SLIDE 1

Project of Company Valuation Method on

PT. HM Sampoerna Tbk
Supervisor
Prof. Zofia Wilimowska

Student
Brigitta Mayori Puteri
 SLIDE 10 4

Company
Description
 3
Indonesia has a large and diverse tobacco consumer market with
a significant percentage of adult smokers. Approximately 67%
of Indonesian men and 5% of Indonesian women are smokers OVERVIEW OF
(Indonesia contains a total population over 250 million people). TOBACCO
Raw materials are mostly sourced domestically and in INDUSTRY
combination with cheap labor it makes production costs
relatively low. As such, the price of a package of cigarettes in
Indonesia is cheap. This has also been the reason why
Indonesia's tobacco industry was not touched by the recent
global economic downturn.

Indonesians continue to consume more cigarettes, although

exports have declined. However, exports contribute little to
Indonesian tobacco producers' sales and profit figures and
therefore the declining export numbers are not an issue.

Source: Indonesia Investment

https://www.indonesia-investments.com/business/indonesian-companies/hm-sampoerna/item204
 4

PT Hanjaya Mandala Sampoerna Tbk. (“Sampoerna”) is one of cigarette company in Indonesia that
becomes a significant part of Indonesia’s tobacco industry for more than a century since its
establishment in 1913, with Dji Sam Soe or known as the legendary “King of Kretek”.
 5

BUSINESS
PROFILE For more than 10 years, Sampoerna has been the market leader in
Indonesia, with a 33.0% market share in the Indonesian cigarette
market in 2018. Sampoerna is a subsidiary of PT Philip Morris
Indonesia (“PMID”) and an affiliate of Philip Morris International Inc.
(“PMI”), a leading international tobacco company with global brand
Marlboro. The scope of activities of Sampoerna comprises of, among
others, manufacturing, trading and distributing cigarettes including
distribution of Marlboro, the leading international cigarette brand
manufactured by PMID.
 
Sampoerna’s experienced management team leverages global best
practices and world-class systems to oversee more than 25,000
permanent employees within Sampoerna and its subsidiaries. The
Company sells and distributes cigarettes through 114 locations of
zone branch offices, sales offices and distribution centers across
Indonesia.
 SALES & 6

DISTRIBUTION
LOCATIONS HM
SAMPOERNA
 7

COMPANY PRODUCTS

SAMPOERNA A SAMPOERNA U DJI SAM SOE SAMPOERNA HIJAU MARLBORO

Machine-Made Clove Machine-Made Clove Hand-Rolled Hand-Rolled Machine White
Cigarettes #1 Cigarettes Cigarettes #1 Cigarettes Cigarettes
 CHARACTERISTICS OF THE COMPANY 8

• Main business field: Tobacco Industry • Revenue: IDR 106,741 Trillion (FY 2018)
• Sector: Consumer goods industry • Net Income: IDR 13,538 Trillion (FY 2018)
• Sub Sector: Tobacco Manufacturers • Total Asset: IDR 46,602 Trillion (FY 2018)
• Total Equity: IDR 35,358 Trillion (FY 2018)
• Stock Exchange: Indonesia Stock Exchange
• Total Cash Dividend: 13,632,478,612,680
• Ticker Code: HMSP
• Authorized Capital (common stock): 157,500,000,000
• Permanent Employee: > 25,000 • Issued and Fully Paid-Up Capital (common stock):
• Employees of TPOS: 39,200 116,318,076,900
• Shareholders:
Name Type Amount Percentage
PT. Philip Morris Indonesia > 5% 107,594,221,125 92.5%
Public < 5% 8,723,855,775 7.5%
Treasury Stock Treasury Stock 0 0%
Johannes Budi Wardhana Direction 75.100 0%
CHARACTERISTICS OF THE COMPANY 9
 10

