We believe that falling interest rates is one of the key themes for Indonesia in 2009. In this note, we have tried to analyse its impact on Indonesian companies with high net gearing levels (>70%), in a more detailed manner, by splitting the debts as domestic and foreign denominated and fixed, and floating interest rates.
œ Among the five companies, PGAS came out as the safest and the least sensitive to interest rates (especially toward the Indonesian rates), since most of its debts are fixed, USD-denominated and bear low rates. The coverage ratio is high.
œ Indofood’s earnings are sensitive to interest rates. Every 1% change would its impact its earnings by 8-10% for FY09-10E, but its coverage ratio is at a very comfortable level.
œ Holcim Indonesia’s actual risk is lower than it looks, in our view. Although the coverage is lower and its earnings are sensitive to US dollar interest rates, its debt is 60% supported by principal. Exceclcomindo’s case is similar to Indofood, but its operating performance is good. Mobile-8 is the riskiest.
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