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MDKA, not cheap
🎯 ⛏ 📈 Rp3,167
Last 12-month cashflow +USD 30 million ⬆️

January 6th, 2021
1 minute read

Sales
After an -8% decline in the second quarter, sales were +3% in the third quarter, Rp 98 billion, below our forecast USD 118 million. But cashflow receipts were higher, USD 107 million. Gold sales were up +1% from the second quarter, smaller silver +139%, copper +38%. We predict sales will rise to USD 131 million by the third quarter 2021.

Cashflow
Cashflow has turned positive this year as investment spending has slowed down. Free cashflow was USD 26 million in the first quarter, USD 4 million in the second & USD 27 million in the third. We use the current quarterly investment spending USD 11 million to predict that the next 12 months average cashflow will rise to USD 28 million.

Sales slow but positive cashflow, debt reducing, not cheap, but generous valuation gives higher target price...

Data file & model
Balance sheet
Because of the positive cashflow, the balance sheet net debt has reduced to USD 141 million in the third quarter from USD 210 million in the second & USD 233 million a year ago. With higher positive cashflow & assuming a USD 32.9 million dividend payout, the net debt will drop further to USD 45 million in 12 months time.

Profit
The low sales meant that net profit was only USD 16 million after USD 21 million in the second quarter. The cash cost ratio of net profit add depreciation minus sales as a percent of sales was higher at 67%. We use the average 64% costs to predict a +113% higher next 12 months net profit of USD 110 million.

Value
MDKA five year net capital raised is USD 291 million as of the third quarter. At the current market value of USD 4.3 billion, it’s not cheap 8.75X sales, 4.33X assets, 6.57X equity, with a 16.9% profitability & a 0.8% yield. Our cashflow forecast is USD 113 million. At 1.6% with a 0.7X adjustment gives a higher target price Rp3,167.
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