contrast to the crop of “aspiring buyers” from Indonesia’s emerging middle class, who, after self-imposed austerity during the 2008 economic crisis, were now searching “to buy the next big thing”, he said.

Barnett added that with entry prices from US$3,000 per square meter, condotels were popular among Indonesian buyers, who bought them to support their lifestyle and as an investment

“The most popular units are the ones with one bedroom because of their lower price point,” he said, adding that “depending on management over a period of five to six years they can offer up to an 8 percent guaranteed yield from profit or revenue from leasing the units,” he said.

Data from the organizations study showed 56 percent of units of hotel-managed condominium and apartment projects in Bali were studios, with another 30 percent consisting of one room.

The current number of studios available is around 300,000 units, while the number sold is slightly above 400,000. The number of one-bedroom units available is close to 200,000, with roughly the same number sold.

Other issues dampen the condotel market. Barnett pointed out that many condotels were “not a stellar investment” due to the locations, usually away from the prime areas.

As a result, condotels could lose out to hotels in strategic areas near the beach when attracting tourists.

The study reported that 12,000 new hotel rooms are in the pipelines as developers prepare for a surge in occupancy brought about by the Asia-Pacific Economic Cooperation (APEC) meeting this year.

Developers are also in a frenzy to build hotels because, in lieu of APEC 2013, the Ngurah Rai Airport will be upgraded to raise capacity to 25 million passengers a year. This would mean a greater influx of tourists in the coming years.

Furthermore, Barnett added, the management of condotels must secure permission from multiple unit owners to invest in the renovation of degraded facilities. Hotels, with singular ownership, were exempted from the hassle of reaching a widespread consensus.

“Condotels may become rudderless ships,” he said.

Barnett said there was the possibility that condotel buyers dump property once their initial investment was returned. This would create a secondary market of used condotels competing with new ones in the primary market. 

“This is the problem with inexperienced property developers,” he said.

Kalbe Farma targets 18% growth for 2013

Publicly listed pharmaceutical company PT Kalbe Farma says that it is expecting sales to increase by up to 18 percent this year.

“Around 15 to 18 percent growth is average in our business. It is likely that the nutritional division will report higher growth,” Kalbe Farma finance director and corporate secretary Vidjongtius said here on Sunday.

Kalbe Farma’s prescription drug, consumer health, nutrition and distribution and logistics division all contributed equally to the company’s total sales in 2012, according to Vidjongtius.

The company established last year PT Kalbe Milko Indonesia, a joint venture that has been planning to build nutritional drink production facility.

Vidjongtius said that the company’s business grew in line with expectations for 2012, estimating that Kalbe Farma would record a sales increase of 24 to 25 percent in 2012 compared to the previous year.

Although the firm has not issued figures for its full-year financial performance last year, a 25 percent increase over the firm’s Rp 10.91 trillion (US$1.13 billion) booked in net sales in 2011 would be about Rp 13 trillion. 

Extrapolating further, the firm’s 18 percent estimate for sales growth for 2013 might translate into almost Rp 15 trillion.

Sales growth in 2012 was supported by, among other things, distribution from a new principal, PT Abbot Indonesia, that boosted the contribution of the distribution division to Kalbe’s total income, 
Vidjongtius added.

Kalbe’s distribution business is run by 91.75 percent owned subsidiary PT Enseval Putra Megatrading, which is also listed on the Indonesia Stock Exchange.

“This year, we don’t see a new principal cooperating with us. Therefore, this year’s growth rate will be lower than last year. However, our growth is still above the market average,” Vidjongtius said.

The firm’s pharmaceuticals division would likely book 12 to 15 percent sales growth this year, according to Kalbe Farma.

Vidjongtius said that new health products, such its Hydro Coco health drink, Tipco juice products and other newly acquired products contributed the most to the company’s growth last year. 

Last year, the company acquired PT Hale International, the producer of Original Love Juice health drink and Pome Rama.

Vidjongtius said that Kalbe would continue to study additional acquisitions for 2013.

“We keep doing studies to investigate the possibility of acquisitions for Indonesia and the Southeast Asia region,” Vidjongtius said. 

“However, it’s difficult to predict realization. Acquisition is our secondary strategy and we are keeping the focus on developing existing business,” he added.

Garuda to start building fourth GMF hangar next week

PT GMF AeroAsia, a subsidiary of national flag carrier Garuda Indonesia, is set to begin construction on its fourth hangar in Cengkareng, Banten, on Jan. 30, with investment of US$50 million, to keep up with the airline’s expanding fleet.

The new hangar is expected to enable the company to repair and overhaul more aircraft, helping the firm increase its revenue by 20 percent to $252 million this year. 

“The fourth hangar will ensure that we keep pace with growing demand from our customers, both domestic and international carriers, and deliver the best service to enhance aviation safety in the country,” GMF president director Richard Budihadianto told The Jakarta Post. 

The Garuda Group alone, for instance, will take delivery of 34 aircraft throughout 2013. The aircraft will be among the new planes of parent company Garuda Indonesia and budget carrier Citilink Indonesia.

Garuda and Citilink will operate 24 and 15 new aircraft, respectively.

