GGRM - September 5th 2011

Gudang Garam Tbk. (GGRM)

Industry sector: Consumer goods industry
Industry sub sector: Tobacco manufacturers

Company Profile

GGRM manufactures cigarettes as well as conducting activities related to its cigarette production. Its subsidiary, PT Surya Pamenang produces paper board used in the company’s product packaging, while the trading and distribution of the products is conducted by PT Surya Madistrindo. The production facilities are located in Kediri and Gempol, Indonesia. The nature of its products has made GGRM a defensive stock, as it tends to hold well during severe market downturn such as what had happened in August when it gained 8.06%.

The only disadvantage trading GGRM is that the stock is perhaps it is way too expensive. At IDR 55,000 the price of GGRM is only eclipsed by ASII’s price tag. Ignoring the costly price, GGRM is simply a favorite.

Both monthly and weekly charts suggest that GGRM’s direction has been clearly upwards, especially after the stock broke its prior peak at IDR 52,500. The breakthrough was a stern sign of a new bullish swing and indeed it took the stock higher even more, to as high as IDR 57,000. After a brief dip towards IDR 46,900, GGRM is now poised to set a fresh record high beyond IDR 57,000.

Near-term support is at IDR 50,100, the most recent swing low, followed by the pivotal IDR 46,900. GGRM needs to hold above this key support to maintain a positive outlook. As long as the support at IDR 46,900 holds, the stock will keep its course towards its near-term objective at a revisit of IDR 57,000 first, then towards setting a new peak at IDR 59,700.

Look to accumulate GGRM on dips around IDR 51,600 – IDR 53,300, risk below IDR 46,900 while setting the first objective at IDR 57,000, then IDR 59,700, and subsequently opening the door towards IDR 63,600 and then IDR 65,600.


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