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DSNG, rising palm oil prices
🎯 🌴 📈 Rp1,050
Last 12-month cashflow +Rp269bn ⬆️⬆️
October 29th, 2020
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Sales
Sales growth was back to negative again in the 3Q -11% from a year ago after +29% in the 2Q. Sales were 26% below our forecast at Rp1.23tn. Fruit production was down -27%, oil -17%, higher prices helped to offset. With prices continuing to rise sharply & production recovering, we predict +7.2% growth in the next 12 months to Rp6.59tn.
Cashflow
Despite the lower sales, free cashflow was higher than the 2Q at Rp133bn excluding some slightly negative working capital & was double our forecast Rp62bn. This was because investment spending turned surprisingly positive. We assume a return to average investment spending which together with our sales forecast, predicts an average quarterly free cashflow of Rp111bn in this next 12 months.
Sales growth was back to negative again in the 3Q -11% from a year ago after +29% in the 2Q. Sales were 26% below our forecast at Rp1.23tn. Fruit production was down -27%, oil -17%, higher prices helped to offset. With prices continuing to rise sharply & production recovering, we predict +7.2% growth in the next 12 months to Rp6.59tn.
Cashflow
Despite the lower sales, free cashflow was higher than the 2Q at Rp133bn excluding some slightly negative working capital & was double our forecast Rp62bn. This was because investment spending turned surprisingly positive. We assume a return to average investment spending which together with our sales forecast, predicts an average quarterly free cashflow of Rp111bn in this next 12 months.
Prices rising, sales will follow, cashflow turning positive, debt being reduced, capital being paid, cheap to assets, higher target...
Balance sheet
The balance sheet has been in net debt because of the previous investment spending & resulting negative cashflow. Net debt was slightly lower in the 3Q at Rp5.9tn from Rp5.96tn in the 2Q. This was because the cash increased to Rp377bn. With our forecast cashflow & a small dividend Rp30bn, net debt will improve to Rp5.5tn in 12 months time.
Profit
Because of the lower sales, net profit became a loss in the 3Q of -Rp18bn. The cash cost ratio of net profit add back depreciation minus sales as a % of sales was higher at 90% from 84% in the 2Q. We expect the cost ratio to improve to 87% which gives a 12 month net profit forecast of Rp303bn.
Value
Like most plantations, DSNG has been raising capital in the last 5 years, Rp1.69bn as of the 3Q. We now expect payments. At Rp5.2tn current value, it’s 0.79x sales, 0.45x assets, 1.26x equity with a 2.3% profitability & 0.6% yield. Our cashflow forecast is Rp443bn. At 1.6% with a 0.4x adjustment that gives a much higher target price of Rp1,060.
The balance sheet has been in net debt because of the previous investment spending & resulting negative cashflow. Net debt was slightly lower in the 3Q at Rp5.9tn from Rp5.96tn in the 2Q. This was because the cash increased to Rp377bn. With our forecast cashflow & a small dividend Rp30bn, net debt will improve to Rp5.5tn in 12 months time.
Profit
Because of the lower sales, net profit became a loss in the 3Q of -Rp18bn. The cash cost ratio of net profit add back depreciation minus sales as a % of sales was higher at 90% from 84% in the 2Q. We expect the cost ratio to improve to 87% which gives a 12 month net profit forecast of Rp303bn.
Value
Like most plantations, DSNG has been raising capital in the last 5 years, Rp1.69bn as of the 3Q. We now expect payments. At Rp5.2tn current value, it’s 0.79x sales, 0.45x assets, 1.26x equity with a 2.3% profitability & 0.6% yield. Our cashflow forecast is Rp443bn. At 1.6% with a 0.4x adjustment that gives a much higher target price of Rp1,060.
