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TLKM
Telkom, largr capital payouts
🎯📞📈➡️ Rp7,413
12m free cash flow +Rp1,564bn ⬇️⬇️
August 14th, 2020
⏰ 1 minute read
⏰ 1 minute read
Watch the 3 minute explainer using the data file & model ⬇️
Sales
Sales growth was lower -6% compared to a year ago in the 2Q, 5% below our forecast -1% growth, & the third out of four quarters in a row of negative sales growth. The key data sales were up +10%. We expect a recovery from the 3Q onwards which results in positive +3.5% growth the next 12 months to Rp137bn.7tn.
Cashflow
Cashflow in 2Q was a large negative -Rp11.25tn excluding working capital. That drags down the last 12 months average quarterly cashflow to +Rp391bn compared to Rp4.58tn in 1Q. But including working capital cashflow was positive. With our forecast sales growth in the next 12 months, we expect a recovery in next 12 months average free cashflow to Rp4.9tn per quarter.
Sales growth was lower -6% compared to a year ago in the 2Q, 5% below our forecast -1% growth, & the third out of four quarters in a row of negative sales growth. The key data sales were up +10%. We expect a recovery from the 3Q onwards which results in positive +3.5% growth the next 12 months to Rp137bn.7tn.
Cashflow
Cashflow in 2Q was a large negative -Rp11.25tn excluding working capital. That drags down the last 12 months average quarterly cashflow to +Rp391bn compared to Rp4.58tn in 1Q. But including working capital cashflow was positive. With our forecast sales growth in the next 12 months, we expect a recovery in next 12 months average free cashflow to Rp4.9tn per quarter.
Sales growth again, cashflow recovery, lower debt, still larger payouts, high yield, higher target price...
Balance sheet
The balance sheet is net debt which increased since the 2018 slowdown in sales & higher dividend payments. Because of positive working capital recently, net debt has been declining from Rp40tn in 2Q last year to Rp35tn in 2Q this year. With our forecast higher cashflow & a smaller dividend, net debt will improve to Rp31.7tn in 12 months time.
Profit
While the sales growth was negative, 2Q profit was higher by +2% compared to a year ago. The cash cost ratio of net profit add depreciation minus sales as a % of sales was lower at 56% bringing the last 12 months ratio to 60%. We use the 60% to predict a +6.6% higher next 12 months profit of Rp29.3tn.
Value
TLKM current market value is at Rp302tn. That’s 2.19X our sales forecast, 1.22X the value of the total assets & 2.43X the equity with a profitability of 23.6%. That’s quite cheap. Yield is forecast at 5%. We use our 1.6% cashflow valuation with a 40% discount because of the high debt which gives a much higher target price of Rp7,413.
The balance sheet is net debt which increased since the 2018 slowdown in sales & higher dividend payments. Because of positive working capital recently, net debt has been declining from Rp40tn in 2Q last year to Rp35tn in 2Q this year. With our forecast higher cashflow & a smaller dividend, net debt will improve to Rp31.7tn in 12 months time.
Profit
While the sales growth was negative, 2Q profit was higher by +2% compared to a year ago. The cash cost ratio of net profit add depreciation minus sales as a % of sales was lower at 56% bringing the last 12 months ratio to 60%. We use the 60% to predict a +6.6% higher next 12 months profit of Rp29.3tn.
Value
TLKM current market value is at Rp302tn. That’s 2.19X our sales forecast, 1.22X the value of the total assets & 2.43X the equity with a profitability of 23.6%. That’s quite cheap. Yield is forecast at 5%. We use our 1.6% cashflow valuation with a 40% discount because of the high debt which gives a much higher target price of Rp7,413.
