We maintain our BUY recommendation (TP-580) which is calculated based on free cash flow (FCF) model, using Beta 0.82, Risk Free 13.1% and Equity Risk Premium 6.5%. We suggest that the investor should take the same position as majority shareholder (PT. Bogamulia Nagadi) have done by acquiring 23.15% company stake at Rp. 700,- .Our target price recommendation still 20.6% below 2008 tender offer price.
Facing difficult year in 2009, the company will be threatened by foreign exchange volatility and decreasing people purchasing power, so it will pressure on its bottom line through declining margin. However, company huge cash will be benefited the company for acquiring either consumer or pharmaceutical company or product instead of avoiding higher cost of working capital.
We believe that holding TSPC stock for long term period will be paid off due to high dividend yield, higher cash ratio, undervalued assets and its conservative and realible management.
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