The ‘deep fried’ stocks more expensive than Nvidia

{"text":[[{"start":9.9,"text":"Indonesia’s third-largest company Dian Swastatika Sentosa is mainly a producer of coal — yet its valuation reflects the boundless optimism of a Silicon Valley start-up."}],[{"start":22.18,"text":"Shares in the miner are worth 135 times the company’s earnings, a valuation even the fastest-growing company would struggle to justify. Nvidia, whose AI chips have made it a stock market darling and pushed its market capitalisation to $4.6tn, has a price-to-earnings multiple of 38."}],[{"start":46.16,"text":"Dian Swastatika Sentosa is one of eight of the top 25 listed companies in Indonesia with P/E multiples of more than 100, according to an FT analysis. Many are linked to conglomerates controlled by Indonesia’s richest tycoons."}],[{"start":64.16,"text":"“It’s quite clear on certain valuation metrics that it’s just so divorced from reality,” said Gary Tan, an emerging market portfolio manager at Allspring Global Investments."}],[{"start":77.14,"text":"The sky-high multiples reflect these companies’ low free float, meaning that most of the stock is held by a controlling shareholder and there is little available for investors to buy and sell."}],[{"start":90.83,"text":"They illustrate the problems flagged by global index provider MSCI in January, when it raised doubts about Indonesia’s investability, and warned of a possible downgrade from ‘emerging’ to ‘frontier’ market status."}],[{"start":106.75999999999999,"text":"MSCI cited opacity in shareholding structures, concerns about possible co-ordinated trading behaviour and limited free floats."}],[{"start":null,"text":"

Big market caps, high valuations and low free floats

Market cap ranking	Company name	Trailing P/E	Stated free float
2	Barito Renewables Energy	358x	12.6%
3	Dian Swastatika Sentosa	135x	20.4%
6	DCI Indonesia	479x	18.6%
14	Pantai Indah Kapuk Dua	131x	15.9%
17	Indoritel Makmur Internasional	104x	7.5%
19	Impack Pratama Industri	208x	24.4%
21	Bumi Resources Minerals	145x	47.2%
24	Mora Telematika (Moratel)	247x	33.8%
Source: Bloomberg, IDX

"}],[{"start":116.78999999999999,"text":"Although high valuations and low free floats do not necessarily indicate anything improper, Indonesian regulators, investors and analysts allege that in some cases insiders hold shares through nominees and trade with each other, creating fake liquidity and manipulating stock prices."}],[{"start":137.09,"text":"The practice often results in wild swings in share prices and has earned the nickname saham gorengan or “deep fried stocks”."}],[{"start":147.33,"text":"“These conglomerate stocks make Nvidia look very cheap,” said Ricky Ho, who runs the $750mn Four Capital fund based in Singapore. Some US stocks such as Palantir and Tesla have high valuations, he said, but they reflect “real liquidity” based on arms-length trading."}],[{"start":170.42000000000002,"text":"Among the stocks that alarm investors are Barito Renewables, Indonesia’s second largest listed company, with a market capitalisation of $45.2bn and a P/E ratio of 358. Barito is controlled by Prajogo Pangestu, Indonesia’s richest person, and has a free float of 12.6 per cent. Its stock, one of the most volatile on the market, is up 679 per cent since its debut in 2023."}],[{"start":204.01000000000002,"text":"Barito Renewables said its share price moves are a “result of [the] market mechanism”. The company said it is committed to complying with regulations and “to upholding good corporate governance and market integrity”."}],[{"start":219.79000000000002,"text":"Dian Swastatika Sentosa, controlled by the Widjaja family as part of its Sinar Mas conglomerate, has a free float of 20 per cent."}],[{"start":230.32000000000002,"text":"DSS derives around 90 per cent of its revenue from coal mining, an industry in which P/E multiples have largely been declining. It has interests in high-growth sectors such as renewables, data centres, chemicals and telecommunications, but those are still a small part of its business. "}],[{"start":250.41000000000003,"text":"Moratel, a telecommunications company that is also part of Sinar Mas, has a P/E multiple of 247 and a free float of 33.8 per cent. At the end of 2025 — before the MSCI warning triggered a market rout — its P/E multiple stood at 1,021. "}],[{"start":271.8,"text":"As part of its efforts to improve transparency, the Indonesian stock exchange recently named some companies with high shareholder concentration, among them several tycoon-owned firms."}],[{"start":284.78000000000003,"text":"The exchange said a limited number of shareholders control 97.3 per cent of Barito Renewables and 95.76 per cent of DSS."}],[{"start":null,"text":"

"}],[{"start":297.11,"text":"Jakarta has announced measures to address the issues raised by MSCI. It has doubled the free-float minimum requirement to 15 per cent — though the regulator has given companies three years to comply — and tightened regulations on shareholder disclosures."}],[{"start":314.64,"text":"Authorities have placed sanctions on investment banks for allegedly violating capital market rules, while Indonesia’s Financial Services Authority (OJK) said it was investigating a “broad range of potential market misconduct”."}],[{"start":330.68,"text":"Potential violations may include “market manipulation and other trading practices intended to create a false or misleading appearance of trading activity”, the authority said. "}],[{"start":341.26,"text":"“The scope of the investigations goes beyond the colloquial notion of saham gorengan and focuses on identifying conduct that may violate capital market rules or undermine the integrity and fairness of price formation in the market,” OJK told the FT, adding: “At present, no specific investigations targeting particular conglomerates or their shareholders have been publicly announced.”"}],[{"start":367.59,"text":"Property developer Pantai Indah Kapuk Dua, with a P/E of 131, also said its share price was determined by market mechanisms. The company said its “reported earnings may not fully reflect the underlying sales performance in a given period”, due to the way in which it records sales. "}],[{"start":387.13,"text":"Indonesia’s stock exchange and the other six companies did not respond to requests for comment."}],[{"start":394.03,"text":"Global fund managers say they generally stay away from tycoon-owned stocks that have a limited public float, but that option is not available to investors who buy an index."}],[{"start":405.46999999999997,"text":"Allspring’s Tan said before making an investment decision in Indonesia, the fund studies shareholdings closely to ensure that the free float is representative of the “actual free float” in the market."}],[{"start":419.71,"text":"“This has been the case with Indonesia for a long time, that you have a few families that control the market, control the companies, and minority shareholders are left in a weaker position,” said Chiara Salghini, portfolio manager at Vontobel Asset Management, which currently does not hold any Indonesian stocks."}],[{"start":439.2,"text":"Salghini said Jakarta will have to increase transparency and see an improvement in macroeconomic indicators before the fund can invest in the country again. "}],[{"start":450.53999999999996,"text":"“Global markets are not going to invest in companies where liquidity is very thin, where the free float is very low and where transparency is not as high as in other countries,” she said."}],[{"start":462.81999999999994,"text":"Data visualisation by Haohsiang Ko in Hong Kong. Additional reporting by Diana Mariska in Jakarta "}],[{"start":479.24999999999994,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1776265791_4143.mp3"}