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Global investor sentiment has been faltering in 2022 due to rising inflation, the Russian invasion of Ukraine and a slowdown in China. While financial markets around the world have consolidated, the Jakarta Stock Exchange Composite Index has gained 16.51% in the past year as Indonesian commodity companies managed to swell.
Indonesia is among the few emerging countries with high commodity exports, which has helped it weather the volatility in commodity markets. The country posted its fastest yearly growth of 5.44% in the second quarter of 2022, as the Russia-Ukraine conflict forced Europe to explore other avenues for oil and gas. Indonesia’s commodity exports are dominated by tin, coal, nickel, petroleum gas and palm oil.
Indonesia’s trade surplus soared to $4.22 bn in July 2022, up from $2.60 bn during the same period last year, while also beating market expectations of a $3.93 bn surplus. Exports were up 32.03% year-on-year largely due to higher palm oil exports. However, the trade surplus has shrunk compared to the June 2022 figure of $5.09 bn.
After raking in profits, Indonesia’s statistics bureau warned last month that the country’s windfall export earnings due to high commodity prices may start dwindling. However, Southeast Asia’s largest economy, which is highly export-oriented, has seen a trade surplus every month since May 2020, helping boost its recovery from the pandemic while reducing the impact of external factors.
“On the growth front, Indonesia is still poised to grow at a healthy and robust clip driven by consistent household spending. The Russia-Ukraine war initially forced commodity prices higher, benefiting Indonesia’s export sector,” writes Nicholas Mapa, senior economist at ING.
While the country is expected to see slowing export growth, the overall story still seems positive as the Russia-Ukraine war continues to impact supplies of gas and vegetable oil. From an investment perspective, which commodity companies are benefitting from the windfall profits?
Provident Agro Tbk
Provident Agro, a joint venture between PT Saratoga Sentra Business and PT Provident Capital Indonesia, was founded in 2006 as a palm oil plantation company. With a market capitalization of $390 m, Provident Agro is among the top palm oil exporters in the country and is listed on the Jakarta Stock Exchange.
The company’s stock has returned 65.99% in value for investors over the past year. Provident Agro currently has a price-to-equity ratio (PE ratio) of 1.78 and has seen its net profit margin swell to more than 800%. It has a price-to-book ratio of 1.04.
The company recently changed its name to PT Provident Investasi Bersama Tbk, in a shift away from a plantation company to becoming an investment company.
SMART Tbk
PT Sinar Mas Agro Resources and Technology Tbk went public on the Indonesia Stock Exchange in 1992 and currently has a market capitalization of $922 m. The stock has risen 20.35% in the past year and has a profit margin of 5.41%. For the half year ended June 30, 2022, saw its basic EPS double to IDR 630 from UDR 349 a year ago.
The company saw its quarterly revenue rise by 47.60% for the period ended June 30 and saw a quarterly earnings growth of 34.70%. The stock has a PE ratio of 3.63.
PT Bumi Resources
Indonesia commodity exports are dominated by coal, and the country is the world’s biggest exporter of coal with nearly 31% share in the global coal export figure in 2021.
Bumi Resources is among the biggest coal companies in the Southeast Asian country with a market capitalization of $1.5 bn and has returned 190.91% in the past year. The stock has a PE ratio of 3.88 and a profit margin of 19.11%. Rising coal prices helped the company record quarterly revenue growth of 82.90% for the period ended March 31.
PT Golden Energy Mines Tbk
A unit of the Sinar Mas Mining Group, coal exporter Golden Energy has seen its stock rise 85% in the past year. The company has a market capitalization of $2.52 bn. The stock has a PE ratio of 6.93 and the company recorded a net profit margin of 21.95%. Golden Energy reported a 41.40% increase in its quarterly revenue for the period ended March 31, whereas its quarterly earnings grew 35.20%.
Indonesia commodity exports
Indonesia has the third-largest gas reserves in the Asia-Pacific region, accounting for 1.5% of the total global gas reserves, after Australia and China. More than 87% of Indonesia’s natural gas production is controlled by foreign companies such as CNOOC, Total E&P Indonesia, Conoco Philips, BP Tangguh and Exxon Mobil Oil Indonesia. The rest of the 13% production is controlled by 100% state-owned firm Pertamina.
