Brief Company Profile

PT Indofood Sukses Makmur Tbk, better known as Indofood, is a major Indonesian company involved in the food industry. The company’s headquarters are in Jakarta. It is best known for its blockbuster instant noodle product, Indomie.

Why do I want to write about an Indonesian company?

I do not deny that I do love eating Indomie (it is really tasty!!!!). On a more serious note, since the Indonesian Rupiah has depreciated substantially since mid 2011, there could be possible opportunity to pick up some good Indonesian stocks at bargain prices(?). If you believe that the Rupiah has bottomed, one may also consider capitalising on future rebound(?) of the Indonesian Rupiah.

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Why Indonesian Rupiah continues to depreciate?

The rupiah would undoubtedly have fallen faster as the currency comes under growing pressure from the country’s huge import bills and the risk of capital outflows. The current account showed a deficit of $24.18 billion in 2012, following a surplus of $1.7 billion in 2011. Since 2012, Indonesia continues to record persistent current account deficit, resulting in continued depreciation for the Rupiah.

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Indonesia plans to review the import of capital goods for big government projects to help manage its current-account deficit, Finance Minister Sri Mulyani Indrawati said on Tuesday (03/07).

The move forms part of a series of coordinated policy measures to bolster the country’s financial markets.

The rupiah, stocks and bonds have sold off as investors flee emerging markets amid rising interest rates in the United States, higher oil prices and the threat of a full blown US-China trade war.

The vulnerability of Southeast Asia’s biggest economy has been increased by worries about its current-account deficit.

Bank Indonesia has raised its benchmark rate by a total of 100 basis points, with the latest hike coming on Friday, amid efforts to defend the rupiah and stem capital outflows.

 

http://jakartaglobe.id/business/indonesia-to-review-capital-goods-imports-to-control-current-account-deficit/

Is it really cheap to consider Indofood?

Its trailing price-to-book (PBR) has fallen substantially from its historical median PBR and its book multiple is currently at historical low:

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Similar to PBR, its trailing price-to-earnings ratio (PER) has fallen below that of its historical median PER and approximates low of 2011-2012.

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From an US investor perspective, USD-equivalent price per share looks reasonable if compared to its historical median share price (in USD).

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From a Malaysian perspective, it looks not unreasonable since the depreciation of the Malaysian Ringgit has since moderated in view of rising crude oil:

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Technically, the stock has probable downside bias with its current trend price trading below 50D and 200D EMAs. It may continue to be a in a range bound position (if it remains above $6,100). Nevertheless, unless it can break the $7,245 resistance level, this will confirm that the “double-bottom” has formed.

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