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SMGR
Semen Indonesia, a cement recovery
🎯👷♂️➡️📈 Rp15,307
12m free cash flow +Rp4,298 ⬆️⬆️
August 10th 2020
⏰ 1 minute read
⏰ 1 minute read
Watch the 3 minute explainer using the data file & model ⬇️
Sales
Sales growth was negative at -9% compared to a year ago in the 2Q which is -12% below our forecast. Post acquisition this is the first quarter of negative sales growth since 2017. Indonesian cement sales jumped +52% May to June, so we expect a recovery from 3Q onwards which is still -13.9% growth the next 12 months to Rp34.5tn.
Cashflow
Cashflow in the 2Q was positive at Rp435bn excluding working capital, but that’s lower than last 12 months average quarterly cashflow which is Rp1,075bn. Cashflow has been recovering after the Holcim acquisition. With our forecast for negative sales growth in the next 12 months, we also get a slightly lower next 12 months average free cashflow of Rp908bn per quarter.
Sales growth was negative at -9% compared to a year ago in the 2Q which is -12% below our forecast. Post acquisition this is the first quarter of negative sales growth since 2017. Indonesian cement sales jumped +52% May to June, so we expect a recovery from 3Q onwards which is still -13.9% growth the next 12 months to Rp34.5tn.
Cashflow
Cashflow in the 2Q was positive at Rp435bn excluding working capital, but that’s lower than last 12 months average quarterly cashflow which is Rp1,075bn. Cashflow has been recovering after the Holcim acquisition. With our forecast for negative sales growth in the next 12 months, we also get a slightly lower next 12 months average free cashflow of Rp908bn per quarter.
Cement sales recovery, positive cashflow & lower debt &, share price double...
Balance sheet
The balance sheet is in net debt because of the previous negative cashflow. But as cashflow now recovers, net debt has been reduced in the last 12 months & was at Rp22.5tn as of the 2Q. With our forecast for positive cashflow ahead & a Rp237bn dividend payout, the next 12 months net debt will be lower again to Rp19.1tn.
Profit
While sales fell -9%, profit was lower by -25% compared to a year ago. The cash cost ratio of net profit add depreciation minus sales as a % of sales was higher at 90% bringing the last 12 months ratio to 87%. We use a better 86% to predict a drop of -9.7% in next 12 months profit to Rp.2.25tn.
Value
SMGR current market value is at Rp57.39tn. That’s 1.66X our sales forecast, 0.76X the value of the total assets & 1.58X the equity with a profitability of 6.2%. That’s reasonably cheap. Yield is forecast at 0.4%. We use our 1.6% cashflow valuation with a 60% discount because of the high debt which gives an almost double target price of Rp.15,307.
The balance sheet is in net debt because of the previous negative cashflow. But as cashflow now recovers, net debt has been reduced in the last 12 months & was at Rp22.5tn as of the 2Q. With our forecast for positive cashflow ahead & a Rp237bn dividend payout, the next 12 months net debt will be lower again to Rp19.1tn.
Profit
While sales fell -9%, profit was lower by -25% compared to a year ago. The cash cost ratio of net profit add depreciation minus sales as a % of sales was higher at 90% bringing the last 12 months ratio to 87%. We use a better 86% to predict a drop of -9.7% in next 12 months profit to Rp.2.25tn.
Value
SMGR current market value is at Rp57.39tn. That’s 1.66X our sales forecast, 0.76X the value of the total assets & 1.58X the equity with a profitability of 6.2%. That’s reasonably cheap. Yield is forecast at 0.4%. We use our 1.6% cashflow valuation with a 60% discount because of the high debt which gives an almost double target price of Rp.15,307.
