Value Opportunity in Indomobil
    Category: Column By : Teguh Hidayat Read : 93 Date : Tuesday, May 01, 2018 - 15:37:48

    If I ask, who is the largest automotive distributor company in Indonesia? Everyone will probably answer Astra International (ASII). But if I ask, who is the second largest automotive company behind Astra? You may get different answers, but one name that may come to mind is Indomobil Sukses Internasional (IMAS). Yup, with total assets of Rp31.4 trillion at the end of 2017, and more than 100 subsidiaries, IMAS is not a small company. The company’s Indomobil brand is also one of the most popular in the automotive industry in Indonesia, behind Astra. Yet, on the other hand, at a price of about Rp1,200 per share (in early April), IMAS’s market cap is only Rp3.5 trillion, or only about 1.5% of ASII’s market cap. Why the disparity in value?

    IMAS is the second or third largest automotive distributor and assembly company in Indonesia, behind ASII and Honda Prospect Motor (HPM). IMAS holds the brands of Suzuki, Nissan, Datsun, Hino, Renault and Volkswagen, and heavy equipment brand John Deere. As you might know, the three most popular car brands in Indonesia are Toyota, the Toyota subsidiary Daihatsu (both held by ASII), and Honda (held by HPM). So, you might say that IMAS only distributes second-tier car brands, but luckily IMAS holds many brands, thus its sales volume, if summed, remains large. IMAS is also part of the Salim group, one of the largest conglomerates in Indonesia.

    As you might guess, IMAS’ market cap is small for a reason. In 2011, IMAS booked a net income of Rp913 billion, but subsequently income fell steadily until it became a loss of Rp289 billion in 2016, and of course the stock tumbled. In April 2012, IMAS was at the level of Rp 9,100, but fell all the way to Rp 835 in February 2018, or down 91% in almost six years. In this case, IMAS looks similar to coal stocks on their lowest points in 2016, which on average had fallen about 85% from prices four years ago.

    However, at Rp 1,200 and a PBV of only 0.3 times, IMAS is clearly undervalued as one of the largest automotive companies in the country. This fact might explain why the stock has moved horizontally since October 2017 at around Rp 900 before recently bouncing up 30% to its current level earlier this year. Based on the experience of coal stocks from 2016 onward, which rose by about 350% as conditions improved for the sector, then the next big profit opportunity might be in IMAS. Yes, IMAS fell this low because the company is losing money, but even so, it is now undervalued. If the company can go from a loss to booking net income in 2018, the stock will easily rise, probably at least 50% before it eventually attracts the attention of bigger investors and traders (meaning the potential upside of the stock could be even more, just like coal stocks one or two years ago).