PT Industri Jamu dan Farmasi Sido Muncul, Indonesia'€™s biggest jamu (herbal medicine) producer, plans to acquire a pharmaceutical company for around Rp 150 billion (US$13.13 million).

Sido Muncul is doing due diligence on PT Berlico Mulia Farma, which has more than 80 products including as cough syrup, vitamins and indigestion pills, and may expand further in the pharmaceutical sector, Sido Muncul president director Irwan Hidayat told Reuters.

Traditional medicine companies in Southeast Asia have big plans to grow amid strong investor interest, as an increasingly health-conscious middle class rises in the region.

Indonesian companies are expected to benefit from a national healthcare system, which was launched at the start of this year with the aim of extending insurance coverage to its 240 million people
by 2019.

'€œHealthcare insurance in Indonesia will lead to a tremendous rise in healthcare spending,'€ Irwan told Reuters over the phone.

'€œBoth herbal and pharmaceutical medicines are needed. In the future, we hope to expand further in the pharmaceutical sector,'€ he said, declining to give more details.

Sido Muncul is also planning to expand its market to Southeast Asia in the near future in a bid to capture the market with the upcoming ASEAN Economic Community (AEC) in 2015.

'€œWe are collaborating with Japan, Vietnam and Thailand so that we can market our products there,'€ Irwan earlier said.

He said that the firm did not plan to setup a factory in those countries.

In addition, he said that Sido Muncul had recently sealed an agreement with Japan to market its jamu products.

'€œThis is a good partnership because the Japanese love turmeric products. We believe that the sales of our turmeric based jamu products will be good.'€

Established in 1940 as a home-industry producing traditional herbal drinks, Sido Muncul became the sole jamu manufacturer that met pharmaceutical standards, the firm claims.

The company also produces food supplements and herbal candy.

Last December, Sido Muncul became the first herbal medicine company to be listed on the Indonesia Stock Exchange (IDX).

Its debut on the IDX garnered a positive response, with its shares climbing 13.79 percent during the opening session. Its shares are now trading over 40 percent higher than its initial public offering (IPO) price.

Sido Muncul'€™s shares (SIDO) were traded at Rp 840 on Monday, down 2.33 percent from the previous closing.

Despite a smooth start, the company surprised the market last year, when its net profit stood at nearly Rp 406 billion, slightly higher than the Rp 387.5 billion scored in the previous year.

The company also reported the lower cost of goods sold, which was 7.4 percent less year-on-year (y-o-y) at Rp 1.36 trillion for the whole
of 2013.

Trust Securities analyst Reza Priyambada earlier said Sido Muncul, whose earnings were '€œbelow expectations'€, was supposed to perform well, citing its established brand.

In the first quarter of this year, Sido Muncul also recorded another 7.7 percent y-o-y drop in revenue to Rp 520 billion, although its net profit managed to jump by 48 percent
y-o-y to about Rp 116 billion.

Irwan earlier said the first-quarter revenue drop resulted from lower sales in some products, without elaborating, while the company'€™s net profit could leap because it no longer had the burden of debt. (mtq)

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