Previously on Sharpfokus
Value 📈 Sharpfokus120
December 30th, 2019
⏰ 2 minute read
⏰ 2 minute read
Cheapest
You may know from reading here that we consider the Indonesian stock market to be one of it not the cheapest of the mainstream emergin markets. With an economy of over $1tn, our stockmarkt total value is only about half of that. That’s a fairly simple macro comparison, but can we see this cheapness from the individual stocks too... yes we can... here’s how.
Apple v BCA
BBCA
First let’s look at the top of the market. 2019 is the year BBCA headed above $50bn for rhe first time & has even made it as far as $60bn now. It’s a great example of a change in sentient. I can still remember the first days of its listing when nobody wanted to buy the shares which were offer only... not a bad strategy to buy what other investors don’t want to.
AAPL
Over in the US AAPL share have also had a great 2019, reclaiming the number 1 market value spot overtaking both MSFT & the whole Indonesian economy (again). The market value of AAPL is now more than $1.2tn, almost $1.3tn. It makes BBCA seem rather small... AAPL is 20x the size of BBCA.
Others
But that’s quite fair. The US economy is over $20tn which makes it 20x the size of the Indonesian economy. On that basis, it looks like BBCA is correctly valued. But how about the rest of the market? AAPL is now about 3.5% of rhe total market value, but BBCA is 11.2%! Now you can start to see how cheap the other Indonesian stocks might be...
Cash flow
UNVR
We are in a world or low to negative interest rates, so stock valuations can be very high. The big stocks in Indonesia are owned by large global institutions & this has led them to be quite accurately valued. Let’s take a popular one, UNVR. In the last 5 years, UNVR finance cash flow which measures what the company pay to debt or equity investors is a total Rp30tn or Rp6tn a year. If we assumed a low yield on that of 1.6%, the shares should be about Rp370tn. UNVR total value is Rp325tn. Close.
ICBP
Take another popular consumer stock which has worked its way into the top stocks & therfore is owned by large global investors, ICBP. ICBP has paid out Rp10.5th in the last 5 years or Rp2.1tn a year on average. Their sales are rising strongly so this might be even higher in future. Using the same calculation. Rp2.1tn/1.6% would suggest a value of about Rp131.2tn & that’s exactly what ICBP is valued at. Spot on.
INCO
How about another well known stock, INCO. INCO hasn’t had quite the same positive earnings environment in recent years as all commodity stocks have endured lower selling prices, but its likely still popular with large investors. INCO has paid out $206m the last 6 years or an average of $34m which is just under Rp500bn. Using the same 1.6% would imply a value of Rp31.3tn. The actual value of INCO is Rp36tn, probably higher as investors reasonably expect commodity prices to rise in the future.
Other stocks
5x
If the value of these bigger stocks is reasonable then the great value must be in other, smaller, less closely followed ones. The implication from GDP is that many stocks here must be undervalued by a factor of about 5x. Can we find them, Yes we can. Here’s 3 examples from our Sharpfokus Saham research which mow covers 67 stocks.
LPPF
These companies are less popular because their sales has been declining or growing less fast. Like BBCA before, they’re companies which might be considered past it. That’s always a great potential opportunity to look out for. First up is LPPF. Click to read. The is a very well run company & has paid out Rp6.9th the last 5 years. That’s Rp1.375tn a year on average. Use the 1.6% & it implies a value of Rp85tn. That’s 7x the current Rp11.9tn...
SCMA, BIRD
Or how about a TV company? With the advent of everything online, it looks to many like this is a sunset industry, but SCMA advertising revenue is starting to pick up again now. SCMA has paid out Rp6.2tn in 6 years, Rp1.025tn a year. That implies Rp64tn or 3x the current value. Another les popular one is BIRD... I don’t know about you but I find myself using them more often now, & sales popped up a bit in the 3Q. BIRD has paid an average Rp485bn a year which implies Rp30tn or 5x the current Rp6tn.
Offer
It’s a simple idea, the market value seems low, but not for the big stocks. Clearly investors value cash flow paid out extremely highly, so we are looking for where that might be for the smaller companies. & of course we want to share the suggestions we find with you. We are running a special offer for a lifetime subscription to Sharpfokus Saham with a one time only payment of Rp500k. No need to pay again. This offer ends midnight tomorrow December 31st, if you’d like to take advantage of it read one of the 3 research examples & just click the icon at the top of the page, register with email & password & we will contact you.
Be a great investor!
