Shares of PT Gudang Garam Tbk (GGRM) were hunted by foreign investors after announcing a dividend of 78% of net profit in 2015 amounting to Rp 5 trillion, or Rp 2,600 per share, reflecting the highest dividend payout ratio since 1999. CIMB Securities assesses that the distribution of this dividend will increase the return on equity (ROE) of GGRM by 76 basis points to 17.7%. CIMB Securities recommends buying the stock with a target price of Rp 95,000 per share.
Over the last two days, the net value of the shares bought by foreign investors in GGRM reached Rp 93.09 billion. Last Thursday (23/6), GGRM share price fell 1.39% to USD 65 450 per share after reaching its highest yesterday at Rp 66,900 per share. The foreign brokers hunting GGRM stocks are, among others, JP Morgan Securities, Merrill Lynch Indonesia, CLSA Indonesia, CIMB Securities, and RHB Securities.
Gudang Garam will pay the dividend on July 22, 2016. Management stated that the Gudang Garam’s large dividend payment is due to the fact that the company no longer requires large capital expenditures for the purchase of capital goods because it has already been completed. Until the first quarter of 2016, the company has absorbed capital expenditure of Rp 695 billion from this year’s capital expenditure budget of Rp 1 trillion. The funds are used to purchase spare parts for machinery, vehicles, and construction of buildings. Remaining capital spending will be allocated to current expenditures. (*)
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