Bittersweet experiences for Malaysian investors

The PT Jawa Power generation plant

INVESTING in Indonesia has proven to be a profitable venture for many Malaysian companies despite the inconsistency in terms of regulations.

Companies in plantations, banking and telecommunications sectors have reaped hefty profits from Indonesia’s large land and prospering population, although some companies have seen their ventures there end up in a court dispute.

Banks with a large exposure in Indonesia include CIMB Group Holdings Bhd and Malayan Banking Bhd (Maybank).

Both own controlling stakes in Indonesian banks. Maybank has 80% in PT Bank Internasional Indonesia Tbk, while the CIMB Group owns a 97.9% stake in PT Bank CIMB Niaga Tbk, Indonesia’s fifth largest bank by assets. Between the two, Indonesia is a more significant contributor to earnings for CIMB (about 30% to group profit before tax) compared with Maybank (7% to group profit before tax).

All the large Malaysian plantation companies have plantation estates in Indonesia. Sime Darby Bhd has the largest planted land in Indonesia. KL Kepong Bhd, Genting Plantations Bhd. IJM Plantations and IOI Corp Bhd also have significant exposures in Indonesia as well.

Sime Darby has a total landbank of 996,698ha of which 285,571ha, or 28.7% is in Indonesia. It has a planted area of 204,505ha in Indonesia.

Genting Plantations owns 162,741ha in Indonesia or 71.2% of its total landbank and has planted oil palm estates totalling 58,733ha in Indonesia.Meanwhile, in the telecommunication sector, Axiata Group Bhd owns 66.5% in PT XL Axiata Tbk (XL). Currently, XL contributes 35% and 34% to the group’s earnings before interest, tax, depreciation and amortisation and revenue respectively.

XL had only seven million subscribers back in 2005. Its subscribers have grown exponentially over the last few years to 68.5 million users in the first quarter. XL completed its acquisition of PT Axis Telekom Indonesia for US$865mil (RM2.9bil) earlier this year.

In the power sector, YTL Power International Bhd has a 20% stake in PT Jawa Power. According to its website, PT Jawa Power owns a 1,220MW coal fired power station at the Paiton power generation complex in East Java, Indonesia. It is one of the largest independent power producer in Indonesia with a 30-year power purchase agreement with PT PLN, the state-owned electric utility company.

Another high flyer is AirAsia Bhd. The budget carrier has 49% ownership in PT Indonesia AirAsia, which operates low-cost aviation services in Indonesia.

AirAsia had gone through hiccups along the way in Indonesia and the company recently scrapped plans for an initial public offering for PT Indonesia AirAsia due to poor financial results.

Indonesia policy risk

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Business , Corporate News , Indonesia


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