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LINK, sales growth accelerating
🎯 📺 📈 Rp4,220
Last 12-month cashflow -Rp186bn ⬆️
October 22nd, 2020
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Sales
Sales growth accelerated again to +7% in the 3Q from +6% in the 2Q & broke the Rp1tn barrier at Rp1,024bn. This is the 5th quarter in a row of positive growth & sales were 4% above our forecast. Subscribers jumped by+26%, ARPU declined -10%. We increase our sales growth forecast to +12.8% in this 12 months to reach Rp4.45tn.
Cashflow
Cashflow is hard to read. It was negative in the 3Q but positive if we take out large negative working capital. It’s hard to know if the working capital is cashflow or not. Investment spending jumped again higher than we expected. Assuming average investment spend & higher sales gives us a forecast positive average quarterly cashflow Rp77bn this 12 months.
Sales growth accelerated again to +7% in the 3Q from +6% in the 2Q & broke the Rp1tn barrier at Rp1,024bn. This is the 5th quarter in a row of positive growth & sales were 4% above our forecast. Subscribers jumped by+26%, ARPU declined -10%. We increase our sales growth forecast to +12.8% in this 12 months to reach Rp4.45tn.
Cashflow
Cashflow is hard to read. It was negative in the 3Q but positive if we take out large negative working capital. It’s hard to know if the working capital is cashflow or not. Investment spending jumped again higher than we expected. Assuming average investment spend & higher sales gives us a forecast positive average quarterly cashflow Rp77bn this 12 months.
Sales accelerating again. lower costs but higher investment, positive cashflow ahead again, capital payouts to re accelerate, higher target price ...
Balance sheet
The balance sheet has turned on its head this last year from net cash to net debt as cashflow turned negative. The net debt was much higher at Rp1.25tn in the 3Q from negative cashflow & equity payouts. With our forecast positive cashflow & an equity payout of Rp129bn, net debt will reduce again to Rp1.07tn in 12 months time.
Profit
Net profit was flat from a year ago at Rp243bn in the 3Q as depreciation increased. The cash cost ratio of net profit add back depreciation minus sales as a % of sales has improved back to 52%. We use this 52% costs ratio to predict a higher net profit of Rp1.29tn in this next 12 months, that’s up +57.4%.
Value
LINK is still a net capital payer. Although cumulative payouts stalled recently at Rp2.3tn, they should now re accelerate again. At Rp5,861bn, it’s 1.32x sales, only 0.68x assets, 1.02x equity with a 22.6% profitability & a forecast 2.2% yield. Our cashflow forecast is Rp310bn. At 1.6% with an 0.6X adjustment because of the debt gives a higher target price Rp4,220.
The balance sheet has turned on its head this last year from net cash to net debt as cashflow turned negative. The net debt was much higher at Rp1.25tn in the 3Q from negative cashflow & equity payouts. With our forecast positive cashflow & an equity payout of Rp129bn, net debt will reduce again to Rp1.07tn in 12 months time.
Profit
Net profit was flat from a year ago at Rp243bn in the 3Q as depreciation increased. The cash cost ratio of net profit add back depreciation minus sales as a % of sales has improved back to 52%. We use this 52% costs ratio to predict a higher net profit of Rp1.29tn in this next 12 months, that’s up +57.4%.
Value
LINK is still a net capital payer. Although cumulative payouts stalled recently at Rp2.3tn, they should now re accelerate again. At Rp5,861bn, it’s 1.32x sales, only 0.68x assets, 1.02x equity with a 22.6% profitability & a forecast 2.2% yield. Our cashflow forecast is Rp310bn. At 1.6% with an 0.6X adjustment because of the debt gives a higher target price Rp4,220.
