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LINK
LINK, more customers lower cashflow
🎯 📺 📈 Rp4,163
Last 12 months cashflow -Rp440bn ⬇️
September 3rd, 2020
⏰ 1 minute read
⏰ 1 minute read
Watch the 3 minute explainer video using the data file & model ⬇️
Sales
Sales growth was +6% in the 2Q, 8% above our forecast, the 4th quarter in a row of growth after 2 declines in the first half of last year. Strategy has shifted. Customers grew +24% in the 2Q but at the expense of ARPU which was -9% from a year ago. We expect 2% sales growth this 12 months, Rp967bn.
Cashflow
Despite the higher sales, cashflow has become dramatically negative the last 3 quarters & was -Rp384bn in the 2Q excluding working capital. This is because investment spending increased significantly to gain customers. With our forecast for sales growth together with expected lower investment spending, we predict that the next 12 months average quarterly cashflow will return to positive again, Rp79bn.
Sales growth was +6% in the 2Q, 8% above our forecast, the 4th quarter in a row of growth after 2 declines in the first half of last year. Strategy has shifted. Customers grew +24% in the 2Q but at the expense of ARPU which was -9% from a year ago. We expect 2% sales growth this 12 months, Rp967bn.
Cashflow
Despite the higher sales, cashflow has become dramatically negative the last 3 quarters & was -Rp384bn in the 2Q excluding working capital. This is because investment spending increased significantly to gain customers. With our forecast for sales growth together with expected lower investment spending, we predict that the next 12 months average quarterly cashflow will return to positive again, Rp79bn.
Margins stabilize, lower investment, positive cashflow, paying out again, lower debt & higher shares....
Balance sheet
Because of the investment spending & resulting negative cashflow, the balance sheet has swung just as dramatically to net debt. Early 2019 net cash was Rp613bn, 2Q net debt was up to Rp612bn, but positive working capital meant that’s lower than the 1Q Rp805bn. With our forecast cashflow & no dividend, net debt will reduce to Rp297bn in 12 months.
Profit
Net profit was almost unchanged from a year ago. Despite the sales growth, the cash cost ratio of net profit add depreciation minus sales as a % of sales, increased from 51% to 54%. The last 12 month average is at 56% & we use that to predict a next 12 months profit of Rp963bn, +16.9% on lower average depreciation.
Value
LINK was paying out capital, but that stalled recently because of the increase in investment spending. At Rp6.1tn it’s 1.54x sales, 0.74x assets & 1.16x the equity with a profitability of 18.2%. Yield is 0%. We reduce our cashflow forecast slightly to Rp315bn which at 1.6% with an 0.6x adjustment because of the new debt gives a target price Rp4,163.
Because of the investment spending & resulting negative cashflow, the balance sheet has swung just as dramatically to net debt. Early 2019 net cash was Rp613bn, 2Q net debt was up to Rp612bn, but positive working capital meant that’s lower than the 1Q Rp805bn. With our forecast cashflow & no dividend, net debt will reduce to Rp297bn in 12 months.
Profit
Net profit was almost unchanged from a year ago. Despite the sales growth, the cash cost ratio of net profit add depreciation minus sales as a % of sales, increased from 51% to 54%. The last 12 month average is at 56% & we use that to predict a next 12 months profit of Rp963bn, +16.9% on lower average depreciation.
Value
LINK was paying out capital, but that stalled recently because of the increase in investment spending. At Rp6.1tn it’s 1.54x sales, 0.74x assets & 1.16x the equity with a profitability of 18.2%. Yield is 0%. We reduce our cashflow forecast slightly to Rp315bn which at 1.6% with an 0.6x adjustment because of the new debt gives a target price Rp4,163.
