Our Head of Research Nick Cashmore spent his weekend … in the office, banging out a bullish piece on Indocement (INTP IJ). He raised the TP to Rp19,000 (from previously Rp17,000). The new TP is based on 17x 2011 earnings. We have revised earnings up by 13% this year and 11% in 2011.
Indocement is an incredible cash machine. The company became net cash last year for the first time in its history. As of December, the company had US$247m in net cash and will generate another US$400m in free cashflow this year after US$60m in planned capex. This FCF yield of 7% could be returned as dividends. We have assumed 40% payout ratio but this could be significantly higher.
The stock does not look cheap from PER standpoint. But assuming 100% output will be sold to higher margin domestic market with 100% capacity utilization, we are talking about PER of 9.4x 2011 for INTP, compared to 11.9x for market.
Indocement has been a fantastic performer over the past 12 months but we continue to recommend the stock as a core conviction holding for Indonesian portfolios. Returns on capital are rising and demand looks ever robust.
Key points from the report:
INTP released stellar financial results for 2009
INTP is well positioned to benefit from the building boom that lies ahead.
Private sector investment will accelerate over the next three years.
Revise our assumptions to 12% volume growth this year and 10% in 2011.
INTP output for 2M10 is already 19% above that of last year.
We have not assumed any price increases, to be conservative.
Supply-demand situation is very attractive. Over the past decade, cement demand has grown by a CAGR of 7.4% and from 1985-1995 demand grew by 10% p.a. But supply growth is forecast at only 4.8% p.a. until 2015.
Alternatively, the group could build a new 2.5m tonne cement plant every year out of cash alone.
Tidak ada komentar:
Posting Komentar