Indonesia Investor Says Consumer Spending to Surge
The chief executive of PT Saratoga Investama Sedaya said that even though gross domestic product growth slowed in the first quarter because of lower corporate spending, Indonesian consumers are showing no signs they are spooked yet.
Saratoga Investama is planning an initial public offering "soon" to raise money for more acquisitions, he said. Meanwhile, its consumer-facing companies, like PT Mandala Airlines, which it manages with its affiliate private-equity fund Saratoga Capital, are going ahead with their expansion plans. Saratoga currently manages around $2 billion, which it has invested in 15 companies.
"We saw it in 2003 and we saw it in 2008, elections are good for business," as millions of dollars are spent on campaigning across the archipelago, he said in an interview. "You see a lot of money is pumped into the system and the consumption goes up."
To better target Indonesia's optimistic middle class, low-cost carrier Mandala plans to more than triple its fleet to 25 aircraft by the end of 2015 from only seven today. That will mean orders of close to $1.6 billion for Airbus, the European Aeronautic Defence & Space Co. unit, he said.
Mandala is also expanding into new routes. Mr. Uno said it just got approval to start flights to Hong Kong, which next month will become Mandala's fourth international destination after Singapore, Bangkok and Kuala Lumpur. The daily flights will be targeting middle-class vacationers looking for a quick weekend away, he said.
First-quarter GDP figures suggested Indonesia's corporations aren't as optimistic. A slowdown in investment in capital goods pushed Indonesia's GDP growth down to 6.02% in the three months ended March 31, the slowest rate in more than two years.
Lower commodity prices, less-aggressive monetary policy, rising wages and an expected rise in government-controlled fuel prices have all combined to convince corporations to invest less this year, said Credit Suisse in a report this week. It cut its forecast on Indonesia's GDP growth this year to 5.7% from 5.8%. The last time Indonesia's economy expanded less than 6% was in 2009.
"Our analysis suggests the big investment boom in Indonesia has come to an end," said Santitarn Sathirathai, a Credit Suisse analyst based in Singapore.
Still, Saratoga thinks consumer-driven sectors continue to do well. Its other companies serving Indonesia's middle class, including motorcycle distributor PT Mitra Pinasthika Mustika and cellular-tower company PT Tower Bersama Infrastructure Group, are optimistic that there will be no slowdown in domestic demand this year, Mr. Uno said.
"Domestic demand is still very robust and it is the pillar of the Indonesian economy," he said.
Banking is one of the consumer sectors Saratoga is looking at closely, said Mr. Uno. Saratoga is already bidding close to $400 million for around 40% of PT Bank Bukopin, Indonesia's 16th largest bank in terms of assets, according to people familiar with the negotiations.
Mr. Uno said he couldn't comment on that deal, but said he expects to have one or two more acquisitions this year.
http://www.wsj.com/articles/SB10001424127887324659404578500690796063654
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