## SMMA, return to growth

🎯 💰 📈 Rp18,679

Last 12-month cashflow -Rp 398 billion ⬆️

January 13th, 2021

1 minute read

Sales

Sales growth was negative in the third quarter, -16% to Rp 9.2 trillion, after a +36% increase in the second quarter from the first. The 12 month average quarterly growth is at -5%. We see this average quarterly growth turning positive to +6% in this next 12 months with sales rising back to Rp 11.6 trillion by third quarter 2021.

Cashflow

It looks like cashflow is turning positive with Rp 824 billion in the third quarter. The average of the last three quarters is positive too, Rp 213 billion. With our forecast for sales growth to turn positive & using a flat investment cashflow, we get a higher average quarterly free cashflow of Rp 1.19 trillion in this next 12 months.

1 minute read

Sales

Sales growth was negative in the third quarter, -16% to Rp 9.2 trillion, after a +36% increase in the second quarter from the first. The 12 month average quarterly growth is at -5%. We see this average quarterly growth turning positive to +6% in this next 12 months with sales rising back to Rp 11.6 trillion by third quarter 2021.

Cashflow

It looks like cashflow is turning positive with Rp 824 billion in the third quarter. The average of the last three quarters is positive too, Rp 213 billion. With our forecast for sales growth to turn positive & using a flat investment cashflow, we get a higher average quarterly free cashflow of Rp 1.19 trillion in this next 12 months.

## Looks like sales ready to grow again, positive cashflow & a slightly higher target price...

Balance sheet

Sales is a combination of asset growth & sales to assets. In the third quarter, asset growth was a positive +3% & 12-month average growth is back to +1% after declining since 2018. The sales to asset ratio was low at 9% in the third quarter. We expect sales to assets to rise to 12% by the third quarter 2021.

Profit

Despite lower sales, net profit jumped in the third quarter to Rp 599 billion from Rp 240 billion in the second quarter. The cash costs ratio of net profit add non cash costs minus sales as a percent of sales improved to 90%. We see a further improvement to 87% which predicts a next 12 months profit, Rp 2.9 trillion.

Value

SMMA has raised a total net capital of Rp 1.96 trillion in the last five years. At the current market value of Rp 76.4 trillion, it’s 1.8X sales, 0.7X assets, 3.1X equity with an 11.9% profitability & a 1.1% yield. Our cashflow forecast is Rp 4.8 trillion. At 1.6% with a 0.4X adjustment gives a higher target price of Rp18,679.

Sales is a combination of asset growth & sales to assets. In the third quarter, asset growth was a positive +3% & 12-month average growth is back to +1% after declining since 2018. The sales to asset ratio was low at 9% in the third quarter. We expect sales to assets to rise to 12% by the third quarter 2021.

Profit

Despite lower sales, net profit jumped in the third quarter to Rp 599 billion from Rp 240 billion in the second quarter. The cash costs ratio of net profit add non cash costs minus sales as a percent of sales improved to 90%. We see a further improvement to 87% which predicts a next 12 months profit, Rp 2.9 trillion.

Value

SMMA has raised a total net capital of Rp 1.96 trillion in the last five years. At the current market value of Rp 76.4 trillion, it’s 1.8X sales, 0.7X assets, 3.1X equity with an 11.9% profitability & a 1.1% yield. Our cashflow forecast is Rp 4.8 trillion. At 1.6% with a 0.4X adjustment gives a higher target price of Rp18,679.