Flawed Financial Statement Plummets Garuda’s Stocks
On Friday (28/6), PT Garuda Indonesia (Persero) Tbk was sanctioned by Otoritas Jasa Keuangan as their annual financial statement for the financial year of 2018 and the first financial quarter of 2019 was found to have a major error. The company’s debt to Mahata Aero Technology that still remains unpaid was instead written as income in Garuda’s financial statement. PT Garuda Indonesia’s secretary, Ikhsan Rosan, stated that Garuda and its accounting team now have 14 days to correct their financial statement and pay their debts. Per one of OJK’s articles regarding an emitent’s financial reports, because of the error found in the 2018 financial report, each of the airline’s eight members of the Board of Directors must pay a Rp100 million fine given by OJK and Indonesia Stock Exchange. In addition, the commissioner of the company and the company itself must pay Rp100 million each. Then, for errors in the Q1 2019 financial report, the company must pay a combined fine of Rp250 million. In total, Garuda must give a total of Rp1,25 billion to OJK.
As news broke out regarding the sanction on Friday (28/6) morning, Garuda (ticker: GIAA) stocks fell rapidly, decreasing 3% to IDR 384 per share during the day. Not stopping there, it fell again as much as 7.5%. According to IDX, GIAA stock prices closed at IDR 366 per share, dropping 30 points since the opening of that day when it was priced at IDR 396 per share. Further complications to the company’s financial performance were imminent, as on Monday (1/7), through a coordinated meeting between government officials, the government of the Republic of Indonesia asked airlines to cut the price of their flight tickets to 50% from the original upper limit rates (TBA) for certain time flights. The news caused a significantly weakened bounceback for GIAA, as it only increased 2,07% to the level 378 rupiah for each stock. On the other hand, one of its competitors, AirAsia were affected by the regulation as well, causing its stocks to fall 1,02% to Rp195. However, sentiment regarding Garuda’s stock performance was mainly positive.
William Hartanto, Analyst at Panin Sekuritas said that as ticket prices fall down, an airline’s revenue performance may not be as good as it used to be, as their revenue flow will most certainly dampen. However, the incident is not considered significant enough as there is still huge potential of sales from market demand, according to William. Furthermore, an official statement by the CEO of Garuda Indonesia, I Gusti Ngurah Askhara Danadiputra, said that the fall of the company’s stock price was mainly caused of panic amidst individual investors, saying that large holders of GIAA’s stocks remain confident in the company. Fundamentally, during the first quarter of 2019, Garuda noted a total revenue of US$924,93 million, an increase of 11,64% from the first quarter of last year. Accordingly, the company also recorded a profit of US$20,48 million, a sharp turn from last year’s Q1 when it reported a loss of US$65,34 million. News of good financial performance brought a significant bounce to the stock during the week, and as of Friday (5/7) the stock has reached Rp402 per shares, showing that the statement from the CEO to be true.