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Public Indonesia Select Fund (PINDOSF) Review And Analysis

This article analyzes and reviews the Public Indonesia Select Fund (PINDOSF).

For your information, the PINDOSF is a unit trust fund managed by Public Mutual Berhad in Malaysia.

The fund invests primarily in equities or stocks of companies based in Indonesia.

The following is a list of topics in this article.

Enjoy!

Fund Summary

The following summary is obtained from the annual report for the financial year ended 31 August 2022.

Category

Equity

Investment Objective

To achieve capital growth over the medium to long-term period by investing in a portfolio of investments primarily in the Indonesian market.

Launch Date

21 Sep 2010

Distribution Policy

Incidental

Risk Level

Very High – 5 (on a scale of 1 – 5)

Volatility

Very High – 24.8 By Lipper Analytics

Size

MYR285 million (USD63 million based on an exchange rate of USD1 = MYR4.5) as of the end of the financial year ended 31 August 2022.

Shariah Compliant

No

Sales Charge

Up To 5%

Expenses

1.78% Of Fund NAV On Average From 2020 To 2022

Performance

Average annual return for the following years ended 31 August 2022.

Years Average Annual Return (%)
1 Year 19.49
3 Years 2.96
5 Years 0.16
10 Years 3.83

* Notes: average total return figures shown in the table above have already accounted for fund expenses.

Annual total return for the financial year ended 31 August.

Years Annual Total Return (%) Jakarta LQ-45 Index (%)
2022 19.49 22.85
2021 4.54 NA
2020 -12.83 NA
2019 9.20 NA
2018 -15.23 NA

* Notes: annual total return figures shown in the table above have already accounted for fund expenses.
* The benchmark of the Fund is the Jakarta LQ-45 Index (LQ 45) which comprises the 45 largest companies by market capitalisation listed on the Indonesia Stock Exchange.

In 2022, the Public Indonesia Select Fund (PINDOSF) as a whole, which consists of equity and money market, registered an annual total return of 19.49% for the financial year under review and the performance is slightly lower compared to the benchmark’s return of 22.85%.

The total return of 19.49% for the unit trust fund is based on a cumulative return of equity and money market which came in at 21.9% and 0.09%, respectively, for the financial year ended 31 August 2022.

After adjusting for an annual expense of 2.5%, the final return of the unit trust fund totaled 19.49% in the year ending August 31, 2022.

Despite the lower performance of the PINDOSF, the return of the fund is nearly in tandem with the return of the Jakarta LQ-45 Index which comprises the 45 largest companies by market capitalization listed on the Indonesia Stock Exchange.

According to the PINDOSF’s 2022 annual report, the higher return of the fund and the Jakarta LQ45 index in 2022 was primarily due to the higher commodity prices and the re-opening of Indonesia’s international borders.

Also, a less-aggressive pace in the Fed’s interest rate hikes and the release of a better-than-expected 2Q 2022 gross domestic product (GDP) growth rate of 5.4% for Indonesia lifted the performance of the fund and the LQ45 index.

Other performance data for the financial year ended 31 August.

Unit Prices (MYR) => prices quoted are ex-distribution

As at 31 August
2022 2021 2020
Highest NAV per unit for the year 0.3080 0.2809 0.2669
Lowest NAV per unit for the year 0.2427 0.1985 0.1484

* Notes: NAV stands for Net Asset Value

Net Asset Value (NAV) and Units In Circulation (UIC) as at the end of the financial year

As at 31 August
2022 2021 2020
Total NAV (MYR’000) 284,942 337,754 348,851
UIC (in ’000) 1,033,229 1,376,551 1,537,972
NAV per unit (MYR) 0.2758 0.2454 0.2268

* Notes: UIC stands for Unit In Circulation. NAV stands for Net Asset Value

Total Expense Ratio

As at 31 August
2022 2021 2020
Total Expense Ratio (%) 1.83 1.77 1.75

* Notes: Total Expense Ratio is calculated by taking the total expenses expressed as an annual percentage of the Fund’s average net asset value.

