MAXIMIZING COMPANY VALUE OF FOUR PALM OIL COMPANIES THROUGH OPTIMAL CAPITAL STRUCTURE

• Main Author: Prawira Santoso, Irwin
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/45742
• Institution: Institut Teknologi Bandung

Palm oil is one of Indonesia's mainstay commodities and the biggest foreign exchange earner. By far, the largest producing and exporting country of palm oil is Indonesia (49%) followed by Malaysia (33%) in 2017. India is the largest destination for palm oil exports reaching 1.06 billion US dollars or 18.1 percent of the total value of Indonesia's palm oil exports. In 2018, India executed a stunning approach by forcing import obligations on Indonesian CPOs of up to 44 percent. A new issue appeared regarding the European Union Renewable Energy Directive II (RED II) regarding the plan to input CPO from Malaysia and Indonesia as high-risk products. Because of this condition, the financial performance of palm oil sector in Indonesia has decreased significantly and this is a difficult time for the palm oil industry in Indonesia starting from 2017 to 2018 and will take effect the following year. External factors such as the increase in customs by India and European Union policies will result in falling world commodity prices and CPO export demand. These factors will certainly affect the condition of financial performance in every company. From this condition, the choice to restructuring debt to keep up the manageability of the company's activities and boost the company's worth gets significant. External analysis seen based on macro-conditions and industrial analysis using PESTEL and Porter Five Forces analysis. Financial analysis is conducted to find out the historical condition of the for four palm oil company (SMAR, BWPT, DSNG, and SSMS) 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 a higher Debt to Equity Ratio than the industry average. The use of excessive debt will increase the risk of default due to high interest expense and liabilities to be paid by the company and will decline the stock price of the company. Companies in this sector need to improve the value of the firm. That can be achieved by minimizing the cost of capital that the impact will maximizing company’s value which is called by optimal capital structure. From the result of financial projections, the basic assumption (most likely scenario) for SMAR achieved a minimum WACC of 8.91% and company value of IDR 5.597,926 Million, BWPT obtained a minimum WACC of 8.45% and company value of IDR 3,909,883 million. DSNG obtained a minimum WACC of 8.25% and company value of 5,343,543 million, SSMS obtained a minimum WACC of 8.65% and company value of IDR 6,837,867 Million in 2019.