## EMTK, lower target price

Current, target price Rp2,415, 1,301 (-46%)

April 6th, 2021

1 minute read

Sales, higher sales

Cashflow, positive

1 minute read

Sales, higher sales

- Sales increased by 8% in the fourth quarter to Rp 3.42 trillion which is 3% above our forecast.
- This is after 17% growth in the third-quarter and brings the quarterly average growth to 4%.
- We are predicting average quarterly growth of 3% in the next 12 months bringing sales up to Rp 3.77 trillion by the fourth quarter of 2021.

Cashflow, positive

- Cashflow was Rp 869 billion in the fourth quarter from Rp 1.13 trillion in the third quarter, despite higher investment spending.
- This brings the average quarterly free cashflow to Rp 405 billion.
- We use much lower investment spending of Rp 50 billion which with higher sales gives an average quarterly Cashflow of Rp 1 billion in this next 12 months.

## Sales strong, cashflow positive, but no margins or change in leverage yet, expensive, lower target price...

Balance sheet, but more leverage

Profit, no margin

Value, lower target price

- Despite the positive cash flow the net leverage of cash minus total liabilities was at Rp 2.8 trillion in the fourth quarter from Rp 2.1 trillion in the third quarter and Rp 1.96 trillion a year ago.
- With our forecast small cash flow and no dividend payout,...
- ...the net cash will be at Rp 2.78 trillion in 12 months time.

Profit, no margin

- Net profit was Rp 1.54 trillion in the fourth quarter up from Rp 571 billion in the third-quarter on non-cash gains.
- The cash cost ratio of net profit add back non-cash cost minus sales as a percent of sales was 101%.
- We use the recent average 99% to predict a lower loss -Rp 78 billion in the next 12 months.

Value, lower target price

- EMTK has raised capital of Rp 78 billion in the last five years.
- At the current market value Rp 116.8 trillion it’s at a high 8X sales, 6.7X assets, 9.8X equity with no profitability and no yield as yet.
- Our 12-months sales forecast is Rp 4.4 trillion. At a 5X valuation, this gives a -46% lower target price of Rp1,301