& a very happy new year from the Sharpfokus team.
Sebastian, Metty & Mercy
You may know from reading here that we consider the Indonesian stock market to be one of it not the cheapest of the mainstream emergin markets. With an economy of over $1tn, our stockmarkt total value is only about half of that. That’s a fairly simple macro comparison, but can we see this cheapness from the individual stocks too... yes we can... here’s how.
Apple v BCA
BBCA
First let’s look at the top of the market. 2019 is the year BBCA headed above $50bn for rhe first time & has even made it as far as $60bn now. It’s a great example of a change in sentient. I can still remember the first days of its listing when nobody wanted to buy the shares which were offer only... not a bad strategy to buy what other investors don’t want to.
AAPL
Over in the US AAPL share have also had a great 2019, reclaiming the number 1 market value spot overtaking both MSFT & the whole Indonesian economy (again). The market value of AAPL is now more than $1.2tn, almost $1.3tn. It makes BBCA seem rather small... AAPL is 20x the size of BBCA.
Others
But that’s quite fair. The US economy is over $20tn which makes it 20x the size of the Indonesian economy. On that basis, it looks like BBCA is correctly valued. But how about the rest of the market? AAPL is now about 3.5% of rhe total market value, but BBCA is 11.2%! Now you can start to see how cheap the other Indonesian stocks might be...
Cash flow
UNVR
We are in a world or low to negative interest rates, so stock valuations can be very high. The big stocks in Indonesia are owned by large global institutions & this has led them to be quite accurately valued. Let’s take a popular one, UNVR. In the last 5 years, UNVR finance cash flow which measures what the company pay to debt or equity investors is a total Rp30tn or Rp6tn a year. If we assumed a low yield on that of 1.6%, the shares should be about Rp370tn. UNVR total value is Rp325tn. Close.
ICBP
Take another popular consumer stock which has worked its way into the top stocks & therfore is owned by large global investors, ICBP. ICBP has paid out Rp10.5th in the last 5 years or Rp2.1tn a year on average. Their sales are rising strongly so this might be even higher in future. Using the same calculation. Rp2.1tn/1.6% would suggest a value of about Rp131.2tn & that’s exactly what ICBP is valued at. Spot on.
INCO
How about another well known stock, INCO. INCO hasn’t had quite the same positive earnings environment in recent years as all commodity stocks have endured lower selling prices, but its likely still popular with large investors. INCO has paid out $206m the last 6 years or an average of $34m which is just under Rp500bn. Using the same 1.6% would imply a value of Rp31.3tn. The actual value of INCO is Rp36tn, probably higher as investors reasonably expect commodity prices to rise in the future.
Other stocks
5x
If the value of these bigger stocks is reasonable then the great value must be in other, smaller, less closely followed ones. The implication from GDP is that many stocks here must be undervalued by a factor of about 5x. Can we find them, Yes we can. Here’s 3 examples from our Sharpfokus Saham research which mow covers 67 stocks.
LPPF
These companies are less popular because their sales has been declining or growing less fast. Like BBCA before, they’re companies which might be considered past it. That’s always a great potential opportunity to look out for. First up is LPPF. Click to read. The is a very well run company & has paid out Rp6.9th the last 5 years. That’s Rp1.375tn a year on average. Use the 1.6% & it implies a value of Rp85tn. That’s 7x the current Rp11.9tn...
SCMA, BIRD
Or how about a TV company? With the advent of everything online, it looks to many like this is a sunset industry, but SCMA advertising revenue is starting to pick up again now. SCMA has paid out Rp6.2tn in 6 years, Rp1.025tn a year. That implies Rp64tn or 3x the current value. Another les popular one is BIRD... I don’t know about you but I find myself using them more often now, & sales popped up a bit in the 3Q. BIRD has paid an average Rp485bn a year which implies Rp30tn or 5x the current Rp6tn.
Offer
It’s a simple idea, the market value seems low, but not for the big stocks. Clearly investors value cash flow paid out extremely highly, so we are looking for where that might be for the smaller companies. & of course we want to share the suggestions we find with you. We are running a special offer for a lifetime subscription to Sharpfokus Saham with a one time only payment of Rp500k. No need to pay again. This offer ends midnight tomorrow December 31st, if you’d like to take advantage of it read one of the 3 research examples & just click the icon at the top of the page, register with email & password & we will contact you.
Be a great investor!
& a very happy new year from the Sharpfokus team.
Sebastian, Metty & Mercy
