Stock and Financial Condition Analysis

PT. INDOSAT Tbk.

I. Company Profile 

PT Indosat Tbk was established by the Government on November 20, 1967 as a foreign investment company to provide international telecommunications services in Indonesia and began commercial operations in September 1969 to build, transfer and operate an International Telecommunications Satellite Organization, or Intelsat, earth station in Indonesia to access Intelsat’s Indian Ocean Region satellites for a period of 20 years. As a global consortium of international satellite communications organizations, Intelsat owns and operates a number of telecommunications satellites.

On October 19, 1994 Indosat's shares began trading on the Indonesia Stock Exchange and the New York Stock Exchange.

At the end of 2002 the Government of Indonesia sold 41.94% shares of Indosat to Singapore Technologies Telemedia Pte. Ltd. Thus, has made Indosat back to Foreign Investment Company. In November 2003, Indosat merger three of its subsidiaries (acquisition) of PT Satelindo, PT IM3, and Bimagraha, and then became one of the major cellular operators in Indonesia

On March 1, 2007 STT sold Indosat shares of 25% in Asia Holdings Pte. Ltd. to Qatar Telecom. On December 31, 2008, Indosat shares owned by Qatar Telecom QSC (Qtel) indirectly through Indonesia Communications Limited (ICLM) and Indonesia Communications Pte Ltd (ICLS) for 40.81%, while the Government of the Republic of Indonesia and the public have respectively 14.29% and 44.90%.

In 2009 Qtel has a 65% stake in Indosat through a tender offer (having an additional 24.19% shares of series B of the public).

• Vision

To be the customer’s preferred choice for all information and communication needs 

• Mission

1. To provide and develop innovative and high quality products, services and solutions, which offer the best value to our customers
2. To continuously enhance shareholder value
3. To provide a better quality of life to our stakeholders

II. Analysis of Financial Ratios

1. Liquidity Ratio

Liquidity ratios are the ratios that measure the ability of a company to meet its short term debt obligations. They show the number of times the short term debt obligations are covered by cash and liquid assets. If the value is greater than 1, the short term obligations are fully covered. As we can see, the Liquidity ratio of Indosat, Tbk in 2005 was fulfill the requirement, because the total amount of current assets was higher than the total amount of current liabilities. But in 2006 until 2011, the liquidity ratio of Indosat, Tbk was stagnant below 1.00, in which indicated that the assets are not liquid enough to face the current liabilities. From this situation the company has probability of difficulties to pay off their current liabilities. 

2.  Efficiency Ratio

Inventory turnover indicates about how well a company manages its inventory. As we can see in graph above, the rate of inventory turnover from period to period become higher and higher. It’s a good thing, because if the rate of inventory turnover is too low, it means that the company may have overstocking of inventory.

The accounts receivable turnover assesses how effective the company’s credit policies are. The higher the rate, the better it becomes. As we can see from the graph above that the highest point turnover is 16 times in 2007. If accounts receivable is higher than sales (the accounts receivable is too low), it means company have some difficulties for collecting accounts receivable or the company is being too generous for granting credit for its customers. 

The measurement of total assets turnover is by divided sales with total assets. A good company has sales more than total assets it has.

3.  Leverage Ratio

This ratio used to determine the company’s financing method (the ability to meet long term obligations). For debt ratio, the higher the debt, higher the financial risk. From graph above, it seems that company carried high financial risk from period to period because total assets can’t cover wholly the total debts incurred by company.

Meanwhile, debt to equity ratio is also an important part in leverage ratio. It gives information about the debt in which company’s in and the equity it has at its disposal. Companies with less debt equity ratio are less risky than the companies having a high ratio. From the graph, the company can control the debt to equity ratio quite well (below 1.00).

Equity ratio is to measure how much equities to finance the total assets. The higher the equity ratio, the lower the financial risk. As we can see from graph above, the difference between equities and total assets are not so much because the graph maintain around the point 1.00 (may less than that, a bit exceed the point). 

4.  Profitability Ratio

Profitability ratios measure a company’s ability to generate earnings relative to sales, assets, and equity. For most of ratios, a higher value is desirable. A higher value means that company is good enough in term of generating profit, revenue, and cash flow. From the graph above, it seems that company is not effective enough to generate profit/revenue. 

III. Analysis of Company Stock

           As we can see the graph above, the price of stocks are fluctuating within 3.50k up to 6k during January 2011 until October 2012. This fluctuation is caused by some factors, for instances, earning per share (net earnings/outstanding shares), interest rates( stocks and bonds market, affect the company’s profit), cash dividend (annual dividend per share), and rate of risks.  Furthermore, we can also see the comparison between stock price and book value per share (price to book). For investors, the lower price to book, the better the value.

            If we observe the graph above, it’s found that the lowest point in 3.50k hit the bottom and indicated that the trend’s changing. The price’s starting to go up and later in August, we found the highest volume of trading indicated people buy the stocks. They buy the stocks because they estimate that the trend is keep going lead to higher price, so later they can sell the stocks in high price.

• Stock prices from 2006 up to 2012 in brief
  
  
  
  
  
  If we compare year-to-year the price of stocks, the highest price’s found in 2008. The price of stock is not only affected by financial statement, but also financial performance. In 2008, Indosat launch IM3 Rp 0.01 per second in telephone service, proved to be competitive advantage for company with affordable price. Indosat also labeled as top brand award 2008 for their products, Matrix, IM3, and Mentari. Moreover, Indosat also launch new product promo, Mentari Sakti, IM3 Rp240 dan StarOne Rp500 for one hour (StarOne Gopek). 
  
  

IV.  Company financial condition and stock price

From the graph above, it’s clearly seen that there’s connection between net profit and stock price of company. When the profit that the company generated is tend to be higher than before, so the initial price offering is higher too, and so reversely. 

V.  Conclusion

         Stock market price is not only affected by financial statement, but also through financial performance by company.