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PENN, a 50% higher target price
​Current 48 Target 72 +50%

December 19th 2021
1 minute read

Sales declined -2%

• Sales declined -2% in the third quarter to 1,512 million dollars vs our 1,588 million dollars forecast.
• This brings the quarterly average to 9% growth.
• We predict average growth of 3% in this next 12 months to bring sales to 1,699 million dollars in the third quarter of 2022.

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Costs jumped 8 points, profit down

• The cash cost ratio went from -77% to -85%, profit from 199 to 86 million dollars in the third quarter.
• The average cost ratio is at -80% now.
• We use the lower average -80% cost ratio to predict a higher 194 million dollars profit in the third quarter of 2022.

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Cashflow lower

• Free cashflow went from 252 to 104 million dollars in the third quarter with -170 million dollars investment Cashflow.
• Average quarterly Cashflow is at 157 million dollars now.
• We assume lower -67 million dollars investment spending which with higher sales gives a much higher 272 million dollars Cashflow in the third quarter of 2022.

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Balance sheet higher leverage

• Cash increased 2,275 to 2,729 million dollars in the third quarter.
• Liabilities increased 12,120 to 12,677 million dollars, so net cash worsened -9,845 to -9,948 million dollars.
• With our forecast cashflow & a -212 million dollars equity payout net cash will improve to -9,139 million dollars in 12 months time.

Valuation, a 50% higher target price

• PENN capital from the last 19 quarters worsened -2,226 to -2,582 million dollars in the third quarter but will be -1,560 million dollars in12 months time.
• At the current market value of 8,174 million dollars based on our forecasts it’s cheap at 0.53 X assets with a 13 years payback & a 3% yield.
• Our cashflow forecast is 1,022 million dollars which means an 8 X valuation. A 12 X valuation gives a 50% higher target price of 72 dollars.

Data file & model