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ADRO, a 5.7% yield
🎯 📱 📈 Rp3,746
Last 12-month cashflow +USD 364M
November 4th, 2020
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Sales
Sales growth was slightly better -33% in the 3Q from -34% in the 2Q. But at USD 592M, sales were down -4% from the 2Q & 16% below our forecast. Production was up +7%, but prices were down by -10%. We expect prices to bounce back in the 4Q & sales to grow +1.7% this next 12 months, USD 2.8BN.
Cashflow
Despite the lower sales, cashflow was strong & better than we expected at USS 181M in the 3Q up from USD 114M in the 2Q. Investment spending fell to just USD 19M. We expect investment spending to rise back to USD 50M which with our sales forecast gives an average quarterly free cashflow of USD 137M this next 12 months.
Sales growth was slightly better -33% in the 3Q from -34% in the 2Q. But at USD 592M, sales were down -4% from the 2Q & 16% below our forecast. Production was up +7%, but prices were down by -10%. We expect prices to bounce back in the 4Q & sales to grow +1.7% this next 12 months, USD 2.8BN.
Cashflow
Despite the lower sales, cashflow was strong & better than we expected at USS 181M in the 3Q up from USD 114M in the 2Q. Investment spending fell to just USD 19M. We expect investment spending to rise back to USD 50M which with our sales forecast gives an average quarterly free cashflow of USD 137M this next 12 months.
Sales to rebound, lower investment, heading to net cash, very cheap valuation, higher shares...
Balance sheet
With lower investment & stronger free cashflow, the balance sheet net debt has reduced sharply from USD 610M in the 2Q & USD 671M in the 1Q to USD 429M in the 3Q. With our forecast for continued strong cashflow & a dividend payment of USD 149M, the net debt will reduce to only USD 31M in 12 months time.
Profit
Net profit dropped into a net loss of -USD 46M in the 3Q, but this is partly because of a non cash cost USD 90M. The cash cost ratio of net profit add back non cash costs minus sales as a % of sales was 74%. We use 73% to predict a next 12 months profit of USD 298M, +159%.
Value
ADRO has been paying out plenty of capital, USD 1.5BN so far. With low investment this will rise further. At Rp 36.8TN, it’s 1.7X capital paid, 0.94X sales, 0.42X assets, 0.65X equity with a 7.4% profitability, 5.7% yield. Our cashflow forecast is USD 548M. At 1.6% with a large 0.25X adjustment, that gives a much higher target price of Rp3,746.
With lower investment & stronger free cashflow, the balance sheet net debt has reduced sharply from USD 610M in the 2Q & USD 671M in the 1Q to USD 429M in the 3Q. With our forecast for continued strong cashflow & a dividend payment of USD 149M, the net debt will reduce to only USD 31M in 12 months time.
Profit
Net profit dropped into a net loss of -USD 46M in the 3Q, but this is partly because of a non cash cost USD 90M. The cash cost ratio of net profit add back non cash costs minus sales as a % of sales was 74%. We use 73% to predict a next 12 months profit of USD 298M, +159%.
Value
ADRO has been paying out plenty of capital, USD 1.5BN so far. With low investment this will rise further. At Rp 36.8TN, it’s 1.7X capital paid, 0.94X sales, 0.42X assets, 0.65X equity with a 7.4% profitability, 5.7% yield. Our cashflow forecast is USD 548M. At 1.6% with a large 0.25X adjustment, that gives a much higher target price of Rp3,746.
