## TOWR, to net capital payer

🎯 📱 📈 Rp1,233

Last 12-month cashflow -Rp 3,258 billion ⬆️

November 8th, 2020

## Watch the 1 minute explainer ⬇️

Sales

Sales growth has slowed down as we expected with 0% from the second to the third quarter & only 2.7% since the first quarter. At Rp 1.87 trillion, sales were only Rp 1 billion different from our forecast! We annualize the current growth rate to get a 5.3% increase in sales in this next 12 months to Rp 7.7 trillion.

Cashflow

Cashflow was positive again as it was in the second quarter & at Rp 631 billion, higher than the previous quarter & our forecast as investment spending slowed down fast. We assume investment spending continues at this lower level & together with our sales forecast this gives a higher quarterly cashflow of Rp 494 billion in the next 12 months.

Sales growth has slowed down as we expected with 0% from the second to the third quarter & only 2.7% since the first quarter. At Rp 1.87 trillion, sales were only Rp 1 billion different from our forecast! We annualize the current growth rate to get a 5.3% increase in sales in this next 12 months to Rp 7.7 trillion.

Cashflow

Cashflow was positive again as it was in the second quarter & at Rp 631 billion, higher than the previous quarter & our forecast as investment spending slowed down fast. We assume investment spending continues at this lower level & together with our sales forecast this gives a higher quarterly cashflow of Rp 494 billion in the next 12 months.

## Sales growth slows, lower investment, positive cashflow, will turn capital payer, some upside...

Balance sheet

The balance sheet net debt has ballooned because of investment spending, now Rp 17.4 trillion from Rp 9 trillion two years ago. About half that is because of paying dividends on negative cashflow! We assume a much lower dividend Rp 139 billion, which with our cashflow forecast means net debt will be lower, Rp 15.6 trillion in 12 months time.

Profit

Net profit was lower than a year ago & last quarter at Rp 612 billion. The business relies on a high profitability & the cash cost ratio of net profit add depreciation minus sales s as a % of sales was 42%, up 1%. We assume 41% to get a slightly higher next 12 month profit of Rp 2.77 trillion.

Value

TOWR has raised capital Rp 1.2 trillion the last five years. We now expect them to turn to a net payer. At Rp 50.1 trillion, it’s 6.47X sales, 1.47X assets, 4.05X equity with a 22.4% profitability, 0.3% yield. Our cashflow forecast is Rp 1.98 trillion. At 1.6% with a 0.5X adjustment because of debt gives a higher target price Rp1,233.

The balance sheet net debt has ballooned because of investment spending, now Rp 17.4 trillion from Rp 9 trillion two years ago. About half that is because of paying dividends on negative cashflow! We assume a much lower dividend Rp 139 billion, which with our cashflow forecast means net debt will be lower, Rp 15.6 trillion in 12 months time.

Profit

Net profit was lower than a year ago & last quarter at Rp 612 billion. The business relies on a high profitability & the cash cost ratio of net profit add depreciation minus sales s as a % of sales was 42%, up 1%. We assume 41% to get a slightly higher next 12 month profit of Rp 2.77 trillion.

Value

TOWR has raised capital Rp 1.2 trillion the last five years. We now expect them to turn to a net payer. At Rp 50.1 trillion, it’s 6.47X sales, 1.47X assets, 4.05X equity with a 22.4% profitability, 0.3% yield. Our cashflow forecast is Rp 1.98 trillion. At 1.6% with a 0.5X adjustment because of debt gives a higher target price Rp1,233.