Sunday, March 3, 2019

Buy Company


Having a large company, performing well and reliably, is the dream or desire of most people. But to make it happen is not an easy matter, because building a bona fide company cannot be instant and can not be done carelessly.
Companies with brilliant performance need, among others, hard work (also) smart, perseverance and tenacity, a capable managerial business, top-notch asset management, okay human resource management, mitigation of business failure risks, and especially sufficient capital.
Not only that, even after standing up, the company will go through a phase where challenges and opportunities come and go in the middle of business competition. To be able to grow big and good, all of that must be managed and utilized optimally. Usually this phase lasts not for a while, but it takes years. If the owner of the plunging company directly handles the operations of the company, of course all of that will consume time, energy, thought and at the same time costs.
With limited capital, establishing a company is of course possible, for example by inviting friends or family by means of a joint venture capital. But even that is not simple, because understanding and mutual agreement are needed, among others, on the field of business to be carried out, how to manage the business and who is responsible. Need solid chemistry.
It is different if there are a lot of funds available, just buy a large, good and trusted company that is ready and running, so it does not start from scratch and is not bothered with the things mentioned above. Companies that have proven to survive in a variety of economic conditions, which always generate large profits, are trusted and already have a positive brand image among consumers, even mastering a broad niche market.
Mrs. Ninoy (let's say her name) has funds of only Rp1,000,000,000 (one billion Rupiah), but Ms. Ninoy wants to have a large and good company that is already in existence in the coal mining industry sector, the Indonesia Stock Exchange (IDX) ) is the right place for Mrs. Ninoy to buy the company in question. On IDX Ms. Ninoy can buy (own) PT. Bukit Asam Tbk (PTBA) in stages by buying its shares little by little according to the availability of available funds without the hassle of taking care of the company's operations directly.
Position in December 2018, there are more than 600 (six hundred) companies (issuers) that are Open (Tbk) from various industrial sectors listed on the IDX and their shares are traded on every trading day. The share price also varies from Rp. 50 (fifty rupiah) to tens of thousands of Rupiah per share.
How to? very easy. Mrs. Ninoy registered as a customer at one securities company (securities broker). After being registered as a customer, Ms. Ninoy gets an Investor Fund Account (RDI) as a means of depositing funds for the needs of share trading transactions, then obtaining an account on an online platform complete with userID and password, all of which are in the name of Ms. Ninoy alone and can only be opened by Mrs. Ninoy.
Securities companies that are registered in the Financial Services Authority (OJK) and IDX currently number in the tens, both those with the status of State-Owned Enterprises (SOEs) and national and foreign Private Owned Enterprises (BUMS). Account opening fees vary from IDR 100,000 (one hundred thousand rupiah) to IDR 10,000,000 (ten million rupiahs) depending on the policies of each securities company.
It should be borne in mind that the funds issued by the customer to open the account do not become the property of a securities company, but remain the property of the customer concerned for the purpose of a share purchase transaction. Securities companies only cite the cost of buying transactions and selling transactions from customers for the purchase or sale of shares by customers. The large purchase transaction costs vary between 0.15% - 0.18% of the value of the purchase transaction, and the selling transaction costs (along with taxes) between 0.15% - 0.28% of the value of the share sale transaction conducted by the customer.
With a fund of Rp1,000,000,000, on January 2, 2018 Mrs. Ninoy bought PTBA shares at a price of Rp2,500 per share, so Mrs. Ninoy obtained as many as 400,000 shares (excluding the purchase transaction fee). The current number of outstanding shares of PTBA is 11,520,659,250 shares, thus Mrs. Ninoy's ownership of PTBA is 0.003%.
Although only 0.003%, Ms. Ninoy is the legal owner of PTBA. Therefore Ms. Ninoy has the right to the net profit / profit obtained by PTBA. But as an owner, of course Mrs. Ninoy is obliged to also bear PTBA's debt or even incur losses if PTBA suffers a loss.
Based on 2017 Financial Statements, PTBA's equity (net capital) is Rp. 13,799,985,000,000 so that the book value (book value) of PTBA is Rp1,197.85. Liabilities (liabilities / debts) of Rp.8,187,497,000,000 so that on each sheet of PTBA's shares there is an obligation / debt of Rp710.68. PTBA's assets are IDR 21,987,482,000,000 so that the asset value attached to each PTBA share is IDR 1,908.53.
PTBA's net profit in the 2017 financial year is Rp.4,476,444,000,000 so that the net profit is attached to each share (earning per share) or PTBA's share EPS Rp.388,56. This means that with net capital (equity) of Rp1,197.85 a net profit of Rp388.56 is generated, so the ratio of net income to equity (return of equity) or ROE is equivalent to 32.44%, while the ratio of net income to gross capital (assets) or ROA is equivalent to 20.36%. Good business performance, higher than deposit interest rates in banks, which is only around 5% (five percent) per year.
In accordance with the book value data in the financial statements above, the purchase at the price of Rp2,500 per share means that Mrs. Ninoy bought 2.09 times more than the value that should have been Rp1,197.85. But because PTBA is one of the best companies in Indonesia, Mrs. Ninoy took such a big price, she thought that the price of good companies is expensive, rarely or even cheap.
In May 2018, PTBA distributed 2017 net income in the form of cash dividends to PTBA owners (shareholders) Rp318.52 per share. Mrs. Ninoy as the owner of PTBA even though it has only started since January 2018, has the right to receive such dividends. The amount of dividends obtained is Rp318.52 x 400,000 pieces = Rp127,408,400.00. After deducting an income tax of 10%, then Mrs. Ninoy receives a net dividend of Rp.114,667,200.00. This amount is equivalent to 11.47% of the capital that has been issued.

