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LSIP
London Sumatra, sales to break above trend
🎯🌴📈➡️Rp2,187
12 month free cash flow +Rp336bn ⬆️
August 3rd 2020
⏰ 1 minute read
⏰ 1 minute read
Sales
LSIP sales growth was +13% from a year ago, but with lower production & price, sales were down -7% compared to the 1Q & sales are still below the long term trend. We expect that to change from the 3Q as prices have jumped 40% since June. We forecast sales to grow 8.4% in the next 12 months to Rp3.98tn.
Cashflow
Cashflow also increased from a year ago & was a positive Rp118bn in the 2Q excluding working capital, as investment spending slowed further. This is the third positive cashflow quarter from the last 12 months which is a total Rp252bn. With our sales growth forecast & lower investment, free cashflow in the next 12 months will be higher still +Rp477bn.
LSIP sales growth was +13% from a year ago, but with lower production & price, sales were down -7% compared to the 1Q & sales are still below the long term trend. We expect that to change from the 3Q as prices have jumped 40% since June. We forecast sales to grow 8.4% in the next 12 months to Rp3.98tn.
Cashflow
Cashflow also increased from a year ago & was a positive Rp118bn in the 2Q excluding working capital, as investment spending slowed further. This is the third positive cashflow quarter from the last 12 months which is a total Rp252bn. With our sales growth forecast & lower investment, free cashflow in the next 12 months will be higher still +Rp477bn.
Sales above trend, cashflow rising, cash too so higher dividends, trading volume points to higher share price...
Balance sheet
LSIP is a rarity among the palm oil companies as it is net cash. Because of the positive cashflow, the net cash position continues to climb up ahead of the August dividend payment & was Rp1.6tn as of the 2Q. Even after the dividend, with our forecast higher cashflow, the net cash will rise to Rp1.94tn in 12 months time.
Profit
Net profit was also positive again compared to a loss last year. But the profit was much lower Rp10bn than Rp81bn in 1Q. The cash cost ratio of net profit add depreciation minus sales as % of sales dropped to 86% from 78% in the 1Q. We use 79% as prices rise to predict the next 12 months profit Rp445bn.
Value
LSIP current market value is Rp6,752bn. That’s 1.7x our sales forecast, just 0.63x the value of the depreciated assets & 0.76x the value of the equity with a profitability of 5%. Yield is forecast at 2%. We use our 1.6% cashflow valuation with a 50% discount despite the lack of debt, which gives a much higher target price of Rp2,187.
LSIP is a rarity among the palm oil companies as it is net cash. Because of the positive cashflow, the net cash position continues to climb up ahead of the August dividend payment & was Rp1.6tn as of the 2Q. Even after the dividend, with our forecast higher cashflow, the net cash will rise to Rp1.94tn in 12 months time.
Profit
Net profit was also positive again compared to a loss last year. But the profit was much lower Rp10bn than Rp81bn in 1Q. The cash cost ratio of net profit add depreciation minus sales as % of sales dropped to 86% from 78% in the 1Q. We use 79% as prices rise to predict the next 12 months profit Rp445bn.
Value
LSIP current market value is Rp6,752bn. That’s 1.7x our sales forecast, just 0.63x the value of the depreciated assets & 0.76x the value of the equity with a profitability of 5%. Yield is forecast at 2%. We use our 1.6% cashflow valuation with a 50% discount despite the lack of debt, which gives a much higher target price of Rp2,187.
