Assessing future investments of conglomerates

Conglomerates play a crucial role in nation-building. In this report, we analyze the businesses, profitability, size, and future sector focus of Indonesia's leading conglomerates. We list conglomerates with combined market cap of their listed companies of more than USD10bn and also conglomerates with more than three listed companies. Specifically, we examine 13 conglomerates and compile a list of their respective listed companies. Over the past two decades, these conglomerates have steadily increased their dominance, doubling their weighting in the JCI, with their consolidated listed companies now accounting for 47% of JCI’s market cap, vs. 23% twenty years ago (as data is available for most of these conglomerates for this period).

The drivers of Indonesia conglomerates’ increasing contribution to JCI’s market cap, particularly in recent years, largely stem from the commodities and critical minerals sectors, including coal, copper, gold, and renewables.

We believe that understanding the future sector focus of these conglomerates is essential for identifying lucrative opportunities in Indonesia, given the significant influence they wield on the nation's economy.

Solid growth track record

Conglomerates’ consolidated revenue CAGRs at +9% from 2010-2023 and profit CAGR at +10% have outstripped Indonesia’s nominal GDP CAGR at +8.9% in the same period. Conglomerates with the highest profit in the period include Djarum (a holding company of BBCA IJ and TOWR IJ [both rated Buy]), Sinarmas (a holding company of BSDE IJ, INKP IJ and TKIM IJ [all not rated]), Astra (a major domestic automotive sector player and a holding company of UNTR IJ [not rated]), and multifinance companies), and also Salim Group (a holding company of INDF IJ and ICBP IJ [both rated Buy]).

Potential investments and collaborations between conglomerates

Based on our analysis, we believe Indonesia conglomerates’ investments are focused on existing businesses and new business lines. Top three sectors in which they invest are: 1) critical minerals value chain (particularly down streaming) in the metal & mining space (nickel, copper, bauxite, etc), 2) renewable energy, 3) healthcare, and 4) infrastructure (industrial estate, toll-roads, etc).

We also notice several conglomerates are collaborating. For instance, Salim currently has stakes in Bakrie’s BUMI IJ and BRMS IJ (both not rated, see here and here). 

Stock call: we are selectively positive

We prefer companies with a solid track record and good cashflows such as BBCA, ICBP, SRTG, ADRO, DRMA and ASSA (all rated Buy). Merger and acquisition activities of these conglomerates are also noteworthy (see here, here and here) in terms of inorganic growth.

Fig. 1: Growing dominance — Indonesia conglomerates doubling the weighting in JCI over time

 

Fig. 2: Evolution of Indonesia conglomerates’ consolidated market cap

 

Fig. 3: Indonesia conglomerates’ market cap CAGR in the past five years

 

Fig. 4: Stocks that have driven the growth of these conglomerates — mostly in the critical minerals/commodities/renewables sectors (period Jan-2019 until Dec-2024)

 

Fig. 5: Companies and the sectors in which conglomerates operate

	Sector
BREN	Geothermal and wind energy producer
TPIA	Petrochemical manufacturer
DSSA	Coal mining & power plant operator
AMMN	Copper & gold mining
GEMS	Coal mining
BUMI	Coal mining
BRMS	Critical minerals mining (eg. Gold, copper etc)

 

Fig. 6: Conglomerates’ breakdown — stocks under the conglomerates, existing business lines and future investments

Group	Companies under conglomerates	Existing business lines	Conglos recent and future investment
Djarum	BBCA, TOWR, BELI	Banks	Industrial real estate
	RANC, SUPR	Cigarettes	Digital infrastructure
		FMCG
		Digital infrastructure
Sinarmas	INKP, TKIM, BSDE, DMAS	Pulp and paper	Telecomunication
	FREN, DSSA, SMMA	CPO	Digital infrastructure
	BSIM, GEMS	Mining - Coal
Astra	ASII, UNTR, AALI	Automotive	Healthcare
	AUTO, ACST, ASGR, ARKO	Multifinance	Renewable Energy - Geothermal
		Energy and metal mining	Digital banks
			Hospitality
Salim	ICBP, INDF, DNET, LSIP	FMCG	Mining - Coal
	SIMP, ROTI, IMAS, IMJS	CPO	Road Contruction
	BINA, DCII	Automotive	Digital & commercial banks
Lippo	LPKR, LPPF, MPPA, SILO	Real estate	Healthcare
	LPCK, MLPL, KBLV, MLPT	Banks	Property Developers
		Retail	Fintech
Emtek	EMTK, SCMA, SAME, BUKA	Private equity	Ecommerce
		Media Company Television	Media Company Streaming Internet
Bakrie	BNBR, ENRG, BTEL, UNSP	Mining	Media Holding Company
	ELTY, DEWA, VIVA, BUMI, BRMS
Tancorp	CLEO, AVIA, DEPO, ZONE	Building material	Ceramic Manufacturing
	RISE, CAKK, PEVE		Consumer - Water
			Paint Manufacture
			Retail (focusing fashion for middle class)
			Property Developers
			Logistics and Transportation
Agung Sedayu	PANI, PDPP	Property	Property
		Retail
Barito	BREN, CUAN, PTRO, BRPT	Forestry Industry (CPO, Timber)	Petrochemical
	TPIA	Property	Renewable Energy - Geothermal
Triputra	ADRO*, ASSA, ASLC, DRMA	Plantation CPO, Rubber	Energy and Chemicals Management Services
	DSNG, TAPG, ESSA, KMTR	Auto Sparepart Manufacture
Saratoga	SRTG, MDKA, TBIG	Mining - Coal	Mineral downstreaming
	MPMX, ADRO*	Mining - Gold and Copper	Healthcare
		Oil & Gas	Renewable
		Infrastructure
		Automotive

 

Fig. 7: Breakdown per conglomerates — several conglos are increasing their weight in JCI (i.e., Barito now 16% of JCI, Agung Sedayu at 2%, etc); 2005-2024 

 

Fig. 8: Indonesia conglomerates – Historical revenue, profit, ROE and capex

 

Fig. 9: Indonesia conglomerates – CAGR revenue and profit in 2010-2023

INVESTMENT RATINGS
A rating of ‘Buy’, indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of ‘Neutral’, indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of ‘Reduce’, indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of ‘Suspended’, indicates that the rating, target price, and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies that are labelled as ‘Not Rated’ or ‘No Rating’ are not in regular research coverage. Benchmark is Indonesia Composite Index (‘IDX Composite’). A ‘Target Price’, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part of the analyst’s estimates for the company’s earnings, and may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market in general. 

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ANALYST CERTIFICATION
The research analyst primarily responsible for the content of this report and certifies that the views about the companies including their securities expressed in this report accurately reflect his/her personal views.  The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.

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Jupriadi Tan (jupriadi.tan@verdhana.id)

David Tjahjadi (david.tjahjadi@verdhana.id)

Gerald Hugo (gerald.hugo@verdhana.id)