Log in/register here
FREN
Smartfren, cash flow positive 2Q 2021
🎯 📱📈➡️ Rp168
12m free cashflow -Rp5825bn
July 26th, 2020
⏰ 1 minute read
⏰ 1 minute read
Watch the 3 minute explainer, using the data file & model ⬇️
Sales
FREN is the fastest growing company we cover & that’s worth something. Sales in 2Q grew +42%, faster than 41% in 1Q & up from 21% a year ago. We see growth continuing on the same path for the next 12 months which would be 29% to Rp10.6tn or Rp3tn a quarter. That’s still less than half ISAT & EXCL.
Cashflow
Cashflow remains very negative. The last 12 months excluding working capital was -Rp5,825bn compared to -Rp3,966bn as of 1Q. The 2Q alone was -Rp1,439bn. But that was because of a record investment spending quarter. With our sales growth & lower investment spending, free cashflow will improve significantly to -Rp1,116 in the next 12 months & will be positive 2Q 2021.
FREN is the fastest growing company we cover & that’s worth something. Sales in 2Q grew +42%, faster than 41% in 1Q & up from 21% a year ago. We see growth continuing on the same path for the next 12 months which would be 29% to Rp10.6tn or Rp3tn a quarter. That’s still less than half ISAT & EXCL.
Cashflow
Cashflow remains very negative. The last 12 months excluding working capital was -Rp5,825bn compared to -Rp3,966bn as of 1Q. The 2Q alone was -Rp1,439bn. But that was because of a record investment spending quarter. With our sales growth & lower investment spending, free cashflow will improve significantly to -Rp1,116 in the next 12 months & will be positive 2Q 2021.
29% sales growth, cash flow positive by next year, no more equity raised, shares above moving average...
Balance sheet
Because of the negative cashflow, net debt in the balance sheet has increased to Rp9.3tn as of 2Q. Equity capital raising has declined to zero. Can FREN grow without capital raising? With our cashflow forecast, we see the net debt at Rp10.4tn in 12 months time without any new equity being raised. That’s less than the peak Rp11.2tn in 2018.
Profit
While sales grew, net profit was positive in 2Q compared to losses in all previous quarters. That’s because of a reversal of 1Q FX losses. The cash cost ratio (net profit add depreciation & FX minus sales as % of sales) has also improved to 80%. We use 77% for the next 12 months to get a lower loss of -Rp1.65tn.
Value
FREN current market value is Rp28.3tn. That’s 2.66x our sales forecast, only 0.83x the value of the assets & 2.87x the equity with no profitability yet. We increase our cashflow valuation to 0.66% from 0.5% using the annualized positive cashflow from 2Q next year because of the extremely strong sales growth. This gives a still higher target price of Rp168
Because of the negative cashflow, net debt in the balance sheet has increased to Rp9.3tn as of 2Q. Equity capital raising has declined to zero. Can FREN grow without capital raising? With our cashflow forecast, we see the net debt at Rp10.4tn in 12 months time without any new equity being raised. That’s less than the peak Rp11.2tn in 2018.
Profit
While sales grew, net profit was positive in 2Q compared to losses in all previous quarters. That’s because of a reversal of 1Q FX losses. The cash cost ratio (net profit add depreciation & FX minus sales as % of sales) has also improved to 80%. We use 77% for the next 12 months to get a lower loss of -Rp1.65tn.
Value
FREN current market value is Rp28.3tn. That’s 2.66x our sales forecast, only 0.83x the value of the assets & 2.87x the equity with no profitability yet. We increase our cashflow valuation to 0.66% from 0.5% using the annualized positive cashflow from 2Q next year because of the extremely strong sales growth. This gives a still higher target price of Rp168
