Indonesia: Wismilak Makes Successful Debut

Source from:  The Jakarta Post  12/20/2012

Cigarette producer PT Wismilak Inti Makmur made a successful debut on the Indonesian Stock Exchange (IDX) on Tuesday, with its share price rising by about 20 percent in active trading.

Just a few minutes after trading opened, the price of the Surabaya-based cigarette company's shares, which trade as "WIIM", jumped to as high as Rp 970 (10 US cents), a 49 percent increase from the Rp 650 initial public offering (IPO) price.

The share price, however, lost ground in evening trading to close at Rp 780, 20 percent higher than its IPO price.

Wismilak, maker of clove cigarettes and premium cigars under the Wismilak, Diplomat and Galan brands, became the 22nd firm to enter the bourse this year and the fourth cigarette firm to be listed on the IDX. The other three firms are PT Gudang Garam (GGRM), PT HM Sampoerna (HMSP) and PT Bentoel International Investama (RMBA).

The company received Rp 409.47 billion from the sale of 30 percent of its shares to the public during the IPO. It has allocated 50 percent of the IPO funds as capital expenditure for the next two years, 30 percent as working capital and the remaining 20 percent to pay off its bank loans.

Of the Rp 204.74 billion allocated as capital expenditure, the company will use Rp 100 billion next year and the remainder of the funds in 2014, according to Wismilak finance director Lucas Firman Djajanto.

"Next year's capital expenditure funds will be spent to improve our IT [information technology] network and to purchase a machine from Germany to increase our production volume," he said in Jakarta.

The new machine, worth around Rp 40 billion, is scheduled to arrive in July 2013 and can produce up to 1.5 billion cigarettes per year. With the new machine, Wismilak hopes to see its total production volume grow 20 percent to 2.28 billion cigarettes next year.

The surge in production is expected to boost the company's revenue by 45.4 percent to reach Rp 1.6 trillion in 2013. Currently, more than 80 percent of Wismilak's revenue comes from the sale of machine-rolled cigarettes (SKM) and cigars, and the remainder from hand-rolled cigarettes (SKT). It sells all of its products in Indonesia.

The company will use the designated working capital funds to buy raw materials to support the higher production volume target in 2013, Lucas added. At the moment, Wismilak gets 75 percent of its raw materials from local sources — Lombok in West Nusa Tenggara, Madura in East Java and Temanggung in Central Java — and 25 percent from overseas, such as China and the US.

As of June 2012, Wismilak's total assets reached Rp 639.5 billion. Its liabilities and equities amounted to Rp 388.29 billion and Rp 251.2 billion, respectively. It expects to reap Rp 1.1 trillion in revenue and Rp 68 billion in net profit by year-end.

Meanwhile, according to PT Bank BNI Securities research analyst Akhmad Nurcahyadi, the presence of Wismilak on the bourse provides more options for people looking to invest in the cigarette industry.

"In general, our industry is still promising as shown by the acquisitions of some local cigarette firms by foreign companies. Wismilak has the potential to grow and offer good returns to its investors in the upcoming years, but it will depend on the company's ability to expand its niche market," he said, adding that Wismilak's brands were more popular among middle- and upper-class consumers. Enditem