## PZZA, take another slice

🎯 🍕 📈 Rp1,373

Last 12-months cashflow -Rp 227 billion ⬇️

December 14th, 2020

1 minute read

Sales

Sales growth was still negative in the third quarter, but at -2%,

better than -10% in the second quarter, -9% in the first. Sales of Rp 847 billion was 5% below our forecast. While food sales fell -4%, smaller drinks doubled. We expect sales to pick up from the fourth quarter back to Rp 1 trillion by third quarter 2021.

Cashflow

Despite sales’ slight decline, cashflow bounced back & was positive in the third quarter for the first time in six quarters, +Rp 22 billion vs our forecast Rp 33 billion. Investment spending was lower, Rp 49 billion & we use this together with our higher sales forecast to predict the next 12 months average quarterly cashflow is +Rp 35 billion.

1 minute read

Sales

Sales growth was still negative in the third quarter, but at -2%,

better than -10% in the second quarter, -9% in the first. Sales of Rp 847 billion was 5% below our forecast. While food sales fell -4%, smaller drinks doubled. We expect sales to pick up from the fourth quarter back to Rp 1 trillion by third quarter 2021.

Cashflow

Despite sales’ slight decline, cashflow bounced back & was positive in the third quarter for the first time in six quarters, +Rp 22 billion vs our forecast Rp 33 billion. Investment spending was lower, Rp 49 billion & we use this together with our higher sales forecast to predict the next 12 months average quarterly cashflow is +Rp 35 billion.

## Sales a bit disappointing but should rise from fourth quarter, cashflow is positive, paying back capital, higher target price...

Balance sheet

The sales slump pushed the balance sheet into net debt this year, but with positive cashflow in the third quarter, net debt improved to Rp 256 billion from Rp 291 billion in the second. With our forecast positive cashflow & no dividend as net profit is negative, net debt will be down to Rp 118 billion in 12 months time.

Profit

The third quarter had a first time net loss of -Rp 19 billion as higher interest expenses pushed the cash costs ratio, net profit add depreciation minus sales as a percent of sales up to 91%. We use the same 91% to predict the next 12 months has a loss of -Rp 43 billion from a Rp 42 billion previously.

Value

PZZA net capital raised the last five years has now halved to Rp 258 billion. At the current market value of Rp 2.1 trillion, it’s 0.55X sales, 0.99X assets, 1.75X equity with negative profitability & no yield yet. Our cashflow forecast is Rp 138 billion. At 1.6% with a quite conservative 0.4X adjustment gives a higher target price of Rp1,373.

The sales slump pushed the balance sheet into net debt this year, but with positive cashflow in the third quarter, net debt improved to Rp 256 billion from Rp 291 billion in the second. With our forecast positive cashflow & no dividend as net profit is negative, net debt will be down to Rp 118 billion in 12 months time.

Profit

The third quarter had a first time net loss of -Rp 19 billion as higher interest expenses pushed the cash costs ratio, net profit add depreciation minus sales as a percent of sales up to 91%. We use the same 91% to predict the next 12 months has a loss of -Rp 43 billion from a Rp 42 billion previously.

Value

PZZA net capital raised the last five years has now halved to Rp 258 billion. At the current market value of Rp 2.1 trillion, it’s 0.55X sales, 0.99X assets, 1.75X equity with negative profitability & no yield yet. Our cashflow forecast is Rp 138 billion. At 1.6% with a quite conservative 0.4X adjustment gives a higher target price of Rp1,373.