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CLEO, just too expensive
🎯💧📉 Rp169
Last 12 months cashflow -Rp1101bn ⬆️
October 15th, 2020
⏰ 1 minute read
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Sales
Sales growth was -17% in the 2Q which is the first ever negative sales growth quarter. Sales almost tripled from the 1Q 2016 to 4Q 2019, but since then have fallen -30%. Bottle sales declined by -41% in the 2Q, non bottle sales only -2%. We expect total sales to recover from Rp222bn now to Rp325bn by the 2Q 2021.
Cashflow
Cashflow in the last 12 months is negative -Rp101bn because of the large investments last year. Since then investment spending is slowing & cashflow has turned positive the last 3 quarters excluding working capital & was +Rp13bn in the 2Q. With continued lower investment & our forecast sales recovery, free cashflow will average Rp10bn a quarter in the next 12 months.
Sales growth was -17% in the 2Q which is the first ever negative sales growth quarter. Sales almost tripled from the 1Q 2016 to 4Q 2019, but since then have fallen -30%. Bottle sales declined by -41% in the 2Q, non bottle sales only -2%. We expect total sales to recover from Rp222bn now to Rp325bn by the 2Q 2021.
Cashflow
Cashflow in the last 12 months is negative -Rp101bn because of the large investments last year. Since then investment spending is slowing & cashflow has turned positive the last 3 quarters excluding working capital & was +Rp13bn in the 2Q. With continued lower investment & our forecast sales recovery, free cashflow will average Rp10bn a quarter in the next 12 months.
A sales recovery, less investment, maintain positive cashflow, but too expensive...
Balance sheet
Because of the investment spending & the resulting negative cashflow, the balance sheet is in net debt & the net debt has increased to Rp336bm in the 2Q from Rp35bn at the end of 2018. With our forecast for positive free cashflow in this next 12 months & assuming no dividend/buybacks, the net debt will now reduce again to Rp295bn.
Profit
With the drop in sales, the net profit declined by -25% from a year ago to Rp29bn in the 2Q. The cash cost ratio of net profit add back depreciation minus sales as a % of sales has improved slightly to 78%. We use the recent average 79% to predict the next 12 months profit will be higher to Rp180bn.
Value
CLEO has been investing & raising capital, Rp515bn so far since 2016. We assume they now start to pay some back. At the current value Rp5,637bn, its 4.87x sales, 3.81x assets, 5.59x equity with a 17.9% profitability & no yield. Our cashflow forecast is Rp41bn. At 1.6% with an 0.8x adjustment that gives a much lower target price of Rp169.
Because of the investment spending & the resulting negative cashflow, the balance sheet is in net debt & the net debt has increased to Rp336bm in the 2Q from Rp35bn at the end of 2018. With our forecast for positive free cashflow in this next 12 months & assuming no dividend/buybacks, the net debt will now reduce again to Rp295bn.
Profit
With the drop in sales, the net profit declined by -25% from a year ago to Rp29bn in the 2Q. The cash cost ratio of net profit add back depreciation minus sales as a % of sales has improved slightly to 78%. We use the recent average 79% to predict the next 12 months profit will be higher to Rp180bn.
Value
CLEO has been investing & raising capital, Rp515bn so far since 2016. We assume they now start to pay some back. At the current value Rp5,637bn, its 4.87x sales, 3.81x assets, 5.59x equity with a 17.9% profitability & no yield. Our cashflow forecast is Rp41bn. At 1.6% with an 0.8x adjustment that gives a much lower target price of Rp169.
