## HMSP, now a 7% yield!

🎯 💨 📈 Rp4,302

Last 12-month cashflow +Rp 11.4 trillion ⬇️

November 20th, 2020

⏰ 1 minute read

⏰ 1 minute read

Sales

After a -17% drop in the first quarter & -11% in the second, sales were up by +10% in the third. At Rp 23 trillion, sales were slightly, 2%, below our forecast. White cigarettes were up +4%, machine +6% while hand rolled jumped +233%. We expect sales to recover back to Rp 26.8 trillion by the third quarter of 2021.

Cashflow

With higher sales & investment spending at close to zero, free cashflow also jumped by +60% to Rp 2.48 trillion in the third quarter, although that’s below our forecast. We assume recent average investment spending of Rp 163 billion which together with our higher sales, predicts an average quarterly free cashflow of Rp 3.34 trillion in this next 12 months.

After a -17% drop in the first quarter & -11% in the second, sales were up by +10% in the third. At Rp 23 trillion, sales were slightly, 2%, below our forecast. White cigarettes were up +4%, machine +6% while hand rolled jumped +233%. We expect sales to recover back to Rp 26.8 trillion by the third quarter of 2021.

Cashflow

With higher sales & investment spending at close to zero, free cashflow also jumped by +60% to Rp 2.48 trillion in the third quarter, although that’s below our forecast. We assume recent average investment spending of Rp 163 billion which together with our higher sales, predicts an average quarterly free cashflow of Rp 3.34 trillion in this next 12 months.

## Sales bounced, cash flow & net cash too, now a 5% yield, shares to rebound...

Balance sheet

Higher sales & positive free cashflow plus also positive working capital have pushed the balance sheet net cash back up to Rp 13.35 trillion post dividend in the third quarter. With our forecast higher positive cashflow & assuming a dividend payout of Rp 12.6 trillion, the net cash will be higher again at Rp 14.1 trillion in 12 months time.

Profit

With higher sales, net profit was also up by +25% to Rp 2 trillion. The cash cost ratio of net profit add back depreciation minus sales as a % of sales has improved back to 90%. We assume a further recovery to 86% costs which will give a +7% higher than previous, next 12 months profit of Rp 12.6 trillion.

Value

HMSP has paid out Rp 57.3 trillion of capital in this last 5 years. At Rp 181.5 trillion current market value, it’s only 3.17X capital paid, 1.77X sales, 4.07X assets, 6.33X equity with a 44% profitability & a 7% yield! Our cashflow forecast is Rp 13.3 trillion. At 1.6% with a 0.6X adjustment gives a higher target price of Rp4,302.

Higher sales & positive free cashflow plus also positive working capital have pushed the balance sheet net cash back up to Rp 13.35 trillion post dividend in the third quarter. With our forecast higher positive cashflow & assuming a dividend payout of Rp 12.6 trillion, the net cash will be higher again at Rp 14.1 trillion in 12 months time.

Profit

With higher sales, net profit was also up by +25% to Rp 2 trillion. The cash cost ratio of net profit add back depreciation minus sales as a % of sales has improved back to 90%. We assume a further recovery to 86% costs which will give a +7% higher than previous, next 12 months profit of Rp 12.6 trillion.

Value

HMSP has paid out Rp 57.3 trillion of capital in this last 5 years. At Rp 181.5 trillion current market value, it’s only 3.17X capital paid, 1.77X sales, 4.07X assets, 6.33X equity with a 44% profitability & a 7% yield! Our cashflow forecast is Rp 13.3 trillion. At 1.6% with a 0.6X adjustment gives a higher target price of Rp4,302.