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WEGE, sales start recovery
Target price Rp375
Last 12-months cashflow -Rp 173 billion

March 15th, 2021
1 minute read

Sales
  • Sales finally jumped, by 59% in the fourth quarter to Rp 674 billion which is just 1% below our forecast.
  • This is after a -44% decline in the third quarter & brings the average quarterly growth to -7%.
  • We predict average growth of 18% this next 12 months, with sales of Rp 1.26 trillion in the fourth quarter of 2021.

Cashflow
  • Cashflow also jumped signs to Rp 542 billion in the fourth quarter from Rp 67 billion in the their quarter.
  • The average quarterly Cashflow is now at -Rp 43 billion.
  • We use investment spending of Rp 59 billion a quarter in our forecast which with higher sales gives an average quarterly Cashflow Rp 36 billion in this next 12 months.

Sales jump, cashflow too. Expecting margins to recover, yield almost 5%, higher target price...

Balance sheet
  • The balance sheet net leverage of cash minus total liabilities was -Rp 2.38 trillion in the fourth quarter from -Rp 2.45 trillion in the third quarter & -Rp 2.4 trillion a year ago.
  • With our forecast return to positive cashflow & assuming a dividend of Rp 103 billion...
  • ...the net cash will be -Rp 2.34 trillion in 12 months time.

Profit
  • Despite higher sales, net profit was lower in the fourth quarter at Rp 25 billion from Rp 34 billion in the third quarter.
  • The cash cost ratio of net profit add depreciation minus sales as a percent of sales was higher 99%.
  • We use 90% as sales recover to predict a next 12 months net profit of Rp 411 billion.

Value
  • WEGE has raised Rp 573 billion of capital in four years, but will now turn payer.
  • At the current market value of Rp 2.2 trillion, it’s only 0.6X sales, 0.39X assets, 0.88X equity with a 16% profitability & a 4.7% yield.
  • Our cashflow forecast is Rp 144 billion. At 1.6% with a 0.4X adjustment gives a higher target price Rp375.