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INCO sharp with a 6% yield forecast

INCO Current 7,175 Target 10,430 + 45%

May 10, 2022
1 minute read

Sales declined seasonally -12%
7% 0% 31% -2% -12%

• Sales declined seasonally -12% in the first quarter to 235 million dollars -13% vs our 269 million dollars forecast.
• This brings the quarterly average to 4% growth.
• We predict average growth of 3% in this next 12 months to bring sales to 267 million dollars in the first quarter 2023.

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Costs down profit up
-65% -69% -40% -91% -54%

• The cash cost ratio went from -91% to -54% profit from -16 to 68 million dollars in the first quarter.
• The average cost ratio is at -64% now.
• We use a -59% cost ratio to predict a 70 million dollars profit in the first quarter 2023.

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Cashflow lower
-2, 74, 44, 39, 11

1. Free cashflow went from 39 to 11 million dollars in the first quarter with -42 million dollars investment Cashflow.
2. Average quarterly Cashflow is at 42 million dollars now.
3. We assume the same -42 million dollars investment spending which with higher sales gives a 67 million dollars Cashflow in the first quarter 2023.

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Balance sheet net cash improved
113, 135, 177, 190, 196

• Cash increased 508 to 518 million dollars in the first quarter.
• Liabilities increased 318 to 322 million dollars so net cash improved 190 to 196 million dollars
• With our forecast cashflow & a -321 million dollars equity payout 63 million dollars liabilities payment net cash will be 133 million dollars in 12 months time.

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Capital paid flat , a 45% higher target price
173, 206, 208, 208, 208

• INCO capital from the last 29 quarters continued flat at 208 million dollars in the first quarter but will be 1,976 million dollars in12 months time.
• At the current market value of 4,986 million dollars based on our forecasts it’s at 2.0 X assets with a 8 years payback & a 6% yield.
• Our cashflow forecast is 258 million dollars which means an 19 X valuation. A 20 X valuation gives a 45% higher target price 10,430 rupiah.

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