Mustika Ratu ( MRAT ) is Attractive

Bloomberg Code: MRAT:IJ
Reuters Code: MRAT.JK

If you are a type of investor who dare to take a position in an unfavorite stock but has strong potential to grow, I bet you will like Mustika Ratu (Bloomberg Code MRAT:IJ, Reuters Code: MRAT.JK). As a company, Mustika Ratu has been priced so low by the market. Its initial IPO was in 1995 with intial price of Rp 2600,00. Today MRAT is trading at Rp 250,00. I do not have data in 1995 to 2005 but I assumed the reason why the market very bearish of this stock is because of its "traditional value". Market thought that MRAT, which is producing traditional cosmetics would not be able to fight against many imported cosmetics with their strong brands names and modern technology. When I noticed that this stock has strong growth history in 2006 to 2008, I started to think that this stock is a potential buy. I would show you the data.

Mustika Ratu (MRAT)	2008	2007	2006
Total Asset (Mio IDR)	354781	315998	291769
Book Value (Mio IDR)	303623	279559	264313
Net Cash Flow (Mio IDR)	10305.8	8349.8	-3121.2
CAPEX (Mio IDR)	-11429	-7426	-5553
Sales (Mio IDR)	307804	252123	226387
Operating Income	25297.8	18435.7	18066.6
Net Income	22290.1	11130	9096.2
Dividend	2225.6	1369.6	0
Total Share	428	428	428
Profitability
ROE	7.34%	3.98%	3.44%
ROA	6.28%	3.52%	3.12%
Operating Profit Margin	8.22%	7.31%	7.98%
Net Profit Margin	7.24%	4.41%	4.02%
Financial Risk
Debt / Equity	16.85%	13.03%	10.39%
Valuation
BV per share	709.40	653.18	617.55
EPS	52.08	26.00	21.25
Sales per share	719.17	589.07	528.94
Cash Flow per share	24.08	19.51	-7.29
DPS	5.2	3.2	0

You could check the BV per share. With today (25 May 09) closed at 250, it is very attractive. Its forward PE ratio less than 3 (In my calculation its full year 2009 EPS would be around 90).

This stock has a very strong growth. Its net income has increased more than 140% since 2006. Its EPS has grown to 52 in 2008 from 26 a year earlier (100% growth).


If the company able to improve its image from "traditional" to "modern" I believe MRAT would be able to continue its sustainable growth in the future. The potential risk that you have to be aware is this stock is not so liquid. You might not be able to sell this stock when you need your money

Stock to Watch: Jaya Pari Steel (JPRS)

Bloomberg Code: JPRS:IJ
Reuters / Yahoo Code : JPRS.JK

Jaya Pari Steel (JPRS) is producing iron and steel products. The company’s main products are steel plates, round bars, and flat bars. JPRS markets its products domestically and internationally. It is operated in Surabaya. Due to the tough economic condition, JPRS suffered some net losses in 4Q 2008 even though the full year 2008 income was good and also suffered a negative operating income in 1Q 2009.

(In millions of Rupiah)	2008	2007	2006
Revenue	732,703.00	432,808.00	340,210.00
Cost of Revenue	617,319.00	362,804.00	286,459.00
Gross Profit	115,384.00	70,004.00	53,751.00
Total Operating Exp.	634,352.00	377,308.00	300,488.00
Operating Income	98,351.00	55,500.00	39,722.00
Net Income	49,157.00	41,566.00	26,796.00
EPS	65.39	55.42	7.04

(In millions of Rupiah)	1Q 2009	4Q 2008	3Q 2008
	(3 Months)	(3 Months)	(3 Months)
Revenue	41,157.00	87,738.00	149,073.00
Cost of Revenue	44,157.00	132,541.00	101,922.00
Gross Profit	(3,000.00)	(44,803.00)	47,151.00
Total Operating Exp.	46,381.00	137,824.00	107,560.00
Operating Income	(5,224.00)	(50,086.00)	41,513.00
Net Income	78.50	(50,783.00)	27,169.00
EPS	0.11	(67.71)	36.07

If we look at the numbers, we could notice that the downturn is might be bottoming. The losses in operating income is decreased in 1Q 2009

	1Q 2009	4Q 2008	3Q 2008
Total Current Asset	256,092.00	373,882.00	473,192.00
Total Asset	282,912.00	399,344.00	491,992.00
Total Current Liabilities	12,173.00	123,117.00	170,352.00
Total Liabilities	13,061.00	129,572.00	171,438.00
Total Equity	269,851.00	269,772.00	320,554.00

The 1Q 2009 balance sheet also shows that JPRS debt to equity ratio is relatively low, around 4.84%. With this level of debt, I believe JPRS would be able to pass these hard times of economic slowdown.

With the current sign of improvement in global economy, I would expect JPRS to generate some significant income in the 4Q 2009. In my calculation, JPRS EPS for 2009 would be around 50. With this forecasted value of EPS, my estimated fair value for JPRS at the end of 2009 would be in the range of 500-600.