ASSESSING THE FUTURE PROSPECT INVESTMENT OF COAL MINING COMPANY: PT INDIKA ENERGY TBK

• Main Author: Fazrulloh, Mirsal
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/57627
• Institution: Institut Teknologi Bandung

Coal is a very multifunctional energy source. Its widely used by various industrial and manufacturing activities, such as in steel industries, cement industries, paper industries, and etc. One of the main functions of coal utilization is as a source of power generation energy. The majority of the world's electricity supply comes from coal. However, the use of coal as energy sources right now is polemic. The use of coal has a negative impact on the environment. Coal has negative impact to environment start from mining process until gas emission from burning process. Coal emission has a big impact on global warming, where 90% of the world's carbon is sourced from coal gas emission. Not only does it affect global warming, but it can also cause a variety of other health diseases such as skin, brain, blood, heart, lungs, and cancer. Because of that, the world government through the Paris Agreement agreed to reduce coal use. G7 countries have agreed not to invest any more in the development of coal power plants. Financial institutions have also not provided loans and investments to coal power plant development. Therefore, the purpose of this study case the author wants to know the prospect of investment in coal companies by looking at external factors and internal factors of the company (the performance of the company financial report and valuation). The company that was used as the object of the study case by the author is PT Indika Energy Tbk. PT Indika Energy Tbk is an integrated coal company that has been established since 1972. In the long run coal use most likely will continue to decrease. However, not all regions have good potential in the development of renewable energy. For examples the development of wind and solar power plants. Not all countries have good enough sources in the development the new renewable energy from wind and solar. Therefore, it will take time for the transformation from coal to renewable energy. This transformation must be accompanied by the calculation of the fulfillment of energy needs. To ensure that with the transformation to renewable energy, the energy need is still fulfilled. The COVID-19 pandemic has made many countries in the world focus on health and economic recovery. Various countries reduced coal demand and began to develop renewable energy. This caused coal companies to lower their production targets. While renewable energy will not be enough to cover the current energy needs. Deficit supply due to pandemic and the need for coal as an energy source will most likely push up coal prices in 2021. This makes coal prospect will still be very interesting. PT Indika Energy Tbk has a fairly good financial performance but has a considerable total debt. Even so, the level of liquidity of the company is still very good. With the company's valuation value based on DCF calculation at Rp 2336.72, making the company's share price undervalued with MOS of 38.80%. Predictions of rising commodity prices due to deficit supply will be the catalyst for improving the performance of coal companies after the pandemic. With the share price still undervalued makes PT Indika Energy Tbk attractive as a place to invest. Investing in commodity companies such as coal with cyclical characteristics should pay attention to momentum. Cyclical companies are not suitable as legacy stock that can be hold forever. The company's performance tends to go up and down in line with the movement of coal prices. So is the share price. Diversification in investing is important. There are many possibilities that happen in the future that we cannot predict.