Portfolio Turnover Ratio

As at 31 August
2022 2021 2020
Portfolio Turnover Ratio (time) 0.88 0.71 0.74

* Notes: Portfolio Turnover Ratio is calculated by taking the average of the total acquisitions and disposals of the investments in the Fund for the year over the average net asset value of the Fund calculated on a daily basis
* The Portfolio Turnover Ratio for the financial year 2022 rose to 0.88 times from 0.71 times in the previous financial year on account of higher level of rebalancing activities performed by the Fund during the year

Cash Distribution And Unit Split

Declaration Date
2022 2021 2020 2019 2018
08-30 08-30 08-30 08-30 08-28
Net Distribution Per Unit (Cent In MYR) 1.50 1.00
Yield (%) 4.9 – 6.2
Net Distribution To Net Income Ratio (%) 27
Net Distribution To Cash Flow From Operations Ratio (%) 15
Unit Split

* Notes: MYR stands for Malaysian Ringgit.

The Public Indonesia Select Fund (PINDOSF) declared a cash distribution of MYR0.015 per unit in 2022, giving a yield of between 4.9% to 6.2% based on the lowest and highest NAV value of 0.2427 and 0.3080 reported for the financial year ended 31 Aug 2022, respectively.

The PINDOSF fund failed to declare a cash distribution in 2021 and 2020 due to lower returns of the fund in both financial years.

Between 2018 and 2022, the Public Indonesia Select Fund (PINDOSF) only managed to declare a cash distribution in 2 out of the 5-year period and they were in 2019 and 2022.

In terms of the distribution ratio, the figure for cash distribution to net income earned after taxation in fiscal 2022 came in at only 27%, a reasonably low number that had retained most of the earnings for future investment and distribution.

From the perspective of cash flow, the cash distribution in 2022 consumed only 15% of the fund’s operating cash flow, thereby leaving plenty of cash for future investment and distribution.

In short, the Public Indonesia Select Fund (PINDOSF) has been a well-managed fund in which a cash distribution would only be initiated when the fund performed significantly well and refrained from doing so when it registered a lower return.

For your information, the net income after taxation earned in 2022 was MYR56 million and the respective operating cash flow generated in the same financial year was MYR104 million.

The Public Indonesia Select Fund (PINDOSF) unit trust has never initiated a unit split in the last 5 years from 2018 to 2022.

Asset Allocation – Indonesia Equities

As at 31 August (% of NAV)
2022 % 2021 % 2020 %
Sectors
Basic Materials 9.7 15.2 4.3
Communications 10.5 12.0 9.1
Consumer, Cyclical 14.7 19.0 15.5
Consumer, Non-Cyclical 6.1 2.1 14.4
Energy 5.1 2.7 1.3
Financial 42.4 29.1 36.3
Industrial 5.2 8.7 9.2
Total 93.7 88.8 90.1


Based on the above table, we can see that the Public Indonesia Select Fund (PINDOSF) has rebalanced its Indonesian portfolio to a more defensive position as of the financial year 2022.

For example, the fund has significantly increased its equity holdings in the Financial sector, growing from 29.1 reported in 2021 to as much as 42.4% reported in 2022.

Moreover, equity holdings in the Consumer Non-Cyclical and Energy sectors also soared by more than 100% in 2022 from prior years, totaling 6.1% and 5.1% respectively.

These sectors usually consist of mega-cap companies that pay regular dividends.

Also, these 3 sectors alone, namely the Financial, Consumer Non-Cyclical, and Energy, made up more than 50% of NAV, thereby underscoring the importance of these sectors in preserving the capital of the fund.

Despite the significant shift of the portfolio to a more defensive nature, the fund still held a considerable portion of equity in sectors such as the Consumer Cyclical, Communications, and Basic Materials, reportedly at 14.7%, 10.5%, and 9.7%, respectively, in 2022.

In short, the fund is capitalizing on rising commodities and a high-interest rate environment in 2022 by holding a significant portion of equities in the Basic Materials, Consumer Cyclical, and Financial sectors.

Another trend worth mentioning is that the fund has slightly increased its holdings of Indonesia equity in 2022 as seen in the table above.

The percentage of Indonesian equity in the fund has soared from 88.8% reported in 2021 to 93.7% reported in 2022, the highest ratio in the last 3 years.

In this case, the fund manager may be expecting favorable economic growth in Indonesia in 2022 and beyond.

