I.
Brief Description of the Company
Semen Gresik, Tbk. is a company which is engaging in cement
industry. Officially inaugurated on August 7, 1957 by the first President of
the Republic of Indonesia with installed capacity of 250,000 tons cement per
year. On July 8, 1991, Semen Gresik was listed at the Jakarta Stock Exchange and
Surabaya Stock Exchange and was the first State-owned Enterprise publicly
listed by offering 40 million shares to the public. Its shareholding
composition was Government 73% and the Public 27%.
In September 1995, Semen Gresik performed right issue
I, which changed the share ownership composition to the State 65% and the
Public 35%. In September 15,1995 Semen Gresik acquired SP and ST, which was
then known as Semen Gresik Group (SGG). The total installed capacity of SGG was
8.5 million tons of cement per year.
On September 17, 1998, the Government sold its 14%
shares in SGG through an open tender, in which Cemex S.A. de C.V, a
Mexicobased global cement company, was declared as the winner. The share
ownership composition was then changed to the Government 51 %, the Public 35%,
and Cemex 14%. As of September 30, 1999, the share ownership
composition has changed to the Government 51 %, the Public 23.5%, and Cemex
25.5%. Meanwhile,
SGG has an installed capacity of 15.82 million tons cement per year.
On
July 27 2006 Cemex S.A. de C.V. shares were sold to Blue Valley Holdings PTE
Ltd., so that the share ownership composition has changed to the Government
51,01%, Blue Valley Holdings PTE Ltd. 24,90% and public 24,09%. Presently, the
real installed capacity of SGG has reached 16,92 million tons per year, and it
covers about 46% of domestic cement market.
II Arithmetic Average Stock and Market Return and Standard Deviation
Stock return (SMGR)
|
Market index (IHSG)
|
Market index (LQ45)
|
|
Average return
|
0,13%
|
0,06%
|
0,04%
|
Standard deviation
|
2,64%
|
1,6%
|
1,87%
|
*The graphic of the average stock and market return is
attached in the appendix
Standard Deviation is the standard statistical measure of the spread of a sample. In finance, standard deviation is applied to the annual rate of return of an investment to measure the investment's volatility. Standard deviation is also known as historical volatility and is used by investors as a gauge for the amount of expected volatility.
A volatile stock will have a high standard deviation
while the deviation of a stable blue chip stock will be lower. From the
standard deviation of Semen Gresik, we can see that Semen Gresik has high
percentage than the standard deviation of the stock market both IHSG and LQ45.
So, we can conclude that Semen Gresik has volatile stock, it is proved also by
the graphic that view us how the stock return follow the trend of market return
(both IHSG and LQ45).
III Beta of Company
using Regression Analysis
IV Capital Asset Pricing Model (CAPM)
The
capital asset pricing model is mainly focus on the relationship between risk
and expected return of stock. Stocks of the company that have higher rate of
returns certainly have high risks to carry with. Reversely, if the investors
want the low risk of stocks, they aim for lower expected rate of return.
Risk of the stocks can be measured by beta of stocks. The
relationship between expected return and beta can be expressed by the following
equation :
This formula implies that the expected return of security is
linearly related to its beta. If beta equals with 0, it means that the expected
return of the security equal with risk free rate. Another point of view, if
beta equals with 1, it means that the expected return of the security equal
with the expected return on market.
To
measure the expected return on security, in this case, Semen Gresik’s stock, we
use the formula above and summarize the data into the table below.
·
IHSG
market index
Expected market return
|
Beta
|
Risk free rate
|
Expected return of stock
|
Actual return of stock
|
0,06%1
|
1,03 *
|
0,02%**
|
0,06%
|
·
LQ45
market index
Expected market return
|
Beta
|
Risk free rate
|
Expected return of stock
|
Actual return of stock
|
0,04%1
|
0,88 *
|
0,02%**
|
0,038%
|
0,13%1
|
From the table above, it’s clearly seen the distinctive
between the two of market index. In IHSG market index, the beta (1,03) was
higher than the beta in LQ45 market index (0,88). It’s previously mentioned
that the higher risk (beta) means the higher expected return of stock. In IHSG
market index, the expected return of stock is 0,06%, higher than in LQ45 market
index by 0,022% (0,038%). The expected return of stock follows the trend of the
expected market return (the market return were 0,06% (IHSG) and 0,04% (LQ45)).
