This Group Field Project has been prepared based on a study conducted by a team of MBA's students from Indonesian Institute for Management Development (IPMI), class 'of- January 1997. This report contains an assessment of Pefindo rating and research results of a study on fixed income instruments, which identify the industries that have a better outlook and to find the opportunity to invest in the financial instruments that have been issued by the companies within those industries. The study uses fundamental financial analysis approach combined with Pefindo' s rating criteria.

This study evaluates the prospects of the five industries that have been chosen, which are banking, infrastructure (electricity and toll roads), pulp & paper, property and construction. In assessing Pefindo rating, the study uses quantitative and qualitative approaches and assigns certain weight in those aspects that have been considered by

Pefindo.

From our assessment result, we found that in banking industry, Pefindo considers about the quantitative aspect first before looking at the qualitative aspect. If the bank has already complied with BI's requirement, it will automatically get BBB rating without looking at the qualitative aspect.

For pulp & paper and construction sectors, Pefindo put the same weight on both aspects because the companies within these industries mostly belong to the same groups. Thus the rating highly emphasizes on the quantitative aspect because the qualitative aspect only differs slightly between each company.

As for infrastructure, Pefindo put more weight on qualitative aspect as the support from the government for this sector will remain strong. For property, in the economic downturn condition, it is having a bad condition. It will be very difficult for Pefindo to give investment grade if it highly emphasizes on quantitative aspect, as the result will not be favorable. We also stated our recommendation on Pefindo' s rating activities.

This study also includes a brief analysis about several companies that have already issued the fixed income instruments, such as Commercial Paper and Bond. Each industry will be represented by several companies within the industry, including company analysis on its structure, line of business, past performance and company outlook.



Banking

This study consists of the outlook of banking industry and individual company report of two state-owned banks (PT. Bank Papan Sejahtera and PT. Bank Tabungan Negara) and four private banks (PT. Bank International Indonesia, PT. Bank Nusa International, PT. Bank Tamara and PT. Bank Modem). All of these banks received an investment grade rating from PT. Pefindo, as they had complied with BI requirements. However, they are different in terms of individual performance.



Pulp & Paper

This study consists of the pulp and paper industry outlook and the .company reports of PT. Tjiwi Kimia and PT. Pindo Deli.



Infrastructure -electricity

This study consists of the electricity business outlook and the company report of PT. Perusahaan Listrik Negara (PLN) as the monopoly holder. PLN received A rating, reflecting its importance as the sole provider for electricity in Indonesia and its ability to service its financial obligation.



Infrastructure-toll roads

This study consists of the outlook of toll roads development in Indonesia and the company reports of PT. Jasa Marga and PT. Citra Marga Nusaphala Persada. Both of them received investment grade rating and were positioned as the major players in the toll road business in Indonesia.



Construction

This study consists of the construction outlook and the company reports of the three state-owned construction companies (PT. Pembangunan Perumahan, PT. Wijaya Karya and PT. Adhi Karya). Construction outlook is the least favorable compared to other industries.



Property

This study consists of the property outlook and the company reports of PT. Ciputra Development and PT. Duta Anggada Realty. With the current economic downturn, property outlook will remain unfavorable in the near future.



Research Location : PT. Pemeringkat Efek Indonesia (PT. Pefindo)

Supervisor: Manggi Taruna Habir

Accepted on 1 December 1997



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