Jakarta, CNBC Indonesia– The Jakarta Composite Index (JCI) has managed to accelerate in the last three weeks. Since 4 November, JCI managed to rally from 5,105.19 to yesterday’s closing level (23/11/20) at 5,652.76 or an increase of 10.72% or 547 index points.
This increase alone raised the total market capitalization of companies listed on the Indonesia Stock Exchange (IDX) from around Rp. 5,950 trillion to Rp. 6,591 trillion.
Of course, the JCI strengthening also raised the 10 stocks with the largest capitalization value, aka the big cap. If we take a closer look, out of the 10 big cap stocks, there are stocks that investors dare to pay high prices because of their good and generous performance in distributing dividends.
Even though the value of equity and assets is not too large, the capitalization value can be tens of times the value of equity. Let’s look at the table below.
The listed companies owning the largest assets in the Indonesian stock market are from the banking sector. This is reasonable because the banking business model is to act as an intermediary between lenders, in this case banking customers, to loan recipients.
So it is natural that large banking assets are recorded because of course the largest composition of these assets is liabilities, in this case Third Party Funds from customers.
Meanwhile, the Big Cap company with the smallest assets fell to PT Unilever Indonesia Tbk (UNVR) which ‘only’ had assets of IDR 20 trillion. Apart from the relatively small assets, the equity is also the smallest among the other 10 Big Cap, namely Rp 5 trillion.
Even though its assets and equity are small, it turns out that UNVR has managed to occupy the fourth position of the largest market capitalization in Indonesia at Rp 294 trillion or almost 60 times its equity.
This shows that investors are ready to pay ‘handsomely’ to buy UNVR shares. This happened because of the good profitability of UNVR.
Just imagine the return on assets on UNVR net income (ROA) reached 36.8% even if using return on equity (ROE) this figure would swell to 115%, much higher than other Big Cap companies which only have a dozen percent ROE.
This means that every year UNVR is able to book a net profit more than its equity even in a pandemic year. If it is annualized, UNVR will later book a net profit of Rp. 5.75 trillion, greater than its ‘only’ equity of Rp. 5 trillion.
UNVR’s great profitability cannot be separated from the main products sold by UNVR, namely daily necessities where these items are still sought after by consumers even in the midst of the Covid-19 attack.
These goods also have a high profit margin as shown by UNVR’s Gross Profit Margin (GPM) which is at 51.98%. This means that the cost of producing Unilever products is less than half of its market selling price.
Combine this with the courage of the company to distribute all of its net income as dividends which shows that UNVR is an existing company already established (mature).
UNVR does not need to set aside its profits to finance expansion, so it has leeway to share it with shareholders, without threatening operations.
This is shown by the dividend distribution ratio (DPR) of UNVR for the last 5 years where the company has always distributed dividends of around 99% of its net profit except in 2019 where the company only shared 55% of its net profit due to the corona virus pandemic.
CNBC INDONESIA RESEARCH TEAM
(trp/trp)
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