OPTIMAL CAPITAL STRUCTURE ANALYSIS
A STUDY FROM INDONESIA TELECOMMUNICATION
COMPANIES LISTED IN IDX FOR PERIOD 2009-2011
FINAL PROJECT
By
Debby Nurhikmah
19009152
Undergraduate Program
School of Business and Management
Institut Teknologi Bandung
VALIDATION PAGE
OPTIMAL CAPITAL STRUCTURE ANALYSIS
A STUDY FROM INDONESIA TELECOMMUNICATION
COMPANIES LISTED IN IDX FOR PERIOD 2009-2011
FINAL PROJECT
By:
Debby Nurhikmah
ID No:
19009152
Undergraduate Program
School of Business and Management
Institut Teknologi Bandung
Supervisor
(Ir. Drs. H. Arson Aliludin, SE, DEA)
195007101976031002
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OPTIMAL CAPITAL STRUCTURE ANALYSIS
A STUDY FROM INDONESIA TELECOMMUNICATION
COMPANIES LISTED IN IDX FOR PERIOD 2009-2011
Debby Nurhikmah
19009152
Date of Final Presentation: August 1st 2012
Date of Graduation: October 20th 2012
Undergraduate Program, Institut Teknologi Bandung, 2012
Final Project Advisor: Ir. Drs. H. Arson Aliludin, SE, DEA
ABSTRACT
Telecommunication is an important sector that support the economic growth in Indonesia. Growth from this sector and transportation sector is the highest compared to other sectors in first quartal of 2012. There are five telecommunication companies that are listed in Indonesia Stock Exchange; they are Bakrie Telecom, XL Axiata, Indosat, Inovisi Telecom, Telekomunikasi Indonesia, and Smartfren Telecom. Those companies have good performance in Indonesia capital market with high total value trading and the highest market capitalization in 2011. The economic growth in Indonesia gives telecommunication companies great opportunity to expand their business. To support their business activities, those companies need more capital. Therefore, determing the right proportion of capital is important in order to reach the optimal value of the firm.
Author uses cost of capital approach to define the optimal capital structure for those telecommunication companies. This costs consist of cost of equity and cost of debt, and both costs are weighted to calculate the weighted average cost of capital. By using this approach, Author calculate the cost of capital for each level of debt and then find out debt ratio that result the minimal cost of capital. At this ratio, this company will have the highest value of the firm, and it is the best capital structure for the company. The calculation of cost of equity uses capital asset pricing model, while cost of debt calculation uses synthetic rating approach.
From the data, every company has different actual capital structure every year and almost all telecommunication companies’ actual capital structure have not been optimal. Moreover, result optimal capital structure for every company every year in telecommunication sector are different. It is because every company has different action that result different earning before interest and tax (EBIT), and every year has different capital market condition. Average optimal capital structure for the companies in telecommunication sectors is 9%. Some companies can adapt their capital following this debt ratio and other companies can have this debt ratio for fund their new projects. To reach its optimal capital structure, companies can increase their debt amount or increase their equity. The choice of increasing debt amount is issuing new bonds and the choice of increasing equity is issuing new stocks outstanding or preferred stock. If the companies can not increase both debt and equity, they have to reduce their needed funds.
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OPTIMAL CAPITAL STRUCTURE ANALYSIS
A STUDY FROM INDONESIA TELECOMMUNICATION
COMPANIES LISTED IN IDX FOR PERIOD 2009-2011
Debby Nurhikmah
19009152
Date of Final Presentation: August 1st 2012
Date of Graduation: October 20th 2012
Undergraduate Program, Institut Teknologi Bandung, 2012
Final Project Advisor: Ir. Drs. H. Arson Aliludin, SE, DEA
ABSTRAKSI
Telekomunikasi merupakan sektor penting yang mendukung pertumbuhan ekonomi di Indonesia. Pertumbuhan dari sektor ini dan sektor transportasi merupakan yang tertinggi dibandingkan sektor lain di quartal pertama 2012. Ada lima perusahaan telekomunikasi yang terdaftar di Bursa Efek Indonesia, mereka adalah Bakrie Telecom, XL Axiata, Indosat, Inovisi Telecom, Telekomunikasi Indonesia, dan Smartfren Telecom. Perusahaan tersebut memiliki kinerja yang baik di pasar modal Indonesia dengan total nilai perdagangan yang tinggi dan kapitalisasi pasar tertinggi di 2011. Pertumbuhan ekonomi di Indonesia memberikan perusahaan telekomunikasi kesempatan besar untuk memperluas bisnis mereka. Untuk mendukung kegiatan bisnis mereka, perusahaan tersebut memerlukan lebih banyak modal. Oleh karena itu, menentukan proporsi modal yang tepat penting untuk mencapai nilai perusahaan yang optimal. Penulis menggunakan pendekatan biaya modal untuk menentukan struktur modal yang optimal bagi perusahaan telekomunikasi. Biaya ini terdiri dari biaya ekuitas dan biaya hutang, dan kedua biaya tersebut ditimbang untuk menghitung biaya rata-rata modal tertimbang. Dengan menggunakan pendekatan ini, Penulis menghitung biaya modal untuk setiap tingkat hutang dan kemudian mengetahui rasio utang yang memberikan biaya modal terkecil. Pada rasio ini, perusahaan akan memiliki nilai tertinggi, dan ini merupakan struktur modal terbaik bagi perusahaan. Perhitungan biaya ekuitas menggunakan Capital Asset Pricing Model, sementara untuk biaya utang perhitungan menggunakan pendekatan sintetis rating.
