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FREN, heading to positive Cashflow
Target price Rp103
Last 12-month cashflow -Rp 4.23 trillion

March 5th,, 2021
1 minute read

Sales
  • Sales increased 1% in the fourth quarter to Rp 2.56 trillion which is 4% lower than our forecast.
  • This is after 10% growth in the third quarter which puts the quarterly average growth at 6%.
  • We expect average growth to increase to 10% in this next 12 months & sales to reach Rp 3.62 trillion by the fourth quarter 2021.

Cashflow
  • The negative cashflow was higher in the fourth quarter at -Rp 1.8 trillion after -Rp 341 billion in the third quarter as investment spending increased.
  • Average quarterly Cashflow is now -Rp 1.1 trillion.
  • We assume lower investment spending Rp 547 billion which with higher sales gives an better average quarterly Cashflow of -Rp 23 billion in this next 12 months.

Sales growth to accelerate, lower investment spending, heading to Cashflow, slightly higher target price...

Balance sheet
  • The balance sheet leverage, cash minus total liabilities was -Rp 25.66 trillion in the fourth quarter from -Rp 24 trillion in the third quarter & -Rp 14.7 trillion a year ago.
  • With our forecast for Cashflow at almost break even & a Rp 92 billion dividend...
  • ...the net cash will be flat at -Rp 24.3 trillion in 12 months time.

Profit
  • Net profit was positive Rp 228 billion in the fourth quarter after a loss -Rp 530 billion in the third quarter on lower non cash costs.
  • The cash cost ratio of net profit add depreciation minus sales as a percent of sales was higher, 78%.
  • We use 72% costs to predict a next 12 months net profit Rp 385 billion.

Value
  • FREN has raised capital of Rp 23.9 trillion in the last six years.
  • At the current market value of Rp 22.42 trillion, it’d at 1.77X sales, 0.6X assets, 1.77X equity with a 3% profitability & a 0.4% yield.
  • Our cashflow forecast (fourth quarter annualized) is Rp 414 billion. At 1.6% with no adjustment gives a higher target price of Rp103.