I Objective

Bambang Supriyanto is an investor with a moderate risk profile and

wants to be sure whether he is investing on the right stocks. He was
going to invest a big amount of money in Krakatau Steels stock. PT
Krakatau Steel Tbk is an extremely well-known steel company in
Indonesia and also the largest steel manufacturer in Southeast Asia. In
2009, the company has become a market leader with domestic market
share 57% in HRC (Hot Rolled Coil), 32% in wire rod and 33% in CRC
(Cold Rolled Coil). Krakatau steel has ten subsidiaries.
PT Krakatau Steel Tbk has been officially listed in BEI (Bursa Efek
Indonesia) with a stock code KRAS. First Initial Public Offering (IPO) of
Krakatau

in

November

2010.

PT

Krakatau

Steel

Tbk

offers

3.155.000.000 shares to public which is 20% of the paid-up capital in

order

to

expand

its

production

capacity,

beside

adding

more

production machine, PT Krakatau Steel Tbk is also planning to use

24,2% of the IPO income to buy the raw materials (iron ore pellet,
scrap, billet and slab), 25% to finance maturation of 388 hectares land
for integrated steel mills project with POSCO) and 15% to increase the
capital investment in two PT Krakatau Steel Tbk subsidiary, PT
Krakatau Bandar Samudera and PT Krakatau Daya listrik.
But during the IPO there has been conflicts going on, the share
price was claimed too low. At first offering (2-4 November 2010),
3.155.000.000 shares were offered at price Rp 850,- per share. At the
same time Ministry of State Owned Enterprises, Mustafa Abubakar and
the underwriter denotes the price of its initial public offering of shares
(initial public offering / IPO) of PT Krakatau Steel is already optimal.
This

issue

triggers

measurement
companies.

of

Bambang

Krakatau

Bambang

to

Steel

decides

to

do

compare
compare

financial
to
it

performance

other
to

local

the

steel

financial

performance of PT Gunawan Dianjaya Steel and PT Jaya Pari Steel as

the steel companies which were already settled in BEI before PT
Krakatau Steel.

II Analysis
Based on the objective, we will apply 3 methods for measuring the
performance of the company. Those 3 methods are :
3.1.

Trend Analysis

This trend analysis is using compound annual growth rate (CAGR)

formula. CAGR is the rate at which something (e.g., revenue, savings,
population) grows over a period of years, taking into account the effect
of annual compounding. A compound is composed of two or more
parts. In the case of compound growth, the two parts are principal and
the amount of change in the principal over a certain time period, which
is called interest in some circumstances.
This is sometimes called growth on growth because it measures
periodic growth of a value that is itself growing periodically. If we are
calculating the annual compound growth rate, then each year the new
basis is the previous basis plus the growth over the previous period. In
looking at an investment, the CAGR is a measure that is commonly
used to show how quickly the investment, or certain aspects of it, such
as gross sales, have been growing. Investment analysts often look at
five-year periods to discern a trend. A specific companys rate of
growth is often then compared with that of competitors or with the
industry as a whole. CAGR can be calculated through dividing the
ending value to beginning value, raised to the power of 1/number of
years) then subtract it by 1.

V(tn) = Ending Value

V(t0) = Beginning Value
tn-t0 = Number of years

In analyzing the performance trend of a company, several ratios

that had been used could be classified into four main aspects: revenue,
return, market and debt performance.

Krakata
u Steel

Gunawa
n
Dianjay
a Steel

Jaya
Pari
Steel

Gross Profit
margin

7.98%

-19.44%

-6.96%

Higer is
better

Operating Profit
Margin

7.75%

-6.74%

-11.19%

Higer is
better

50.16%

16.79%

-0.38%

Higer is
better

-2.51%

1.52%

1.14%

Lower is
better

8.17%

-4.78%

6.49%

Lower is
better

Earnings per
share

37.73%

8.92%

-11.60%

Higer is
better

Book value per

share

-93.85%

No data

10.81%

Higer is
better

43.65%

106.23%

7547.45
%

22.78%

No data

-20.47%

Higer is
better

0.02%

No data

24.43%

Lower is
better

0.01%

No data

18.79%

Lower is
better

Aspect

Reven
ue

Net Profit Margin

COGS to
Revenue
Operating
Expenses to
Revenue

Marke
t

Retur
n

Return on Assets
Return on Equity
Debt to Equity

Debt
Debt to Capital

Informat
ion

Higer is
better

TABLE COMPARASION (CAGR Calculation Trend 2007 - 2010)

3.2. BUMN Financial Scoring

BUMN financial scoring is a new framework introduced by the
government.

