Log in here
GAR, extremely cheap stock
🎯 🌴📈S$0.413
Last 12 months cashflow +USD15m ⬆️
September 18th, 2020
⏰ 1 minute read
⏰ 1 minute read
Watch the explainer ⬇️
Sales
Sales growth in the first half was +7%, after 5 straight semesters of negative growth, & 7% above our forecast. Plantations is becoming the driver again with growth of +9%, despite an -8% decline in fruit production, as prices rise. Refinery sales grew +7%. For the next 12 months we assume continued price growth & 7% sales growth to USD7.1bn
Cashflow
Cashflow was also positive +USD49m excluding working capital & even more positive if we include working capital. The improvement is partly because of lower investment spending which has slowed down for the last two semesters. We assume investment spending stays lower & with our sales growth we predict a higher average semester cashflow of USD61m in this next 12 months.
Sales growth in the first half was +7%, after 5 straight semesters of negative growth, & 7% above our forecast. Plantations is becoming the driver again with growth of +9%, despite an -8% decline in fruit production, as prices rise. Refinery sales grew +7%. For the next 12 months we assume continued price growth & 7% sales growth to USD7.1bn
Cashflow
Cashflow was also positive +USD49m excluding working capital & even more positive if we include working capital. The improvement is partly because of lower investment spending which has slowed down for the last two semesters. We assume investment spending stays lower & with our sales growth we predict a higher average semester cashflow of USD61m in this next 12 months.
Sales growth, positive cashflow, paying out capital, extremely cheap, higher share price...
Balance sheet
The balance sheet is in net debt & it’s high. As of the first half this year, net debt is at USD2.86bn. Net debt has been declining since USD3.03bn in first half 2018, but dividend payments have kept net debt high. With our forecast positive cashflow & a dividend of USD14m, net debt can improve to USD2.75bn in 12 months.
Profit
Net profit was a loss of -USD146m which was partly from FX & higher depreciation. But the cash cost ratio of net profit add back depreciation & other non cash minus sales as a % of sales was higher at 98%. We assume a return to 95% this next 12 months which is a return to a profit of USD49m.
Value
GAR has been paying out capital for the last 5 years & it wll reach a cumulative almost USD500m this next 12 months. At USD1,307m it’s 0.18x sales, 0.16x assets, 0.31x equity with a 1% profitability & 1.1% yield. We raise our cashflow forecast to USD123m. At 1.6% with a 0.5x adjustment, the target price is a much higher S$0.413.
The balance sheet is in net debt & it’s high. As of the first half this year, net debt is at USD2.86bn. Net debt has been declining since USD3.03bn in first half 2018, but dividend payments have kept net debt high. With our forecast positive cashflow & a dividend of USD14m, net debt can improve to USD2.75bn in 12 months.
Profit
Net profit was a loss of -USD146m which was partly from FX & higher depreciation. But the cash cost ratio of net profit add back depreciation & other non cash minus sales as a % of sales was higher at 98%. We assume a return to 95% this next 12 months which is a return to a profit of USD49m.
Value
GAR has been paying out capital for the last 5 years & it wll reach a cumulative almost USD500m this next 12 months. At USD1,307m it’s 0.18x sales, 0.16x assets, 0.31x equity with a 1% profitability & 1.1% yield. We raise our cashflow forecast to USD123m. At 1.6% with a 0.5x adjustment, the target price is a much higher S$0.413.