Asset Allocation – Non-Indonesia Equities

As at 31 August (% of NAV)
2022 % 2021 % 2020 %
Countries
Hong Kong 4.8 1.7 2.2
Korea 0.9
Singapore 0.2
Thailand 0.4
United States 5.6 3.8
Total 4.8 8.8 6.0



In terms of foreign equity holdings, the Public Indonesia Select Fund (PINDOSF) has decreased significantly its non-Indonesian equities holdings in the fund in 2022.

As shown, the total foreign equity holdings totaled only 4.8% in 2022 compared to 8.8% in 2021, a reduction of almost 50%.

In 2022, the fund’s foreign equity position was concentrated on only a single country and that was Hong Kong, totaling 4.8% of NAV as of 31 August 2022.

For the rest of the countries such as Korea and the U.S., the Public Indonesia Select Fund (PINDOSF) had exited the positions.

Particularly, the fund had such a large position in the U.S., reportedly at 5.6% in 2021, in its foreign equity portfolio.

However, the fund had totally sold off all U.S. equities as of the financial year of 2022.

Despite the concentrated exposure to Hong Kong equity within the fund’s foreign equity portfolio, it represents only 4.8% of NAV, which was far lower than its Indonesian equity.

Perhaps, the fund manager may be expecting a favorable stock market in Hong Kong in 2022 and beyond.

Asset Allocation – Total

Change In Portfolio Exposures

As at 31 August
2022 % 2021 % Change (%)
Investment Type
Equity and equity-related securities 93.4 97.6 -4.2
Money market 6.6 2.4 +4.2



The total equity portfolio of the Public Indonesia Select Fund (PINDOSF) has dipped by 4.2% from 97.6% reported in 2021 to 93.4% reported in 2022.

In contrast, the cash holding or money market position of the fund has increased by 4.2% to reach a total percentage of 6.6% as of August 31, 2022.

In other words, the fund held more cash in 2022 than in 2021.

The cash position of the fund increased quite substantially in 2022, notably at nearly 3X its 2021 percentage.

In my opinion, the rise of cash in the fund is seen as a good move as the fund manager may be able to make opportunistic buying of some undervalued blue-chip companies in Indonesia.

Cash And Deposits (Liquid Assets)

As at 31 August
2022 (MYR’000) 2021 (MYR’000)
Liquid Assets
Deposits With Financial Institutions 10,680 8,096
Cash At Banks 10,368 94
Total Net Assets
Net Asset Value (“NAV”) 284,942 337,754
Ratio Of Total Cash To NAV (%) 7.4 2.4



As discussed in prior discussions, the Public Indonesia Select Fund (PINDOSF) held a considerable amount of cash as of 2022.

The significant cash position is also reflected in the balance sheet as shown in the table above.

As seen, as of 31 August 2022, the total cash to NAV ratio totaled 7.4% or MYR21 million, a sizable number compared to the 2021 figure which totaled only MYR8 million.

The considerable increase in the cash position of the fund shows that the fund has rebalanced to a rather defensive portfolio and is ready to make an opportunistic buying of undervalued equity.

The large cash position in 2022 may also indicate an unfavorable outlook for the Indonesian equity market in 2022 and beyond.

Top 10 Equity Holdings – Indonesia

As at 31 August 2022
Fair Value (MYR’000) Percent Of NAV (%)
Equity Securities Related Sectors
Bank Central Asia Financial 29,920 10.5
Bank Rakyat Indonesia Financial 28,676 10.1
Bank Mandiri Financial 27,899 9.8
Astra International Consumer Cyclical 25,990 9.1
Telkom Indonesia Communications 22,077 7.8
Bank Negara Indonesia Financial 15,190 5.3
Adaro Energy Energy 14,536 5.1
Erajaya Swasembada Consumer Cyclical 12,270 4.3
Bank Jago Financial 11,268 4.0
Sumber Alfaria Trijaya Consumer Non-Cyclical 11,080 3.9
Total 198,906 70.0



The table above shows the top 10 equity holdings of the Public Indonesia Select Fund (PINDOSF) for Indonesian companies.

At the top spot, Bank Central Asia came in at 10.5% of NAV or MYR29.9 million as of 31 August 2022, making it the largest holding of the fund.

