Krakatau steel (A)

By. Syndicate 8
Hanung Pracoyo (29116027)
Astika Ulfah Izzati (29116047)
Aldi Yosafat (29116211)
Case
Overview
PT. Krakatau Steel Tbk. is one of steel company in Indonesia that established
in 1970. In 2009, this company became a market leader with the domestic
market share of 57% in Hot Rolled Coil, 32% in wired rod, 33% in cold roll
coil.

In November 2009, PT Krakatau Steel Tbk has been officially listed in Bursa
Efek Indonesia. It offers 3.155.000.000 shares public which is 20% of the
paid-up capital to expand its production capacity.

PT. Krakatau Steel Tbk is planning to use 35,8% of IPO (Initial Public
Offering) income to add more production machine for achieving its target (3,5
million-ton Hot Rolled Coil per year).

Besides that, It is also planning to use 24,2% of the IPO income to buy raw
materials, 25% to finance maturation of 388 hectares land, and 15% to increase
the capital investment of PT. Krakatau Bandar Samudera and PT. Krakatau
Daya Listrik
Proble
m
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 that time Mustafa Abubakar (Ministry of State Owned

Enterprises) 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 Bambang Supriyatno (The investor who want to

invest in Krakatau Steel) to do a financial performance
measurement of Krakatau Steel compare to other local steel
companies. Bambang decides to compare it to the 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.
ANALYSIS
Trend analysis
BUMN Financial Scoring Framework
DuPont Formula
Trend Analysis
Trend analysis is used to analyze the company
continuos growth. The better growth rate of one
company, describe the stability of company
performance. To determine the growth of amount
of return from of the company, we use 4 aspect
which is revenue, return, market and debt
performance for the input value at CAGR Formula.
 TABLE COMPARASION (CAGR Calculation Trend 2007 - 2010)
KRAKATAU GUNAWAN STEEL JAYA
STEEL PARI
STEEL

Revenue Aspects

Higher is better Gross Profit Margin 8% -6% -7%

Higher is better Operatin Profit Margin 8% -6% -11%
Higher is better Net Profit Margin 50% 9% -12%
Lower is better COGS to Revenue -1% 2% 1%
Lower is better Operating Expense to 8% -5% 5%
Reven
Due of IPO its normal the Market Aspects
book value is significantly Earnings per share 38% -92% -12%
decreasing for KS Book Value per share -89% no data 11%
Return Aspect

Higher is better Return on Assets 29% -4% -24%

Higher is better Return on Equity 23% no data -21%
Debt

Lower is better Debt to equity 0% no data 19%

Lower is better Debt to Capital -12% no data 32%
 According to that table (Trend
Analysis), Krakatau Steel shows the
best performance in its stability
growth. So it is the best idea if
Bambang invest his money in Krakatau
steel.
BUMN Financial Scoring
Framework
A benchmark for scoring the Financial
Scoring Framework is financial ratio of
return of equity, return of investment, cash
ratio, current ratio, collection period,
inventory turnover, total asset turnover,
and total equity to total asset
 Krakatau Steel Gunawan Dianjaya Steel PT. Jayapari Steel

Financial Financial Financial

Ratio Score Ratio Score Ratio Score
Indicators Indicators Indicators

Return of Equity 11,4% 16 Return of Equity 26,55% 20 Return of Equity 9,48% 14

Return of
13,4% 12 Return of investment 34,24% 15 Return of investment 14,25% 12
investment
Cash Ratio 60,5% 5 Cash Ratio 0,89% 0 Cash Ratio 12,17% 2
169,03
Current Ratio 177,3% 5 Current Ratio 5 Current Ratio 276,83% 5
%
Collection Period 29,1 5 Collection Period 20,0 5 Collection Period 79,9 4,5
Inventory
160,9 3 Inventory Turnover 118,9 4 Inventory Turnover 95,4 4
Turnover
Total Asset 159,15
84,5% 7 Total Asset Turnover 5 Total Asset Turnover 104,01% 4
Turnover %
Total Equity to Total Equity to Total Total Equity to Total
52,9% 2,5 60,09% 8,5 72,98% 7,5
Total Asset Asset Asset

Total Score 55,5 Total Score 62,5 Total Score 53

Less
Category Healthy Category Healthy Category
Healthy
Grade A Grade AA Grade BBB

Krakatau steel is a healthy company (Grade A)

with total score 55,5, Gunawan Dianjaya Steel is a
healthy company (Grade AA) with total score 62,5,
and PT. Jaya Pari Steel is less healthy (Grade BBB).
So according from BUMN method Gunawan
Dianjaya Steel has the best financial performance.
Dupont Formula

Dupont formula is based on ROE formula

which is modified. DuPont formula is a
common model to measure a company
performance.
 Krakatau Steel
DuPonts Component Value
Profit Margin Ratio 7,15 %
Total Asset Turnover 84,49 %
Gunawan Dianjaya Steel
Equity Multiplier 1,89
ROE 11,42 % DuPonts Component Value
Profit Margin Ratio 10,02 %
Total Asset Turnover 159,14 %
Equity Multiplier 1,66
ROE 26,47 %

PT. Jayapari Steel

DuPonts Component Value

Profit Margin Ratio 6,65%
Total Asset Turnover 104,01%
Equity Multiplier 1,37 From DuPont Formula we can see that
ROE 9,47 % Gunawan Dianjaya Steel has the highest
number of Return of Equity 26,47 %. A
company with good Dupont ROE ratio is
actually have a good financial
performance.
Conclusion
Based od three analysis method, we can
conlude that :
Trend analysis shows Krakatau steel as the best
choice to invest because it is showed the best
performance in stability growth
Based on BUMN Financial Scoring Framework and
Dupont analysis shows that Gunawan Dianjaya
has the best in financial performance.