DETERMINING THE OPTIMAL CAPITAL STRUCTURE OF THE FOUR LARGEST COAL MINING COMPANY FOR MAXIMIZING THE VALUE OF THE COMPANY

• Main Author: 29116198, Mikdad
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/28920
• Institution: Institut Teknologi Bandung

Currently, Indonesia is the second largest coal exporters to the Asia Pacific market. The coal produced in Indonesia is mostly exported to China and India as one of the world's largest coal-consuming countries. The economic transition in China that previously depended on the industrial sector into the service sector caused a decrease in world coal supply-demand that caused the decline of world coal price. The contribution of the coal sector in Indonesia's GDP decrease from 3% to 2% in recent years. Because of this condition, the financial performance of coal mining companies in Indonesia has decreased significantly and this is a difficult time for the coal industry in Indonesia starting from 2012 until early 2017. From this condition, the decision to increase debt to maintain the sustainability of the company's operations and maximize the firm's value becomes important. Because this is an internal step of the management of each company that can minimize the adverse effects caused by external factors that can not be controlled such as the decline in coal prices. <br /> <br /> Marco-conditions and industrial analysis will be using PESTEL and Porter Five Forces analysis. After performing an external analysis. Financial analysis is conducted to find out the historical condition of the for largest coal company (ADRO, PTBA, ITMG, and BYAN) for further use as the basis for future projection. Overall of the company's financial analysis are seen in a bad situation. This situation can be seen from the small Return on Equity and high weighted average cost of captial. Companies in this sector need to improve the value of the firm and expand the business. That can be achieved by minimizing the cost of capital that the impact will increasing firm’s value. <br /> <br /> From the result of financial projections, the basic assumption (most likely scenario) for ADRO achieved a minimum WACC of 11.77% and firm value of 5.161 Million USD, PTBA obtained a minimum WACC of 12.93% and firm value of IDR 33,240 Billiom. ITMG obtained a minimum WACC of 12.00% and firm value of 1,126 Million USD, BYAN obtained a minimum WACC of 8.31% and firm value of 2,939 Million USD in 2018. This recommendation is a business solution that can be done by the company with the aim that the company pay more attention to the capital structure in order to have optimal portion in debt and equity in order to maximize the firm value.