As investors, we must be familiar with corporate action. Let's briefly recall what it is because corporate action can affect our investment value and return in the long term.
Corporate action refers to a step or action that has been taken by a public corporation that has a direct impact on its investors. We've known types of action such as Initial Public Offering (IPO), General Meetings of Shareholders (GMS), Dividends, Right Issue, Private Placement, Warrant, Stock Split, Reverse Stock Split, Buyback, Merger & Acquisition, Tender Offer, Backdoor Listing, and so on.
As investors, you must remember that there will always be a "purpose" of corporate action. We can't just embrace it as something that certainly benefits our investment. Where there's an action, there might be a secret agenda behind it. So, what you must habituate in responding to corporate action is more like connecting the puzzle to discover the truth.
Connecting the puzzle
Understanding the meaning of corporate action is like playing a puzzle. You have to seek the information from here and there and find the connection by being curious and suspicious about the action and the data.
In THINK Class—Corporate Action, held on 11 January 2025 (members can now watch the recording video on THINK website), THINK specifically guided members in practicing how to sense the suspicious or questionable aspect of corporate action and how to gather the information to collect the puzzle pieces so that, in the end, we can see the truth behind what the company actually wants to achieve when it decides to take corporate action.
As investors, we can find out piece by piece by accessing the IDX (Indonesia Stock Exchange) website to find "Disclosure" files. We may jump to the company website and straightly point our destination to the "Investor Relations" section to see all the documents related to the investors (such as the Financial Statements, Disclosure of Information, Press Releases, and Annual Reports). We can also search for related news in various media, such as newspapers and magazines, and by talking with associated parties. This article will give a case study on discovering whether a corporate action is valuable, valid, and honest.
Study case: DEWA's suspicious loan
PT Darma Henwa Tbk (DEWA) has recently been a hot topic among stock investors. The general mining contractor service company, publicly listed on the Indonesia Stock Exchange on 26 September 2007, has been being watched for the last two to three years and is believed to be a prospective investment target.
One of the recent disclosures of information was published on 30 December 2024. The document announced the conversion plan of some of DEWA's debt to the creditors by taking corporate action—RIGHT ISSUE—with the mechanism of Capital Increase Without Pre-emptive Rights (PMTHMETD).
The purpose of this action was to readjust the financial position since the company was unable to fulfill the payment obligation to the creditors on its due date. The main highlight was debt to these two entities:
- PT Madhani Talatah Nusantara (MTN) with the value of a loan bill of 756,990,789,000 IDR
- PT Andhesti Tungkas Pratama (ATP) with the value of a loan bill of 358,925,000,000 IDR.
To simplify, the disclosure tells us that both MTN and ATP had agreed to convert DEWA's debt into shareholding or stock ownership at a price per share of 65 IDR. This corporate action resulted in MTN holding 29.84% of DEWA shares and ATP holding 14.15% of DEWA shares.
This announcement was indeed disconcerting since it raises a big question that investors must dig deeply to determine whether this action could be valuable or just a one-off event with no value.
Who are MTN and ATP, and why can they get the shares?
Samuel Patrick, Director of Analysts, and Jonathan Daniel, Manager of Analysts at THINK, started to collect the puzzle pieces by checking the connection between DEWA, MTN, and ATP.
Tracking the record of DEWA
Savvy investors must investigate various aspects, including the history of the related parties and the company's owners. In this case, we can look for information from multiple sources.
But first, let's check DEWA's financial statement.
In DEWA's latest Financial Statement (Q3 2024), we can notice that its top revenues came from PT Kaltim Prima Coal and PT Arutmin Indonesia. Those two are associates of PT Bumi Resources Tbk (BUMI). This shows that DEWA plays the role of a subcontractor for BUMI.
Then, in the Cost of Revenues section, "subcontractors" took the biggest portion, so we can conclude that DEWA actually hires other subcontractors for its business.
THINK analysts then looked for other puzzle pieces by tracking down DEWA's financial statement from a few years back, particularly zooming into the Business Loan section. From the data, we figured that MTN has been a subcontractor for DEWA since 2017.
What to emphasize
Following the finding of a long-term relationship that has actually been established between DEWA and MTN, investors also can't forget to pay attention to ATP. The findings were more puzzling on this.
ATP was established on 19 April 2022. This new limited liability company suddenly just happened to give a big loan amounting to 300 billion IDR to DEWA on 25 April 2022 (with generous terms and conditions, as shown in the picture below).
Another oddity was DEWA's ASP history compared to similar companies, such as DOID, PTRO, UNTR, and AADI. The ASP of the others has had ups and downs since 2018. Meanwhile, DEWA documented stable ASP from 2018 until 2023.
What is going on, actually? Why did DEWA seem special or… so not special?
*the historical ASP data for each company mentioned above can be read at KBSI (Kamus Besar Saham Indonesia), which showcases brief analysis overviews of 500 publicly listed companies from 70+ industries in Indonesia.
The whole puzzle and deduction of the truth
Getting the big picture on DEWA's corporate action involves a better understanding of the key player–BUMI as DEWA's primary client.
You can find out how big BUMI is by reading its brief analysis on KBSI. In 2022, BUMI became a joint venture owned by Salim Group and Bakrie Group (Bakrie Group alone initially owned the company). Since Salim joined the company's management, we have sensed Salim's urge to realign and improve BUMI.
They had restructured the board member level, rearranged the financial transactions to eliminate inefficiency, and reselected related parties for the business.
As the subcontractor for BUMI, DEWA must be in line with the headway. The corporate action is intended to help DEWA sort out its debt while the company is also in the process of purchasing new production fleets, securing major funding, and appointing a new board of directors.
To be fair, DEWA's financial performance in 2024 was still not impressive. The company was still in deficit so that it couldn't pay a dividend. So again, our task as detectives is to find more puzzle pieces and connect them one by one.
Always remember: actual corporate action should give value to the company and its shareholders.
To learn more about how we dissect the real truth in corporate action, kindly watch our newest THINK CLASS–Corporate Action. During that session, we also discussed another interesting company!