Dari data, setiap perusahaan memiliki kondisi struktur modal yang berbeda setiap tahun dan hampir seluruh kondisi struktur modal perusahaan telekomunikasi ini belum optimal. Selain itu, hasil struktur modal yang optimal bagi setiap perusahaan setiap tahun di sektor telekomunikasi juga berbeda. Hal ini karena setiap perusahaan memiliki tindakan yang berbeda, sehingga pendapatan sebelum bunga dan pajaknya juga, selain itu juga karena adanya perbedaan kondisi pasar modal setiap tahun. Rata-rata struktur modal yang optimal bagi perusahaan di sektor telekomunikasi adalah 9%. Beberapa perusahaan dapat mengadaptasi modal mereka mengikuti rasio hutang ini dan perusahaan lain dapat menggunakan rasio utang ini untuk mendanai proyek-proyek baru mereka. Untuk mencapai struktur modal yang optimal, perusahaan dapat meningkatkan jumlah utang mereka atau meningkatkan ekuitas mereka. Pilihan meningkatkan jumlah utang adalah mengeluarkan obligasi baru dan pilihan meningkatkan ekuitas adalah menerbitkan saham baru di pasaran atau saham preferen. Jika perusahaan tidak dapat meningkatkan hutang dan ekuitas, mereka harus mengurangi dana yang dibutuhkan.
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FOREWORD
My gratefulness to Allah SWT for His blessing and guidance so that I can finish this final project. Final project is completed in order to meet graduation requirement to obtain bachelor degree from undergradate program of School of Business and Management Institut Teknologi Bandung. I also express my gratefulness to my beloved mother and father, Dasmi and Eppy Salim, for pray, care, and happiness that support myself to always study.
Besides, I would also say many thanks to:
1. My supervisor, Arson Aliludin, DEA, for his sharing knowledge, not only about finance but also about other lesson. His guidance and supports are also helpful so that I can finish it on time.
2. Anggoro Budi Nugroho, MBA, as my examiner.
3. My lecturers, tutors, and other SBM staffs, for the knowledge and helps during three years at SBM.
4. My siblings: Eka, Sari, Rana, and Randi who always motivate myself to become a better person.
5. My best colleagues : Fifi, Fina, Katherin, Falen, Gayatri, Sarah, Ayundha, Ayi, Cathy, Sania, Hedy, Nia, Linda, and others for the great learning experience and meaningful moment during three years at SBM.
6. Mirah, Lee Marvin, and Daniel who acknowledge myself from the questions I asked about this final project.
7. My course mate Nadhira and Tika for the happiness they share and for unforgettable new experiences.
8. My best friends at Unit Budaya Lampung ITB: Noura, Fira, Nia, Ridho, Kevin, Gilbran, and others who become my family in Bandung that always give helps when I need and also for the cultural learning program that I got.
9. My best friends: Salmani, Ami, Dhita, Opialeta, Dyah, Tya, Nia, Anggun, Venny, Nefa, Aming, Tiara, and Hani, who always give support and suggestion whenever I need.
Bandung, July 2012
Debby Nurhikmah 19009152
vi
TABLE OF CONTENTS
ABSTRACT...
iii ABSTRAKSI...
iv FOREWORD...
v TABLE OF CONTENTS...
viLIST OF FIGURES
...
viiiLIST OF TABLES
...
ix LIST OF APPENDICES... x
CHAPTER I INTRODUCTION...
1 1.1 Background...
1 1.2 Problem Identification...
2 1.3 Objectives...
2 1.4 Problem Limitation...
