Shares of Indonesia's second largest cigarette seller, PT Gudang Garam, surged to their highest level in more than nine years as the passing of its chairman triggered speculations the firm may be sold.

The shares jumped by 19 percent to close at Rp 6,200 on Monday, the biggest increase since Nov. 5, 1998, Bloomberg data shows.

The gain trimmed the company's loss for the year at 27 percent, compared with a 17 percent decline in the benchmark Jakarta Composite Index.

"The market could speculate that the likelihood of a potential sale of Gudang Garam to a multinational tobacco company has increased," Stevanus Juanda, an analyst with JPMorgan Chase & Co., said as quoted by Bloomberg.

He said the sale was expected to help lift the company's market share, which was declining following the acquisition of the country's largest cigarette firm by sales, PT HM Sampoerna, by Philip Morris International Inc. in 2005.

Gudang Garam controlled 49 percent of the national cigarette market in 1997, and was overtaken by Sampoerna for the first time in the first quarter of 2007. Since then, Sampoerna has held 24 percent of the country's market, followed by Gudang Garam at 23 percent and Djarum at 20 percent.

The company's first quarter net profit dropped 16.46 percent to Rp 336.13 billion from Rp 404.31 billion in the same period of 2007 despite seeing a 6.54 percent increase in revenue.

Nine out of every 10 cigarettes are clove-flavored, called kretek for the crackling sound made by the burning spice.

Cloves, which are native to Indonesia, are added to tobacco, imparting a sweet scent and emitting eugenol, a chemical that numbs the throat to the effects of smoke.

Rachman Halim, one of the country's wealthiest citizens, died at Mount Elizabeth Hospital in Singapore on Sunday after a week of intensive-care treatment for a coronary illness. He was 60 and is survived by his wife, seven children, two sisters and four brothers.

His funeral will be Aug. 3 in his hometown of Kediri, East Java.

Rachman took over the company's leadership from his father Surya Wonowidjojo in 1985, listing it at the Jakarta Stock Exchange in 1990. He made the company one of the country's most famous and powerful cigarette brands.

Last year, Rachman's family ranked as Indonesia's eighth richest, with a value of US$1.6 billion.

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