At 10.1% of NAV or MYR28.7 million, Bank Rakyat Indonesia held the second spot in the fund.

Bank Mandiri topped the 3rd place at 9.8% of NAV or MYR27.9 million.

Have you noticed that the top 3 holdings of the fund were all banks or companies in the Financial sector?

The 3 banks alone made up 30% of the NAV of the fund.

Also, 9 companies out of the top 10 holdings in the fund were part of the components that made up the Jakarta LQ45 Index which consists of 45 largest companies by market capitalization listed on the Indonesia Stock Exchange.

As a result, the performance of the Public Indonesia Select Fund (PINDOSF) should follow closely the Jakarta LQ45 index.

Another trend worth mentioning is that the top 10 holdings of Indonesian equity alone in the fund made up 70% of the fund’s NAV or nearly MYR200 million as of 31 August 2022.

This concentrated makeup makes the unit trust fund a very high-risk investment, not to mention the high volatility.

In addition, a mishap in the Indonesian financial system will certainly plunge the return of the fund severely as 5 out of the top 10 equity holdings were in the Financial sector as of 31 August 2022.

In short, the performance of the Public Indonesia Select Fund (PINDOSF) will almost depend on the return of these top 10 equities, specifically the Financial sector of the Indonesian economy.

Top 10 Equity Holdings – Foreign

As at 31 August 2022
Fair Value (MYR’000) Percent Of NAV (%)
Equity Securities Related Sectors
Alibaba Group Holding Ltd Communications 9,890 3.5
JD.com, Inc Communications 3,236 1.1
Sunny Optical Technology (Group) Co. Ltd Industrial 430 0.2
Total 13,556 4.8

* Notes: There are only 3 foreign equities held by the unit trust fund based as of 31 August 2022.

In terms of foreign equity holdings, the Public Indonesia Select Fund (PINDOSF) held only equities in Hong Kong and these were concentrated on only a few companies, namely Alibaba Group, JD.com, and Sunny Optical Technology.

Of all the 3 foreign companies, Alibaba Group Holding Ltd was the largest position in the fund, comprising 3.5% of NAV or MYR10 million as of 31 August 2022.

The 2nd spot went to JD.com, at MYR3 million or 1.1% of NAV.

Sunny Optical Technology came in at only 0.2% of NAV or MYR0.4 million, making it the smallest holding in the foreign equity portfolio.

In short, with only 4.8% of NAV or roughly MYR13.6 million per the financial year of 2022, the Public Indonesia Select Fund (PINDOSF) unit trust fund has limited exposure to foreign equity.

Unit Price Vs Benchmark

PINDOSF Unit Price Vs JKLQ45 Index

PINDOSF Unit Price Vs JKLQ45 Index

* Close prices for both indexes are used to plot the chart above.
* 3 months of data are obtained from Yahoo Finance and Public Mutual Online.

The chart above shows the plots of the Public Indonesia Select Fund (PINDOSF) unit price and the Jakarta LQ45 index.

As seen, the unit price of the Public Indonesia Select Fund (PINDOSF) follows closely the volatility of the JKLQ45 index.

In other words, when the LQ45 index rises, so will the PINDOSF unit price and vice versa.

The correlation between the 2 plots is expected because as much as 94% of the fund’s NAV is comprised of Indonesian equity.

On top of that, 9 out of the top 10 Indonesian equity holdings in the fund are a component of the Jakarta LQ-45 index.

For your information, the Jakarta LQ-45 (JKLQ45) comprises the 45 largest companies by full market capitalization listed on the Indonesian Stock Exchange.

In short, the PINDOSF unit price correlates closely with the JKLQ45 volatility.

Speaking of the unit price, we need to find out the relationship between the unit price of the fund and the JKLQ45.

For example, for every 10-point change in the JKLQ45 index, how much of that will affect the PINDOSF unit price?

Let’s move on to find out.

