INCO, sales growth stalls
Target price Rp8,253
Last 12-month cashflow +USD 141 million
February 26th,, 2021
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- Sales declined -8% in the fourth quarter to USD 194 million after +14% in the third quarter. Sales were 20% below forecast.
- Production dropped by -16% while prices increased only 13%.
- Average quarterly growth is at -6%. We expect this to turn positive +13% in this next 12 months & sales to reach USD 308 million by fourth quarter 2021.
- Cashflow was lower at USD 29 million in the fourth quarter from USD 71 million in the third quarter as investment spending increased.
- Average quarterly Cashflow is at USD 35 million.
- We use a forecast investment spending of USD 38 million which with higher sales gives an average quarterly free Cashflow of USD 39 million in this next 12 months.
Sales down on lower production, lower cashflow on higher investment spending. Yield 3.4%, sales to rise above Rp8,000...
- The balance sheet leverage of cash minus total liabilities was positive USD 94 million in the fourth quarter after USD 101 million in the third quarter, negative -USD 32 million a year ago.
- With our forecast positive cashflow & a dividend payout of USD 151 million...
- ...the net cash will be positive at USD 99 million in 12 months time.
- Net profit was lower at USD 6 million in the fourth quarter after USD 24 million in the third quarter.
- The cash cost ratio of net profit add back depreciation minus sales as a percent of sales was higher at 77%, from 70%.
- We use 77% costs, which predicts a higher next 12 months net profit of USD 151 million.
- INCO has paid out capital of USD 180 million in the last seven years.
- At the current market value of USD 4.47 billion, it’s 24X capital paid, 4.4X sales, 1.94X assets, 2.2X equity, with a 7.5% profitability & a 3.4% yield.
- Our cashflow forecast is USD 155 million. At 1.6% with a 0.6X adjustment, gives a higher target price Rp8,253.