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GGRM
Gudang Garam, heading to net cash
🎯 ☁️ 📈➡️ Rp127,725
12m free cash flow +Rp12,116bn ⬆️
July 31st, 2020
⏰ 1 minute read
⏰ 1 minute read
Watch the 3 minute explainer using the data file & model ⬇️
Sales
GGRM sales growth was -1% in the 2Q, A slow down but not too bad. Our forecast was for growth of-2%. Sales were also down -3% from the 1Q. We expect sales to start a recovery from the 3Q & into next year. Our next 12 months forecast is for sales growth to return with a modest +2.8% to Rp114.5bn.
Cashflow
Cashflow is interesting, because the last 12 months is a very high Rp12.1tn. That’s because there have been four consecutive quarters of positive cashflow as opposed to the usual three because of slow payment of excise tax. With our sales growth forecast and assuming more normal working capita, we forecast the next 12 month free cashflow will be at Rp7.8tn.
GGRM sales growth was -1% in the 2Q, A slow down but not too bad. Our forecast was for growth of-2%. Sales were also down -3% from the 1Q. We expect sales to start a recovery from the 3Q & into next year. Our next 12 months forecast is for sales growth to return with a modest +2.8% to Rp114.5bn.
Cashflow
Cashflow is interesting, because the last 12 months is a very high Rp12.1tn. That’s because there have been four consecutive quarters of positive cashflow as opposed to the usual three because of slow payment of excise tax. With our sales growth forecast and assuming more normal working capita, we forecast the next 12 month free cashflow will be at Rp7.8tn.
Sales to recover, cashflow rising, heading to net cash, cheap ➡️ re rating...
Balance sheet
It’s in the balance sheet that things are most interesting of all. Thanks to the improving cash flow the net debt has been declining to just Rp233bn as of the 2Q. Yes that’s partly from slow payment of excise tax, but with our cash flow forecast for the next 12 months, net debt will finally turn into net cash Rp2.19tn.
Profit
With the slight decline in sales net profit fell more, -29% because of both higher depreciation and a slightly higher cash cost ratio, net profit add depreciation minus sales as a percent of sales. The 12 months cost ratio is at 88% and we use this to forecast the next 12 months profit will rise slightly to Rp10.68Rn or +2.5%.
Value
GGRM current market value has fallen to Rp96tn. That’s cheap, 0.84x our sales forecast, 1.17x the assets and 1.6x the value of the equity despite a high profitability of 18%. Yield is also high at 5.7%. We use our 1.6% cash flow valuation with a very large discount of 50% which still gives a much higher target price of Rp127,725.
It’s in the balance sheet that things are most interesting of all. Thanks to the improving cash flow the net debt has been declining to just Rp233bn as of the 2Q. Yes that’s partly from slow payment of excise tax, but with our cash flow forecast for the next 12 months, net debt will finally turn into net cash Rp2.19tn.
Profit
With the slight decline in sales net profit fell more, -29% because of both higher depreciation and a slightly higher cash cost ratio, net profit add depreciation minus sales as a percent of sales. The 12 months cost ratio is at 88% and we use this to forecast the next 12 months profit will rise slightly to Rp10.68Rn or +2.5%.
Value
GGRM current market value has fallen to Rp96tn. That’s cheap, 0.84x our sales forecast, 1.17x the assets and 1.6x the value of the equity despite a high profitability of 18%. Yield is also high at 5.7%. We use our 1.6% cash flow valuation with a very large discount of 50% which still gives a much higher target price of Rp127,725.