Positive Changes

Positive Changes
JKLQ45 Index Changes PINDOSF Unit Price Changes In MYR Ratio
Date
11/30/2022 13.06006 0.00130 0.000100
11/23/2022 1.63000 0.00120 0.000736
11/17/2022 3.95996 0.00010 0.000025
11/11/2022 21.28998 0.00260 0.000122
11/07/2022 9.30005 0.00310 0.000333
11/04/2022 4.66998 0.00100 0.000214
10/31/2022 4.41998 0.00310 0.000701
Average 0.000392

* Notes: The 7-day data shown in the table above is for illustration purposes. Actual calculation spans 90 days and 90-day data is used to calculate the average.
* Notes: Changes are calculated based on the difference between the current day’s close price and the previous day’s close price.

The table above shows the correlation between the JKLQ45 index and the PINDOSF unit prices in an upward direction.

Based on the 90-day data between Sept and Dec 2022, the average ratio came in at 0.000392.

At this ratio, a 1-point index increment in the JKLQ45 will result in an MYR0.000392 increase in the PINDOSF unit price.

For a 10-point index increment, the PINDOSF unit trust fund will increase by MYR0.00392 or MYR0.4 cents on average.

Negative Changes

Negative Changes
JKLQ45 Index Changes PINDOSF Unit Price Changes In MYR Ratio
Date
12/07/2022 -16.26001 -0.00400 0.000246
12/06/2022 -17.31000 -0.00510 0.000295
12/05/2022 -10.44000 -0.00350 0.000335
12/01/2022 -12.32001 -0.00030 0.000024
11/25/2022 -2.58002 -0.00250 0.000969
11/22/2022 -5.53003 -0.00030 0.000054
11/16/2022 -3.39996 -0.00410 0.001206
Average 0.000385

* Notes: The 7-day data shown in the table above is for illustration purposes. Actual calculation spans 90 days and 90-day data is used to calculate the average.
* Notes: Changes are calculated based on the difference between the current day’s close price and the previous day’s close price.

The table above shows the correlation between the JKLQ45 index and PINDOSF unit prices in a downward direction.

Based on the 90-day data between Sept and Dec 2022, the average ratio came in at 0.000385.

The average ratio indicates that when the JKLQ45 falls by 1 index point, the PINDOSF unit price will fall by about MYR0.000385 on average.

From a 10-point perspective, the PINDOSF unit price will fall by about MYR0.00385 or MYR0.4 cents on average.

Therefore, the Public Indonesia Select Fund (PINDOSF) unit price has quite a balanced sensitivity to both market rise and fall based on the average ratio of 0.000392 and 0.000385, respectively.

As a result, the PINDOSF unit trust will react in nearly the same way to both a market rise and fall.

Review Summary

As of the financial year of 2022, the Public Indonesia Select Fund (PINDOSF) unit trust registered an annual return of 19.49% compared to a return of 22.85% for the Jakarta LQ45 index.

The performance of the unit trust fund demonstrated a good correlation to the JKLQ45 index.

In terms of exposure, as much as 70% of the fund’s NAV was made up of the top 10 Indonesian equities.

Of the top 10 equity holdings, 5 of them were companies in the Financial sector, making up nearly 40% of the fund’s NAV.

The fund had little exposure to foreign equity, only at 4.8% of NAV as of 31 August 2022.

As a result, the PINDOSF unit trust is highly risky and volatile. A major mishap in the Financial sector of the country will plunge the fund considerably.

Moreover, the PINDOSF had nearly the same sensitivity to a market rise and fall, meaning that the fund had risen and fallen at nearly the same pace as market volatility.

Do note that this sensitivity will change when the unit trust fund rebalances its portfolio in the future.

Also, the fund has been well-managed in terms of cash distribution as it only paid out a cash distribution when it registered a good performance.

In summary, the return of the Public Indonesia Select Fund (PINDOSF) will largely depend on the economic growth of Indonesia, especially in the Financial sector of the country.

References and Credits

1. All financial information in this article was obtained and referenced from the following links:

a) Public Mutual Unit Trust Fund
b) JKLQ45 index

Disclosure

The content in this article is for informational purposes only and is neither a recommendation nor advice to purchase a security. The Public Indonesia Select Fund (PINDOSF) is not in any way sponsored, endorsed, sold, or promoted by StockDividendScreener.com.

Therefore, StockDividendScreener.com shall not be liable (whether in negligence or otherwise) to any person for any error in this article.

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