HM Sampoerna Studying Higher Free Float on Indonesia Stock Exchange
Indonesian tobacco giant Hanjaya Mandala Sampoerna (HM Sampoerna), subsidiary of Philip Morris International, is studying the requirement to increase its free float ratio from (a mere) 1.82 percent to 7.50 percent. Last year, the Indonesia Stock Exchange (IDX) announced that it would force listed companies to offer at least 7.50 percent of their enlarged equity to the public. This rule will come into effect in January 2016. HM Sampoerna is the third-largest Indonesian company in terms of market capitalization (IDR 295 trillion).
Top Market Capitalization at end-2014:
| Company | Market Capitalization |
| Bank Central Asia | IDR 320 trillion |
| Astra International | IDR 301 trillion |
| HM Sampoerna | IDR 295 trillion |
| Telekomunikasi Indonesia | IDR 289 trillion |
| Bank Rakyat Indonesia | IDR 285 trillion |
| Bank Mandiri | IDR 249 trillion |
| Unilever Indonesia | IDR 246 trillion |
| Perusahaan Gas Negara | IDR 145 trillion |
| Gudang Garam | IDR 117 trillion |
| Bank Negara Indonesia | IDR 113 trillion |
Source: Neraca
HM Sampoerna is one of the 40 listed Indonesian companies that fail to meet the new free float criteria. Ito Warsito, General Director at the IDX, said that this requirement (stipulated by BEI No Kep-00001/BEI/01-2014) has been formulated to increase liquidity on the stock exchange. If companies fail to meet this criteria by 30 January 2016 then they may face sanctions that include a fine, suspension or even delisting from the IDX.
Currently, American global cigarette and tobacco company Philip Morris International controls a 98.18 percent stake in HM Sampoerna through its subsidiary Philip Morris Indonesia. HM Sampoerna holds a 30 percent market share in Indonesia’s lucrative tobacco industry. Approximately 65 percent of Indonesian men consume tobacco products (roughly between 80 and 85 million people) in Southeast Asia’s largest economy. HM Sampoerna posted net sales of IDR 59.6 trillion (USD $4.8 billion) in the third quarter of 2014, a 9.1 percentage point growth (year-on-year) from the same period in 2013. Meanwhile, the company’s net profit grew 1.3 percent to IDR 7.6 trillion (USD $608 million) over the same period.
There are several steps that can be taken by HM Sampoerna to meet the new requirement for listed companies. These steps include a stock split, rights issue or delisting. Analysts expect that a stock split (either in combination with a rights issue) is the most obvious option.
Stock Quote HM Sampoerna - HMSP:
Further Reading:
• Indonesian Tobacco Products Subject to Excise Tax Hike in January 2015
• Higher Cigarette Excise; Indonesia’s Tobacco Industry in Trouble?
• Indonesian Tobacco Giant Sampoerna Shuts down Two Cigarette Plants
• Revenue or Health: Dilemma of Curbing Indonesia's Tobacco Consumption