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TOBA, cheap but negative cashflow
Target price Rp697
Last 12-month cashflow -USD 129 million

January 22nd, 2021
1 minute read

Sales
Sales growth was back to positive +8% in the third quarter & USD 56 million after the -69% decline on the second quarter. Average quarterly growth is at -21%. We expect sales growth to turn positive & average 17% a quarter in this next 12 months & sales to rise back to USD 102 million by the third quarter 2021.

Cashflow
If we exclude the spending on the power plant, free cashflow was USD 1 million in the third quarter while the quarterly average was at USD 5 million. With our forecast for higher sales but some higher investment spending, we predict that the average quarterly free cashflow will be exactly the same USD 5 million in this next 12 months.

Sales growth to turn positive, flat cashflow excluding power project spending, low valuation but negative capital, slightly higher target price ...

Data file & model
Balance sheet
Because of spending on the power business, negative net cash minus liabilities has increased from -USD 73 million in 2016 to USD 434 million in the third quarter. The increase is slowing, up from USD 427 million in the second quarter. Without including power spending, with positive cashflow, net cash will improve to -USD 413 million in 12 months time.

Profit
Net profit was back up in the third quarter tUSD 12 million from USD 5 million in the second quarter. The cash costs ratio of net profit add back depreciation minus sales as a percent of sales was low at 75%. We use the higher average 88% costs to predict a next 12 months profit of USD 34 million.

Value
TOBA has raised net capital of USD 199 million in the last five years. At the current market value of USD 311 million, it’s only 0.9X sales, 0.4X assets, 0.9X equity, with a 10% profitability & no yield yet. Our cashflow forecast is USD 21 million. At 1.6% with a 0.3X adjustment, this gives a higher target price of Rp697.
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