Earlier this week we paid a visit to Samudera for a casual chat with Executive Director, Dhrubajyoti Das. Although we've never owned Samudera shares, we've been impressed with their consistent growth in turbulent times over the last 5 years, and appreciated the chance to get more firsthand information about the business and future plans.

Is Samudera like NOL, but smaller?
Das: No, not at all. Samudera means 'Ocean', and our core business involves shipping, but the similarity with NOL ends there. The large global shipping lines like NOL, Maersk and P & O NedLloyd are our customers. While they focus on efficient long-haul transport in large quantities to hub ports like Singapore, Samudera extends their reach to smaller regional ports in Asia and the Middle East.

Is Samudera an Indonesian Family Business?
Our company is 63% Indonesian-owned and the balance is held by public shareholders. About 50% of our shipping volume is also generated from Indonesia. The controlling stake in Samudera Shipping is by PT Samudera Indonesia, a leading integrated transportation firm, which is majority owned by Mr. Soedarpo Sastrosatomo, the founder, and his family. Samudera is not family managed. The family owners turned the company over to professional managers long ago. Our sales have steadily increased over the last several years, even as the Indonesian economy was turbulent. The need for our services is steadily increasing.

Ships are expensive, is your Business Capital Intensive?
We own just 2 ships in our 28-ship fleet for our core container business. We charter the majority of our ships. It is an efficient use of capital and it allows maximum flexibility in our operations. There is an ample supply of ships for chartering in the regions where we operate. We do have another specialized business we call industrial shipping where we have to own the ships in order to provide stable logistics solution. Currently, we own a fleet of 10 very specialized vessels including pneumatic bulk handling systems adapted for transport of dry bulk cement and liquid petrochemical products as well as petroleum tankers. Our ships are recognized by the name "Sinar", which means "shine". Our fleet has been built over the last few years and their full operational revenue will begin to be recognized from 2001 onward.

Can you continue to grow your business in the future as in the past?
Yes, I believe there is no reason not to expect continued growth. We will have more industrial ships contributing to revenue in 2001 onward. Our core business of regional feeder routes with containerized shipping will benefit from the sheer organic volume growth expected in coming years, as well as our successful penetration into key markets in the Middle East and North Asia. We also plan more growth for our carrier owned container (COC) business which has higher margins. In contrast to feeder services, where we serve the Main Line Operators, our COC business directly serves the cargo controllers (the manufacturers, importers or exporters and freight forwarders), particularly for destinations within our established feeder service network.

For example, if a customer wants to ship containerized cargo from Bombay to Bangkok, both ports within our normal feeder network, we can complete the shipment with our operated fleet at a higher margin. This segment of our business grew by 38% in year 2000. Our COC service network is now wider and more extnesive than our feeder service network.

What Competitive Advantages does Samudera have?
I believe, our sound management philosophy is our strength. We remain focused in only one sector of the economy, i.e. cargo transportation and related industries. We are guided by a combination of two principles. First, there is a corporate-wide entrepreneurial thinking, always seeking opportunities for business growth and market expansion, because we believe tomorrow must be better than today. Second, we believe in financial conservatism and exercise of prudence in all our investments and capital expenditures. I firmly believe that these two principles, working together, serve the Group well, during economic booms as well as downturns.

We are gaining a competitive scale in our operations. Today, we are the #6 customer of PSA among all global shipping lines passing through Singapore. Our main regional competitor is RCL in Thailand, which is a bit larger than Samudera--but the gap is narrowing. We have been able to expand our operations beyond Singapore and Indonesia because we can leverage our relationships with the Main Line Operators. We are able to gain business in the Middle Eastern ports by asking our Singapore/Indonesia customers for a bit of business with their Dubai operations. We have also had some success in the Indian subcontinent and in Hong Kong and China. We see no reason why we can't continue this expansion into new routes.

We have been in business for a long time, so we have long-standing satisfied customer relationships that help sustain our competitive advantage. Our industrial shipping business often works under long-term contracts with multinational companies. In the future, we may look to enhance our competitive advantage further by leveraging our parent company's expertise in logistics services to acquire a European freight forwarder with strong pan-European operations to extend their operations into Asia. Certainly year 2001 is challenging with slowing economies in Asia, North America and Europe simultaneously, but our longer-term growth opportunities in our business are pretty exciting.

Why do you think your stock price is below IPO (S$0.39) after 4 years of growth?
That's a difficult question to answer. Our performance has been good, but we tend to get lumped into some unattractive categories with analysts and retail investors... such as 'Indonesian stocks' and 'shipping stocks'. We see ourselves as a regional service company and should command a much higher valuation based on our past track record and future prospects. Our current historical PE multiple at a recent share price of S$0.25 is about 5.5. We are taking steps to improve our corporate image, our market positioning, and our investor and public relations. We are committed to our shareholders and will strive to increase the value of our shares.


Sage@wallstraits.com