TWISTING THE END FATE OF TREASURY SHARES: HOW THE OPTIMAL CAPITAL STRUCTURE CAN IMPROVE THE CORPORATE ACTION OF TELKOM INDONESIA

• Main Author: AFIF / 29116476, MUHAMMAD
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/29109
• Institution: Institut Teknologi Bandung

According to POJK No. 30/POJK.04/2017 that regulate Repurchase Shares By Public Company, PT Telekomunikasi Indonesia Tbk (Telkom) has an obligation to divert 1,737,799,800 of the remaining of treasury shares until the due date in November 2018, that have been held by Telkom for almost 6 years. The remaining of the treasury shares might be divert by reselling in or outside the stock exchange and/or cancel by means of capital reduction. Telkom initially planned to resale their total remaining of 1.74 billion of treasury shares until the due date on November 2018, in order to get an additional allocation of company’s capital expenditures. However, the slow-down growth of the company and the declining state of the equity market, forcing Telkom to seek other options to divert of its remaining of treasury shares. <br /> <br /> The objectives of this research are to give the best suggestions to Telkom Indonesia to end the treasury shares program, regarding its remaining 1.74 billion of treasury shares to comply POJK No. 30/POJK.04/2017 by also achieving the optimal capital structure that could maximize the value of Telkom. This research begins by identifying and examining the internal and external factors of the business. Afterward, current company’s financial performances and current condition of company’s capital structure will be calculated using trade-off theory approach, in order to evaluate debt ratios to assess the optimal proportion of company’s capital structure. Then, through every possibility in the capital structure condition, this study will simulate the company’s capital structure, including the scenario of the remaining treasury shares, in order to assess which kind of optimal capital structure that would maximize the value of the company. <br /> <br /> After conduct the optimal capital structure simulation, the Author found that Telkom Indonesia is in under levered situation, where the current market value of company’s capital structure is consist of 11.76% of debt and 88.24% of equity, then lead to 12.10% of WACC. Meanwhile, the optimal level of the company’s capital structure consisted of 35% of debt and 65% of equity, then could lead to cheaper WACC which is equal to 12.03%. Therefore, the company should canceled the remaining of company’s treasury shares. The result suggests to Telkom Indonesia to use more debt for good investment project such as merger and acquisition or any capital expenditure to support the aggressiveness of infrastructure development.