Investment and Finance

Consumer Goods Industry Perseveres

VIVAnews - Shares of consumer goods industry will be targeted by investors by 2009. In addition to being categorized as defensive stock, share movement in the industry tends to be crisis-resistant.

Pressures from the global economic crisis affecting various domestic industries do not lower the performance growth of companies in the home consumer goods sector.
 
While a number of companies is affected by the crisis, consumer goods industry perseveres because it produces goods for daily needs.

Supporting the country's economy, people's consumption props up 80 percent of the gross domestic product (GDP). "Consumption is definitely hit by the crisis. But the sector will keep growing because the population is increasing," Director of PT Reliance Securities Steve Susanto told VIVAnews.

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In his opinion the consumer goods industry will survive. The growth has been five percent. However, next year it will likely fail to reach that figure. Decreasing people's purchasing power due to inflation rate is one of the obstacles in the growth of the industry.

Based on data of the Central Statistics Agency (BPS), of the total GDP of Rp 1,340 trillion by third quarter of 2008, home consumption contributed around Rp 777 trillion.

The performance of companies in this sector during the third quarter of 2008 has increased, including PT Unilever Indonesia Tbk (UNVR). The company having market capitalization of Rp 56.46 trillion (per 12 December 2008) or third largest after PT Telekomunikasi Indonesia Tbk (Rp 133.05 trillion) and PT Bank Central Asia Tbk (Rp 67.73 trillion) is still able to grow.

Per 30 September 2008, Unilever's net sales increased by 22.4 percent to Rp 11.75 trillion compared to the same period of 2007 with Rp 9.6 trillion. Net profits reached Rp 2.04 trillion, or an increase of 29.9 percent.  

Earnings per share (EPS) reached Rp 268 per share or an increase of 29.4 percent compared to nine months of 2007 reaching Rp 207 per share. Unilever's total assets reach Rp 6.58 trillion with Rp 3.46 trillion of equity.

Unilever's experience represents that of several companies in the sector that is capable of surviving amidst the declining purchasing power. It has become a mirror for consumer industry's strength.

The company, established on 5 December 1933, has disbursed funds of up to Rp 1.2 trillion between 2005 and 2007.

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PT BNI Securities analyst Akhmad Nurcahyadi said that Unilever's performance was supported by its image as a multi-national company. Domestic company's expansion will trigger performance growth.

Company's cash flow is quite high. Per September of 2008, cash and cash equivalent reached Rp 805.04 billion, which is higher than the same period of 2007 with Rp 794.41 billion. "The company is excellent in product diversification. Unilever is also excellent in market competition strategy," he told VIVAnews.

However, the price of Unilever share (per 17 December 2008 at Rp 7,800) is above fair value. Share price target in 12 months is at Rp 7,000 per share.

"If the company does not set out corporate acts, acquiring or increasing production capacity, we see no reason to increase the target of Unilever share price," he said.

Up until the end of 2008, BNI Securities predicted that Unilever will gain income of around Rp 13.54 trillion with net profit of Rp 2.12 trillion. The income projection increases by 7.9 percent compared to 2007 with Rp 12.54 trillion. Meanwhile, the targeted net profit increases by 8.1 percent compared to last year's Rp 1.96 trillion.

"Unilever's valuation is already high. With price to earning ratio (PER) of 23.2 times, Unilever is indeed above the average PER of industry with 24 times," he said. However, in its industry, Unilever share is categorized as defensive stock and share dividend actively.

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Translated by: Bonardo Maulana Wahono

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28 Maret 2024