When DEWA is not GOD

PT Darma Henwa (DEWA) Tbk has just raised Rp624 billion from the issuance of new shares (6.24 billion) to refinance its debts. The stock once surged 28.2% in Dec 20, 2009 to Jan 6. But since then the stock retreated 18%. The mining contractor struggles to convince investors about its future.

DEWA is controlled by PT Bumi Resources (BUMI) Tbk through a controversial acquisition early last year, highly inflated price that time. BUMI paid Rp2.41 trillion for an indirect ownership of 44% in DEWA. Assuming that BUMI also participated in the recent rights issue, the company had to spend Rp275 billion to maintain its 44% ownership in DEWA. So, the combined investment in DEWA would go up to Rp2.685 trillion.

How much is the value of DEWA at the moment? Well, at the current stock price of Rp123, DEWA has market capitalization of Rp2.689 trillion. And, how much is 44% of Rp2.689 trillion? Rp1.18 trillion. So, potential loss of investment for BUMI as of today is at least Rp1.5 trillion.

How good is DEWA?

Well, the company's operating profit margin declined from 20.3% in 2007 to 11.8% in 2008 and 7.1% in the first half 2009. The company generated net profit of Rp2 billion only in six months of 2009. With "equity" of US$277 million and total asset of US$487 million, how much is the ROE, and ROA? Well, clearly too small to put it here.

BUMI shareholders? Fortunately, they are too busy with speculating on the stock, dubbed as the busiest casino in the country. 

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