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Kimia Farma: Prospects Amongst Paid-Vaccination Issues

The Indonesian Government introduced "Vaksinasi Gotong Royong", a voluntary paid-vaccination program that can be accessed from Kimia Farma clinics. This initiation is regulated in The Ministry of Health Regulation (Permenkes) number 19 of 2021 regarding vaccination in COVID-19. It is the second amendment of the Ministry of health regulation number 10 of 2021. Ganti Winarno Putro, Kimia Farma Corporate Secretary, said that the type of vaccine obtained is from Sinopharm, which is one of three approved vaccines by the Government for this program. However, this paid-vaccination program brings in some cons. Many believe that this program could be slowing down the vaccination campaign for all Indonesians. Pandu Riono, an epidemiologist from Universitas Indonesia, believes the late regulations may limit people's access to the COVID-19 vaccine. Responding to the fuss around this initiative, Kimia Farma has decided to postpone its "Vaksinasi Gotong Royong" program, which was scheduled on Monday (7/12), and instead focus on the socialization process. Through its corporate communication, Kimia Farma announced their apologies on the same day, and the delay will be made until further notice. On the other hand, after the announcement of the paid-vaccination program, PT Kimia Farma Tbk's (KAEF) shares have risen sharply at Rp3,500 per share, up from an initial opening of Rp3,150 per share, at the close of trading on Monday (7/12). Artha Sekuritas Indonesia Analyst, Dennies Christoper, said that The paid-vaccination program aided the increase. He is furthermore optimistic that, despite the program's delay, KAEF will continue to rally.

In addition to the recent attention they incurred as a result of their plan to offer paid-vaccines, Kimia Farma was also planning to make an additional capital gain. Indonesia Stock Exchange (IDX), as of Tuesday (7/13), KAEF will issue additional capital by giving rights issue as much as 2.7 billion series B stock, which are a type of common stock that may have more or fewer voting rights than series A shares, with a nominal of Rp100 per stock, amounting to around Rp27 billion. This corporate action lets the company's stockholders participate in the issuance of mandatory convertible bonds, otherwise known as OWK. The amount of compulsory convertible bond issuance will be adjusted based on the company's funding needs. The company will utilize proceeds from this corporate action to fulfill maturing loan payments as well as working capital. Furthermore, it will be used for business development in the context of digital transformation and information technology systems. As for implementing the mandatory convertible bonds OWK issuance and rights issue, the company will seek shareholder approval at the Extraordinary General Meeting of Shareholders on August 18, 2021.

Looking thoroughly at its working fundamentals report, Kimia Farma's net profit fell 33.90% year on year (yoy) from Rp26.16 billion in January to March 2020 to Rp17.29 billion in the first quarter of 2021. Kimia Farma's revenue is split evenly between domestic and international sales. Rp2.27 trillion was provided by local sales posts, including Rp1.97 trillion in sales to local third parties and Rp292.60 billion in sales to linked parties. Meanwhile, international sales posts contributed Rp32.83 billion, including Rp27.36 billion in quinine salt products and Rp5.47 billion in pharmaceuticals and medical devices. At the end of March 2021, Kimia Farma's total assets reached Rp17.47 trillion. Reportedly, throughout the COVID-19 pandemic, the pharmaceutical sector’s share price has indeed risen significantly. PT Prodia Widyahusada Tbk (PRDA), for instance, has risen 149% year to date to Rp8,100 per share on Tuesday (7/12). Then, in the health sector, PT Siloam International Hospitals Tbk (SILO) surged 81% to Rp9,975 per share and the management of Bunda Hospital, PT Bundamedik tbk (BMHS) who has just listed on the IDX on Tuesday (7/6) has shot up 131% in a week to Rp980 per share. The increment of pharmaceuticals and health sectors are believed to be caused by the excitement towards health industries development, restructuration of the current 3-class BPJS tariff to a single tariff with uniform room and service standardizations, and the inclusivity of healthcare and healthtech development. As of now, the public is still waiting for Kimia Farma's continuation on paid vaccination and other corporate actions in the following times.


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