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ADRO, very cheap
Target price Rp3,891
Last 12-month cashflow +USD 377 million

March 4th,, 2021
1 minute read

Sales

• Sales declined again by -2% to USD 581 million in the fourth quarter which was 11% below our forecast.
• Avenge quarterly growth is -8% in the last 12 months...
• but we expect growth to finally turn positive with average growth of 8% in this next 12 months & sales to reach USD 786 million by the fourth quarter of 2021.

Cashflow

• Despite slow sales, cashflow was almost as predicted, USD 99 million in the fourth quarter from USD 189 million in the third quarter.
• Average quarterly Cashflow is at USD 94 million.
• Investment spending is low & we use the average USD 46 million, which with higher sales gives a higher average quarterly Cashflow USD 142 million this next 12 months.

Sales to rebound, lower investment, heading to net cash, very cheap valuation, higher shares...

Data file & model

Balance sheet

• The balance sheet leverage of cash minus total liabilities improved to -USD 1.25 billion in the fourth quarter from -USD 1.4 billion in the third quarter & -USD 1.66 billion a year ago.
• With our forecast for higher positive free cashflow & a USD 122 million dividend...
• ...net cash will improve to -USD 809 million in 12 months time.

Profit

• Net profit was positive again, USD 38 million in the fourth quarter after a loss -USD 46 million in the third quarter.
• The cash cost ratio of net profit add depreciation minus sales as a percent of sales was lower at 68%.
• We use the average 73% costs to predict a higher next 12 months profit of USD 244 million.

Value

• ADRO has now paid USD 1.66 billion of capital the last six years.
• At the current market value of USD 3.89 billion, it’s only 1.9X capital paid, 1.1X sales, 0.52X assets, 0.78X equity with a 6% profitability & a 3.8% yield.
• Our cashflow forecast is USD 569 million. At 1.6% with a 0.25X adjustment gives a higher target price, Rp3,891.