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ADES, a 10X target price
🎯 💧 / 💄 📈 Rp10,817
Last 12-month cashflow +Rp 168 billion ⬆️

November 27th, 2020
​⏰ 1 minute read
Sales
After 2 negative growth quarters, sales jumped back +37% in the third quarter! At Rp 165 billion, sales were 24% ahead of our forecast. Amazingly, the cosmetic sales Rp 89 billion (+49%) have overtaken water Rp 68 billion (+11%)! We expect water will revive & help drive sales back up to Rp 192 billion by the third quarter next year.

Cashflow
Cashflow keeps improving & has reached Rp 168 billion for the last twelve months, with Rp 60 billion in the third quarter alone. Investment spending even turned positive because of an asset sale. Assuming zero investment spending & higher sales, we conservatively forecast a slightly lower average quarterly free cashflow of Rp 51 billion in this next twelve months.

Sales rebound, strong cashflow, net cash building for big dividends, cheap valuation, a 10X target price..

Data file & model
Balance sheet
As cashflow has increased, the previous balance sheet net debt has turned to a rising net cash. Net cash was Rp 268 billion in the third quarter, up Rp 168 billion this year. With our forecast for more positive cashflow & a dividend payout of Rp 96 billion, the net cash will still rise to Rp 305 billion in 12 months.

Profit
Net profit almost doubled from Rp 19 billion in the second quarter to Rp 34 billion in the third quarter. The cash cost ratio of net profit add back depreciation minus sales as a percentage of sales dropped from 76% to 73%. We use the same 73% to predict a next 12 months profit Rp 161 billion, up by +83%.

Value
ADES has now paid out a net Rp 164 billion of capital in five years. That will rise fast. At current value Rp 773 billion, it’s 1.03X sales, 0.88X assets, 1.15X equity with a 23.9% profitability & a 12.5% yield. Our cashflow forecast is Rp 204 billion. At 1.6% with a 0.5X adjustment gives a 10X higher target price of Rp10,817.
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