IDX BUMN20 prospects: Hope blooms for SOE stocks

This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.

Bisnis Indonesia - Prospek IDX BUMN20: Asa merekah saham pelat merah

31 October 2024

By Dionisio Damara

Bisnis, Jakarta – The financial report performance and the establishment of the state-owned enterprise (SOE) super-holding in the long term have the potential to act as catalysts for stocks in IDX BUMN20.

PT Bursa Efek Indonesia (IDX) has announced its minor evaluation of the stocks listed in IDX BUMN20, effective from 5 November 2024 to 4 February 2025. The result indicates that there are only changes in the stock weights, with no changes to the constituents.

Stocks in IDX BUMN20 that increased their weight include BBRI, BBTN, PGEO, TLKM, BJBR, and AGRO. Meanwhile, stocks that decreased their weight include BMRI, BRIS, ELSA, JSMR, MTEL, PTPP, and PTBA.

As of now, stocks in IDX BUMN20 are still underperforming with a decline of 4.91% year-to-date (YtD) as of Wednesday, compared to the ICI, which has increased by 4.08%. The index growth is mainly sustained by stocks such as BMRI, which increased by 17.28%, BRIS by 71.56%, PGAS by 46.89%, PTBA by 34.67%, and TINS by 106.20%.

Meanwhile, stocks that have hindered IDX BUMN20 include TLKM, which decreased by 22.10%, SMGR by 37.62%, BBRI by 13.32%, PGEO by 11.63%, and MTEL by 5.80%.

Kiwoom Sekuritas Indonesia Research Head Sukarno Alatas believes that the weight changes will affect the performance of stocks in IDX BUMN20. According to him, stocks that have increased in weight can achieve positive performance, while stocks that have decreased in weight risk being negatively impacted by the evaluation.

However, Sukarno observes that the stock performance of state-owned companies remains attractive, especially for issuers with strong fundamentals. Additionally, valuations are becoming more appealing due to the current decline in the performance of stocks in the index.

“The prospect of declining interest rates in the future will be positive for most sectors. However, the challenge lies in economic uncertainty due to geopolitical tensions, which could impact company income in the future,” he said to Bisnis on Wednesday (30/10).

He believes that most stocks in IDX BUMN20 remain attractive to investors as investment options. However, suitable timing is needed to maximise their potential. The state-owned company stocks favoured by Kiwoom Sekuritas include BBRI, BBTN, TLKM, PGEO, and SMGR (or SIG).

“In addition to the increase in weight, these stocks are undervalued in terms of valuation. Therefore, it is advisable to wait and see the financial performance in the third quarter of 2024, as it could impact the stocks,” Sukarno said.

Super-holding

Meanwhile, an SOE super-holding, Daya Anagata Nusantara Investment Management Agency (BPI Danantara), is planned to be established to serve as a catalyst for SOE performance in the future.

BPI Danantara Head Muliaman Darmansyah Hadad mentioned that BPI Danantara would be inaugurated by President Prabowo Subianto on 8 November 2024.

Along with the inauguration of the new institution, the government is also preparing a legal framework to coordinate the tasks and functions of BPI Danantara.

An SOE observer from Datanesia Institute, Herry Gunawan, views the establishment of BPI Danantara as a breath of fresh air, with the potential to improve SOE performance through profit-oriented corporate principles.

“Because the management adheres to corporate principles, business considerations will be prioritised over political considerations,” he stated.

Therefore, he stated that BPI Danantara must not be involved in political matters and should have the freedom to manage state-owned companies independently.

This will help in distinguishing those that manage state assets.

“Business-oriented SOEs must be restructured to avoid overlapping activities in the same field, such as construction SOEs. Another consideration is to focus on selecting strategic businesses,” he stated.

He hopes that BPI Danantara will be treated as a super-holding that functions as an investment holding company. Meanwhile, business operations can be managed by the already established SOE holdings.

“Make BPI Danantara a super-holding that manages strategic SOEs and is oriented towards profits. For social-oriented SOEs, transform them into public service entities. Prabowo's assertiveness will determine the success of Danantara,” he stated.

On a separate occasion, Mirae Asset Sekuritas Senior Market Chartist Nafan Aji Gusta suggested that a super-holding is necessary for all state-owned companies to synergise and operate effectively and efficiently.

With the establishment of the new institution, SOEs are expected to demonstrate integrity and enhance their dominance in various sectors by prioritising good corporate governance (GCG).

“This aims to strengthen the fundamentals of SOEs in the future and mitigate various uncertainties at both global and domestic levels,” Nafan revealed.

Panin Sekuritas Analyst Felix Darmawan added that a super-holding can enhance adaptability in seizing business and financial opportunities, as decisions will be made by the corporations themselves. This structure is also expected to make SOEs more competitive.

Potential

Toto Pranoto, Associate Director of the SOE Research Group at the Management Institute of the Faculty of Economics and Business at Universitas Indonesia, is optimistic that BPI Danantara can become an entity that manages state assets, similar to Temasek and Khazanah.

In terms of the asset portfolio value, the consolidated value of SOEs is much higher than that of both Temasek and Khazanah. However, he believes that state-owned companies have not yet been fully optimised to produce profit.

“The total consolidated value of SOEs is many times higher than that of Temasek and Khazanah. However, the ability of SOEs to generate profit is lower. This means that having many assets does not necessarily translate to optimal operation in producing profits,” he stated.

Based on the consolidated financial report released by the SOE Ministry, the total assets of the 65 state-owned companies reached Rp10,401.5 trillion in 2023. This amount represents a 6.26% increase from the previous year's total of Rp9,788.64 trillion.

Meanwhile, Temasek, known as one of the largest investors in the world, recorded a total portfolio value of S$389 billion as of March 2024. This value is approximately Rp4,610.99 trillion, based on an exchange rate of Rp11,853 per Singaporean dollar.

Khazanah Berhad recorded a total asset value of 165.84 billion ringgit throughout 2023, which is approximately Rp596.24 trillion, based on an exchange rate of Rp3,595 per Malaysian ringgit.

With this capital, SOE Deputy Minister Kartika Wirjoatmodjo believes that the SOE super-holding currently being prepared by the government has the potential to surpass the performances of Temasek and Khazanah.

“We know that there are entities like Temasek and Khazanah. We believe that our SOEs will surpass these global entities,” Kartika said at the SOE Ministry building in Jakarta on Monday (21/10).
 

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