JAKARTA. Number of issuers have decided to shift their business core to the more profitable business. One of the issuers, PT Evergreen Invesco Tbk (GREN) recently has shifted its business core from yarn-spinning to warehousing business through its subsidiary PT Tristate Indonesia.
According to President Commissioner of Evergreen Invesco William Kayhatu, the warehousing business will gain more profit from the less revenue, while yarn-spinning business have less profit from higher revenue.
To date, GREN owns 42,000 meter square of warehouse on the area of 10 hectare. Since November 2015, GREN has rented out a 13,000 meter square of warehouse to PT Coca Cola Amatil Indonesia with an Rp 32,500 per meter square for a month of rental fee.
In order to support the new business, GREN plans to gain IDR30 trillion of funds by issuing 150 billion of new shares.
Aside of GREN, PT Kresna Graha Securindo or KREN has also converted the company’s business core from brokerage to investment. Meanwhile, PT Hanson International Tbk (MYRX) and PT Rimo International Lestari Tbk (RIMO) have shifted their business cores from textile and mining to property, as well as from retail to property, respectively. In order to acquire property companies, RIMO plans to gain Rp 7 trillion of funds through right issue.
Some analysts said that issuers may have two options in shifting their business cores. First, by integrating and expanding their business scopes, and second, by shifting their business cores thoroughly.
KREN seems to take the first option, by increasing its level to holding company. In this case, KREN still maintains its financial service but expands to financial technology sector at the same time.
According to analyst at Panin Sekuritas Frederik Kasali, financial technology business has potential to support KREN business, since the new business recently tends to have good prospect.
Some issuers preferred to shift their business cores in order to improve their fundamentals. One of the issuers, MRYX decided to shift its business to mining sector amid the sluggish textile industry.
However, the mining sector felt in 2013, MRYX’s profits in that year drastically dropped from Rp 102 billion in 2011 to Rp 0.2 billion.
MRYX performance improved after entering property business by booking profit nets at Rp 1.4 billion, Rp 19.82 billion, and IDR318.86 billion in 2015, 2015, and the middle of 2016, respectively.
However, the shift in business core actually has potential risk, on the grounds that the new business is not necessarily to be profitable for the issuer.
Furthermore, issuers’ performance may decrease after converting their business. For an example, PT Mitra Pinastika Mustika Tbk (MPMX) was experiencing lower performance after shifting its business core from distributing Nissan and Datsun cars, as well as producing Castrol oil to venture capital and other business sectors.
“However, this (the business shift) at least reflects that the companies are active in ivestment so that they have opportunities to improve their performance”, Frederik said.
Therefore, investors are suggested to monitor the issuers’ new business, or wait until the issuers release the financial reports with the results of the new business. (Translator: Muhammad Farid)
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