2 1.5 Systematical Writing...
3CHAPTER II THEORITICAL FOUNDATION
...
52.1 Capital Structure
...
52.2 Cost of Capital Approach
...
62.2.1 Cost of Equity
...
62.2.2 Cost of Debt
...
82.2.3 Weighted Average Cost of Capital (WACC)
...
102.3 Optimal Capital Structure and Cost of Capital
...
11CHAPTER III METHODOLOGY
...
133.1 Problem Identification
...
143.2 Theoritical Foundation
...
143.3 Data Collection
...
143.4 Data Analysis
...
143.5 Conclusion and Suggestion
...
15CHAPTER IV DATA ANALYSIS
...
174.1 Research Data Collection
...
174.2 Key Assumption
...
174.3 Actual Capital Structure
...
184.4 Optimal Capital Structure Analysis Using Cost of Capital Approach
...
184.4.1 Cost of Equity Calculation
...
194.4.2 Cost of Debt Calculation
...
20vii
4.5 Actual and Optimal Capital Structure
...
234.6 Factors that Influence Optimal Capital Structure
...
254.6.1 Capital Market Condition
...
254.6.2 Earning Before Interest and Tax
...
274.7 Average Optimal Capital Structure for Telecommunication Companies
...
29CHAPTER V CONCLUSION
...
335.1 Conclusion
...
335.2 Recommendation
...
33REFERENCES
...
35viii
LIST OF FIGURES
2.1 Types of Capital
...
52.2 Optimal Capital Structure
...
113.1 Flow Chart of Research Methodology
...
134.1 Value of the Firm EXCL 2009
...
23ix
LIST OF TABLES
2.1 Bond Rating and Interest Coverage Ratio
...
92.2 Indonesia Market Interest Rate
...
104.1 Risk Free Rate and Market Return
...
174.2 Actual Capital Structure
...
184.3 Unlevered Beta
...
194.4 Cost of Equity EXCL 2009
...
204.5 Cost of Debt EXCL 2009
...
214.6 Optimal Capital Structure EXCL 2009
...
224.7 Detail Optimal Capital Structure EXCL 2009
...
224.8 Actual and Optimal Capital Structure
...
244.9 Optimal Capital Structure Indosat 2010
...
254.10 Optimal Capital Structure TLKM 2009
...
264.11 Optimal Capital Structure TLKM 2010
...
264.12 Optimal Capital Structure TLKM 2011
...
274.13 Optimal Capital Structure BTEL 2010
...
284.14 Optimal Capital Structure BTEL 2011
...
294.15 Average Optimal Debt Ratio
...
304.16 Company Rating
...
31x
LIST OF APPENDICES
A. Cost of Equity Bakrie Telecom (BTEL) 2009
... 36
B. Cost of Debt BTEL 2009
... 37
C. Optimal Capital Structure BTEL 2009
... 38
D. Cost of Equity Indosat (ISAT) 2009
... 39
E. Cost of Debt ISAT 2009
... 40
F. Optimal Capital Structure ISAT 2009
... 41
G. Cost of Equity Telekomunikasi Indonesia (TLKM) 2009
... 42
H. Cost of Debt TLKM 2009
... 43
I. Optimal Capital Structure TLKM 2009
... 44
J. Cost of Equity BTEL 2010
... 45
K. Cost of Debt BTEL 2010
... 46
L. Optimal Capital Structure BTEL 2010
... 47
M. Cost of Equity XL Axiata (EXCL) 2010
... 48
N. Cost of Debt EXCL 2010
... 49
O. Optimal Capital Structure EXCL 2010
... 50
P. Cost of Equity ISAT 2010
... 51
Q. Cost of Debt ISAT 2010
...
52R. Optimal Capital Structure ISAT 2010
...
53S. Cost of Equity INVS 2010
...
54T. Cost of Debt INVS 2010
...
55U. Optimal Capital Structure INVS 2010
...
56V. Cost of Equity TLKM 2010
...
57W. Cost of Debt TLKM 2010
...
58X. Optimal Capital Structure TLKM 2010
...
59Y. Cost of Equity EXCL 2011
...
60Z. Cost of Debt EXCL 2011
...
61AA. Optimal Capital Structure EXCL 2011
...
62AB. Cost of Equity ISAT 2011
...
63AC. Cost of Debt ISAT 2011
...
64AD. Optimal Capital Structure ISAT 2011
...
65AE. Cost of Equity INVS 2011
...
66AF. Cost of Debt INVS 2011
...
67xi AH. Cost of Equity TLKM 2011