Pic : google image
That up to the third quarter of 2018 (in September 2018), PTBA's equity (net capital) increased to Rp14,921,935,000,000 so that the book value (book value) of PTBA became Rp1,295.23. Liabilities (liabilities / debts) fell to Rp7,548,437,000,000 so that the liabilities attached to each share fell to Rp655.21. PTBA's assets are Rp. 22,470,372,000,000 so that the asset value attached to each PTBA share becomes Rp1,950.44.
Net income has reached Rp. 3,929,899,000,000, so the net profit is attached to each share (earnings per share) or EPS Rp. 341,12. The ratio of net income to equity (return of equity) or ROE is equivalent to 26.34%, and the ratio of net income to gross capital (assets) or ROA is equivalent to 17.49%. PTBA's business performance remains good, it is still higher than the deposit interest rate in banks, considering that the performance achievement figure is only nine months, so at the end of 2018, the achievement of PTBA's business performance will certainly increase.
What about Mrs. Ninoy's investment performance after having a month with PTBA? With EPS of IDR 341.12, the net profit obtained by Ms. Ninoy is (IDR 341,12 x 400,000) = IDR 138,447,018.00, equivalent to 13.64% of the initial capital of IDR 1,000,000,000. However, if the initial capital is deducted from the cash dividend that has been received previously, then the net profit percentage obtained by Ms. Ninoy is Rp. 136,477,018.00 / 885,332,800.00, equivalent to 15.41%. Isn't that good?
As the owner, Ms. Ninoy does not need to bother managing her company (PTBA), because all company operations are handled by a board of directors who have been appointed and determined by PTBA owners (shareholders) at the General Meeting of Shareholders (GMS).
By having PTBA, Ms. Ninoy benefits from; increase in equity and receive dividends as long as he is the owner of PTBA (holding PTBA shares), as well as profit from the difference in excess share price (capital gain) if at one time Mrs. Ninoy sells (shares) PTBA.
Shares are not solely about stocks. When Mrs. Ninoy bought PTBA's shares, it meant that Mrs. Ninoy had bought part of the ownership of PTBA. Mrs. Ninoy did not buy a sheet of paper which was called a stock. Mrs. Ninoy bought a company, in this case the company in question was PTBA.
And because of this, the future plan of Ms. Ninoy will again buy PTBA shares according to available funds so that their ownership of PTBA will increase, hoping that the dividends they will receive in the twilight of their lives will increase too, even leaving the company (PTBA) to their children.

Thus, hopefully useful.

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