We have downgraded our WACC estimate drastically from 16.4% to 9.6%, taking into account the reductions in (1) risk-free rate assumption from 11.0% to 6.2% (2) Market risk premium from 7.2% to 5% and (3) Beta estimate of 1.4x to 1.1x.
The benefit of lower WACC has however been offset by our lower exchange rate assumption. Besides this, we also fine-tune our assumptions for production and fuel rate. After all changes, our DCFderived target price fell from Rp2,400/share to Rp2,100/share.
Market has seen a rally in last 2 months with JCI up by about 50%ytd, but BYAN’s share price outperformed the market, rising by 511%ytd. As our DCF-derived target price is 62.8% lower than the current price, we affirm our Sell call on BYAN.
Long term catalyst for the stock is the BYAN plans to upgrade majority of its coal from 4,217 kcal coal to 6,263 kcal. However, in the absence of complete information we have not considered the impact of upgradation in our DCF derived target price.
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