Garuda’s new aircraft will comprise four Boeing 777-300 Extended Range (ER); 10 B737-800 Next Generation (NG); two Airbus 330-200s; one A330-300; and seven Bombardier CRJ1000 NextGen, while Citilink will take delivery of 10 A320s and five Avions de Transport Regional ATR 72-600s.

Besides the Garuda Group, Lion Air, Sriwijaya Air and Mandala Air also use GMF’s hangars to maintain and repair their aircraft. 

As for international airlines, Zimbabwe’s Avient Aviation and Afghanistan’s KAM Air are going to use GMF facilities this year. 

“We are going to have more new customers this year,” he said. 

The new Hangar 4 would be constructed on 18,000 square meters of land and would be equipped with a multipurpose docking platform for C-checks or heavy maintenance of narrow-body aircraft, such as the B737 and A320 family, he said.

The hangar will be able to house up to 16 narrow-body aircraft at one time.

“The construction will take approximately one year to complete and we expect it to be operational at the end of 2013,” he said.

As of today, GMF’s existing three hangars can accommodate up to 29 aircraft.

In addition, the company plans to build a fifth hangar, which is aimed to house four wide-body aircraft, including the B747 and A330 series, as soon as it completes the fourth one. 

The fifth hangar is projected to commence commercial operations in 2015.

GMF has also finished its Maintenance, Repair and Overhaul (MRO) facilities for the sub-100 Bombardier jet in Makassar, South Sulawesi.

In the future, it planned to set up more Bombardier MRO facilities in Garuda’s regional hubs: Balikpapan, East Kalimantan; Biak, West Papua; Denpasar, Bali, and Medan, North Sumatra, where the Canadian aircraft were based, he added. 

Garuda signed a contract to purchase 18 Bombardier CRJ1000 NextGen airplanes at the Singapore Airshow in February last year with an option to buy an additional 18. This year, the airline will operate five jets from its Makassar hub. 

GMF AeroAsia has facilities to conduct A-Check (light maintenance) to D-Check (the most comprehensive aircraft checks), in Cengkareng, west of Jakarta, and has been certified by the European Aviation Safety Agency (EASA) and the US Federal Aviation Administration (FAA), giving it a competitive advantage as an MRO company.

Baramulti and Resource Alam hopeful on high coal prices

Publicly listed coal miners PT Baramulti Suksessarana (BSSR) and PT Resource Alam Indonesia (KKGI) are optimistic about the business climate in 2013 as coal prices rebound. 

“That [the price] is much better compared to several months ago. The global economy picture remains challenging but economic data flow from the US and China suggest there is light at the end of the tunnel,” Baramulti investor relations head Adi Hartadi said in an email sent to The Jakarta Post.

As previously reported, the government expects the Indonesia coal reference price (HBA) to reach over US$100 per ton this year following potential economic recovery shown by the recent US fiscal-cliff budget deal. 

The country’s average HBA only reached $95.5 per ton last year, far below the average price level in 2011 of $118.4 per ton.

Adi said Baramulti aimed to produce up to 5.5 million tons of thermal coal in 2013, 57 percent higher than the 3.5 million tons estimated last year. The company currently operates one mining site in Kutai Kartanegara, East Kalimantan, and another in Banjarmasin, South Kalimantan, through subsidiary PT Antang Gunung Meratus.

The Kutai Kartanegara mining site is located in a 2,460-hectare concession area with 54.6 million tons of coal reserves and 207.4 million of coal resources. Meanwhile, the Banjarmasin mine occupies a 22,433-hectare site and reportedly has 59.6 million tons of coal reserves and 860.7 million tons of coal resources.

China and India will remain Baramulti’s biggest markets this year, followed by domestic consumption, according to Adi. To support the target, it will purchase several supporting facilities and develop its infrastructures using funds generated from last year’s initial public offering (IPO).

Baramulti raised about Rp 509.9 billion ($52.88 million) from its IPO in October 2012. About Rp 234.55 billion of the funds will finance Antang’s capital expenditure (capex), while Rp 56.09 billion will be used as Baramulti’s capex. 

“The capital expenditure will be spent accordingly up to 2014,” Adi said.

Between January and April 2012, Baramulti reaped $39.41 million in sales and $7.05 million in net profits. However, it has not submitted its 2012 full year financial report to the Indonesia Stock Exchange (IDX). 

The company estimated that last year’s growth could go beyond 50 percent as it booked a total of $55.79 million in sales and $3.1 million in net profits in 2011.

Resource Alam commissioner Suria Tjahaja said that the company remained upbeat that business would be much improved this year compared to 2012. 

“Our average selling price throughout last year was $52 per ton. We believe the price will increase, supported by brighter prospects in China,” he said.

Resource Alam has set the target of 4.7 million tons in coal production volume by year-end, up 11.9 percent from the 4.2 million tons last year. It produces low- and medium-calorie coal through subsidiary PT Insani Bara Perkasa in East Kalimantan province. It also has several other concession areas in East Kalimantan and Central Kalimantan provinces but they are still at the exploration stage.

Similar to Baramulti, Resource Alam’s sales are dominated by exports to China with 80 percent, followed by South Korea, India and domestic market.

The company set aside $2.5 million from its internal cash for 2013’s capex, which will include heavy equipment purchases, land acquisition and infrastructure development.