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KREN, cheap but not very profitable
🎯 📲 📉Rp109
Last 12 months cashflow -Rp692bn ⬇️⬇️
September 20th, 2020
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Sales
Sales growth was +22% in the 2Q, but that’s lower than the +37% in the 1Q & the average of the last 6 quarters which is +55%. The newer digital sales were up +27% while the legacy financial business was down by -68%! We assume sales growth will still be strong at +22.4% in this next 12 ‘months to Rp15.9tn.
Cashflow
Cashflow is very negative at -Rp408bn in the 2Q excluding working capital. That’s after -Rp383bn in the 1Q. Investment spending ha slowed to Rp138bn in the first half of this year from Rp317bn the second half last year. We assume low investment which with our sales forecast, gives a positive average +Rp64bn a quarter cashflow in this next 12 months.
Sales growth was +22% in the 2Q, but that’s lower than the +37% in the 1Q & the average of the last 6 quarters which is +55%. The newer digital sales were up +27% while the legacy financial business was down by -68%! We assume sales growth will still be strong at +22.4% in this next 12 ‘months to Rp15.9tn.
Cashflow
Cashflow is very negative at -Rp408bn in the 2Q excluding working capital. That’s after -Rp383bn in the 1Q. Investment spending ha slowed to Rp138bn in the first half of this year from Rp317bn the second half last year. We assume low investment which with our sales forecast, gives a positive average +Rp64bn a quarter cashflow in this next 12 months.
Sales growth, cashflow to turn small positive, higher dividend, cheap valuation, but lower target price...
Balance sheet
The balance sheet is in net cash because of the share issue, but the net cash has been falling because of the negative cashflow. From Rp498bn at the end of last year, net cash is Rp249bn as of the 2Q. With our forecast positive cashflow & a Rp54bn dividend, net cash will come up again to Rp259bn in 12 months.
Profit
Net profit was down by -81%, despite the strong sales growth, as the cash cost ratio of net profit add back depreciation minus sales as a % of sales increased to 99%. Costs have steadily increased with digital sales. We assume an improvement to 98% in this next 12 months, which gives a profit forecast of Rp248bn, higher by +22.8%.
Value
KREN has been raising a lot of capital, Rp1.5tn in the last 2.5 years. We assume they now turn payer. At Rp2,038bn it’s only 0.13x sales, 0.51x assets, 0.65x equity with 7.9% profitability & a 2.6% yield. Our cashflow forecast is Rp64bn. At 1.6% with a 0.6x adjustment because of low profitability, gives a slightly higher target price of Rp131.
The balance sheet is in net cash because of the share issue, but the net cash has been falling because of the negative cashflow. From Rp498bn at the end of last year, net cash is Rp249bn as of the 2Q. With our forecast positive cashflow & a Rp54bn dividend, net cash will come up again to Rp259bn in 12 months.
Profit
Net profit was down by -81%, despite the strong sales growth, as the cash cost ratio of net profit add back depreciation minus sales as a % of sales increased to 99%. Costs have steadily increased with digital sales. We assume an improvement to 98% in this next 12 months, which gives a profit forecast of Rp248bn, higher by +22.8%.
Value
KREN has been raising a lot of capital, Rp1.5tn in the last 2.5 years. We assume they now turn payer. At Rp2,038bn it’s only 0.13x sales, 0.51x assets, 0.65x equity with 7.9% profitability & a 2.6% yield. Our cashflow forecast is Rp64bn. At 1.6% with a 0.6x adjustment because of low profitability, gives a slightly higher target price of Rp131.