Through

BUMN

financial

scoring

framework,

performance of company can be classified into three categories:

healthy, less healthy, and unhealthy. In this framework, performance
of company is based on three aspects: financial aspect (contributes
70% of the total score), operational aspect (contributes 15%), and
administration aspect (contributes 15%).
There are 8 financial indicator ratios, there are Return of
Equity, Return of Investment, Cash Ratio, Current Ratio, Collection
Period, Inventory Turnover, Total Asset Turnover, and Total Equity to
Total Asset. Where each ratios has specific weight contributed to the
overall score. Since Bambang only wanted to do a measurement on
the financial aspect, he readjusted the score for health classification
as displayed below:
Financial
Indicators
Return on
Equity (ROE)
Return on
Investment
(ROI)
Cash Ratio
Current
Ratio
Collection
Period
Inventory
Turnover
Total Asset
Turnover
Total
Equity/Total
Asset
Total Score
Rating
Classificatio
n

Krakatau Steel

Gunawan
Dianjaya Steel
Ratio
Score
27%
20

Ratio
11%

Score
16

11%

30%

0.61
1.77

5
5

29.10

Jaya Pari Steel

Ratio
9%

Score
12

15

13%

10.5

0.01
1.69

0
5

12%
277%

2
5

19.19

79.87

4.5

160.92

118.87

99.58

0.84

3.5

1.59

4.5

4.5

53%

8.5

60%

104,01
%
73%

55,0
A
Healthy

61,5
AA
Healthy

7.5

50
A
Healthy

TABLE COMPARASION (BUMN Financial Framework 2010)

3.3. DuPlont Formula

DuPont formula is a common model to measure a companys
financial performance. DuPont analysis calculates the ROE where in
business world, it is one of the important ratios for investors since it
gives a brief look on how profitable the company to the investors
interest. The higher ROE, the more attractive the company in the
eye of investors.
ROE is affected by three things:
ROE = Profit Margin x Total Asset Turnover x Equity Multiplier

DuPlont Formula (in millions)

Component
Net
Profit

Profit
Margin
Ratio

Total Asset
Turnover

Equity
Multiplier

Gunawan
Dianjaya
Steel

Jaya Pari
Steel

1.062.683

171.428

28.446

Revenu
e

14.856.15
6

1.710.132

427.793

Revenu
e

14.856.15
6

1.710.132

427.793

Asset

17.584.05
9

1.074.570

411.282

Asset

17.584.05
9

1.074.570

411.282

645.713

300.134

Equity

ROE

Krakatau
Steel

9.293.915
11,43%

26,55%

9,48%

TABLE COMPARASION (DuPlont Formula 2010)

III

Conclusion and Recommendation

3.1.

Conclusion

Trend analysis shows that Krakatau Steel has more stable

performance based on every aspect of the company rather than
others. In this method, Krakatau Steel are the best choise to
invest.

BUMN Financial Scoring Framework, the Krakatau Steel score is

defeated by Gunawan Steel but the score are not to much
difference.

In Dupont Formula, Krakatau Steel again defeated by Gunawan

Steel with quite different result.

In those 3 methods, just CAGR methods is can generating

resistance values in the company over the years.

3.2.

Recommendation :
Based on the conclusion, that Gunawan Steel won two
methods, we still recommend to Bambang to invest in Krakatau
Steel if Bambang want to invest in long term. Because a
comparison scale companies are very much larger than Gunawan
and Jaya Pari Steel based on the profit margin. And also on the
value of the resistance trend CAGR method.
But if Bambang just want to see on the aspect ratio of profit
on annual and short-term investment, Gunawan is considerable
value to be an option in investing.