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SSMS
Sawit Sumbermas, all points up
🎯🌴📉➡️ Rp1,890
12m free cash flow -Rp742bn ⬇️
June 24th, 2020
⏰ 1 minute read
⏰ 1 minute read
Watch the 3 minute explainer using the data file & model ⬇️
Sales
We don’t have operating data for SSMS 1Q. For the full year last year fruit production fell by 6%. 1Q sales growth was back to positive again 6% thanks to a higher palm oil price. We think the palm oil price will continue to rise as supply is tight & forecast next 12-month sales growth of 10% to Rp3.63tn.
Cashflow
SSMS 12-month free cashflow has been negative for the last 7 straight quarters along with the rest of the palm oil sector. Investment spending has remained high, but as planting has slowed down, we assume much less spending the next 12 months. With our sales forecast this would turn the next 12-month free cashflow back to a positive Rp576bn.
We don’t have operating data for SSMS 1Q. For the full year last year fruit production fell by 6%. 1Q sales growth was back to positive again 6% thanks to a higher palm oil price. We think the palm oil price will continue to rise as supply is tight & forecast next 12-month sales growth of 10% to Rp3.63tn.
Cashflow
SSMS 12-month free cashflow has been negative for the last 7 straight quarters along with the rest of the palm oil sector. Investment spending has remained high, but as planting has slowed down, we assume much less spending the next 12 months. With our sales forecast this would turn the next 12-month free cashflow back to a positive Rp576bn.
Sales growing as palm oil price rises, cashflow jumping, debt reducing, shares can rise...
Balance sheet
SSMS has net debt like most plantations. Net debt was Rp4.96tn as of the 1Q up from Rp3.94tn a year ago (but cash was high at Rp2.2tn). Net debt jumped in the 1Q because of the FX effect of a weak rupiah. With our forecast cashflow, net debt will reduce to Rp4.39tn in 12 months assuming there’s no dividend.
Profit
SSMS fell to a net loss in the 1Q, because of the large FX loss which will now reverse as the Rp has recovered. The cash cost ratio (net profit add back depreciation and FX minus sales as % of sales) bounced to 67% in 1Q from 88% in 4Q 2019. We use 78% to get a 12-month profit of Rp494bn.
Value
SSMS current market value is Rp7.43tn. That’s 2.05x our sales forecast, 0.67x the assets & 1.77x the value of the equity with an 11.7% forecast profitability. Yield forecast is 0%. We use our 1.6% cashflow valuation with a large 50% discount because of the debt (although this will reside with FX) which gives a much higher target price of Rp1,890.
SSMS has net debt like most plantations. Net debt was Rp4.96tn as of the 1Q up from Rp3.94tn a year ago (but cash was high at Rp2.2tn). Net debt jumped in the 1Q because of the FX effect of a weak rupiah. With our forecast cashflow, net debt will reduce to Rp4.39tn in 12 months assuming there’s no dividend.
Profit
SSMS fell to a net loss in the 1Q, because of the large FX loss which will now reverse as the Rp has recovered. The cash cost ratio (net profit add back depreciation and FX minus sales as % of sales) bounced to 67% in 1Q from 88% in 4Q 2019. We use 78% to get a 12-month profit of Rp494bn.
Value
SSMS current market value is Rp7.43tn. That’s 2.05x our sales forecast, 0.67x the assets & 1.77x the value of the equity with an 11.7% forecast profitability. Yield forecast is 0%. We use our 1.6% cashflow valuation with a large 50% discount because of the debt (although this will reside with FX) which gives a much higher target price of Rp1,890.