From historical data of average stock return (SMGR), it
shows 0,13% as actual return of stock. It’s expected in the next period/term,
with the certain risk, the expected return of stock will be 0,06% (comparison
with IHSG market index) and 0,038% (comparison with LQ45 market index). The
actual stock return was much higher then the expected stock return, it’s a sign
that the company may be able to cover the expected return of stock for the next
period.
The
asset pricing model has a basic graphic assumption shown below.
In
our cases, we show you the customized graphic of asset pricing model (picture
of graphic)
In
the graphic above, the SML graph originally represent about asset pricing model
formula. The security market line is a useful tool
in determining whether an asset being considered for a portfolio offers a
reasonable expected return for risk. The SML line is viewed as required rate of
return. Say for example, with the same price of securities, if the expected return on the security is higher than the
required rate, then security is undervalued/underpriced. Reversely, if the
expected return on the security is lower than the required rate, then security
is overvalued/overpriced.
Based on graphic, both
of expected stock return, from IHSG and LQ45 , have the expected security
return almost same with the required rate of security return. It means that
Semen Gresik’s securities (stocks) have reasonable expected return for risk. It
attracts the investor because it gives the clear direction related to the risk
and return of stocks.
V Hypothesis testing
Generally, the hypothesis testing is a kind
of procedure based on sample evidence and probability theory to determine
whether the hypothesis is reasonable statement. We use the hypothesis testing
as an evidence to check whether there is relation or no relation between the
expected return of stock and the risk (beta) of stock.
1. Ho
= There is no relation between the risk of stock (beta) and stock return
Ha
= There is relation between the risk of stock (beta) and stock return.
2.
Criteria
The value of t calculated < t table,
Ho accepted
The value of t calculated > t table,
Ha accepted
3. Statistic
test
Stock
return and IHSG market index
Stock
return and LQ45 market index
With significance of 0,05% (two-tailed) and degree of
freedom
,
the t-table shows 1,96. Based on the t-calculated above, one with IHSG index
shows 28,38 and the other with LQ45 index shows 28,17. In short, both of the
t-calculated number are higher than the t-table one (28,38 > 1,96 ; 28,17
> 1,96).
The other interpretation,
the adjusted R square in IHSG is 39%. It means that 39% of stock return is
affected by independent variable of beta. The remaining 61% is affected by
other variables. Same interpretation is also due to LQ45 market index.
4. Decision
The value of t-calculated
> t-table, Ho rejected and Ha accepted
5. Conclusion
There is relation between the risk of
stock (beta) and stock return
VI Values of Betas
Beta is the measure of
stock’s risk in comparison to the market as a whole. It’s used in the capital
asset pricing model (CAPM) that calculates the expected return of an asset
based on its beta and expected market returns.
From the calculation in
the previous section, we can see there’s different result between the beta of
IHSG and beta LQ45. It’s come up because there’s a different of market index
benchmark. IHSG is the benchmark of the performance of all of stocks that are
listed on BEI. Meanwhile, LQ45 is the average stock price from 45 stocks that have
highest liquidity on BEI, known as blue chip. It’s shown that the minimal expected
return that investors expect from LQ45 is only 0.04 is lower than expected
return that investors expect from IHSG is only 0.06, since IHSG provides higher
risk than LQ 45.
VII Conclusion
Stock prices of Semen Gresik have high
sensitivity towards the market index (standar deviation). Besides, it has also
the beta range from 0,88-1,03. It shows that the stock of company has high
risks. Even with the high risk, the actual return of company stock can cover the requred rate of
return.