Fundamental Strategic Financial

Analysis Analysis Analysis
 11

There are several ways to value a business. Two of the examples

are Discounted Cash Flow (DFC) Method and Book Value Method.
In this project, I am going to use both of the methods.
DCF METHOD The two methods are used to evaluate the profitability of
investment. The DCF method has roots in discount methods of
assessing the profitability of investments, which in contrast to
traditional methods assumes the volatility of the value of money
over time, while the book value method is based on the historical
costs of their acquisition—the book value ignores the changes in
purchasing power of money that have occurred since the
BOOK VALUE introduction of the asset into the records until the valuation of the
accounting method.
METHOD
The two of them have their own advantages and disadvantages in
which we could see the result and compare them at the end of the
project.
SLIDE 10 9

Cash Flow
Forecasting
CASH FLOW FROM OPERATING ACTIVITIES FORECAST 13

CF from Operating Activities

25000000
f(x) = 5944669.6 x − 11974811863.4
R² = 0.86 From the increasing trend line
CF from Operating Activities
20000000
it can be concluded that the
15000000
CF from operating activities
will increase in the future.
(in Million of IDR)

10000000 However, the R-squared is

almost 0.8556 hence we
5000000
cannot trust the regression so
0 much.
2014 2015 2016 2017 2018 2019 2020 2021
Year

Year CF from Operating Activities

2015 811163
2016 14076579
2017 15376315
2018 20193483
2019 27476059
2020 33420729
2021 39365398
*forecast is made by replacing x in regression equation to the forecasting year
*2015-2018: actual data; 2019-2021: forecast result
 NET PROFITS (EARNING AFTER TAX) FORECAST 14

Net Profits
16000000
If we relate the result with financial analysis
14000000
on previous chapter, especially on Return on
Net Profits (in Million of IDR) f(x) = 943363.5 x − 1889958875.5
R² = 0.79
Equity (ROE) and Return on Asset (ROA)
12000000
where one of the factor used is net profits, it
could be seen that the trend is fluctuated
10000000

8000000
where there will be a year where it
6000000
decreases. However in this forecast, the
4000000 trend is only increasing meaning net profits
2000000 will increase in the future. As the R-squared
0
2014 2015 2016 2017 2018 2019 2020 2021
is 0.7902, quite low, we cannot really trust
Year
the regression and result so much.

Year Net Profits

2015 10363308
2016 12762229
2017 12670534
2018 13538418
2019 14692031
2020 15635395
2021 16578758
*forecast is made by replacing x in regression equation to the forecasting year
*2015-2018: actual data; 2019-2021: forecast result
 DEPRECIATION FORECAST 15

Depreciation
250000
f(x) = 24074.2 x − 48352066.3
R² = 0.95
From the increasing trend line
Depreciation (in Million of IDR)
200000
it can be concluded that the
150000 depreciation from operating
activities will increase in the
future, especially as the R-
100000

50000
squared is 0.9545 which is
closed to 1.
0
2014 2015 2016 2017 2018 2019 2020 2021
Year

Year Depreciation
2015 163498
2016 175089
2017 200305
2018 235340
2019 253743.5
2020 277817.7
2021 301891.9
*forecast is made by replacing x in regression equation to the forecasting year
*2015-2018: actual data; 2019-2021: forecast result
 WORKING CAPITAL FORECAST 16

Working Capital
31000000
f(x) = 1178485 x − 2349109367
R² = 0.95 To find the working capital, current asset of the
29000000
year should be subtracted with the current
27000000
liabilities of the year. After that, forecast can be
conducted. The current asset and current
(in Million of IDR)

25000000
Working Capital

23000000 liabilities are both increasing every year, creating

21000000
greater working capital on the following year.
From the increasing trend line it can be
concluded that the working capital will increase
19000000

17000000
in the future, especially as the R-squared is 0.95
15000000
2014 2015 2016 2017 2018 2019 2020 2021
which is closed to 1.
Year

Year 2015 2016 2017 Year 2018

Working Capital
2015 25268656
Current Asset 29807330 33647496 34180353 37831483 2016 27219018
2017 27697384
Current Liabilities 4538674 6428478 6482969 8793999 2018 29037484
2019 30251848
Working Capital 25268656 27219018 27697384 29037484 2020 31430333
2021 32608818
Working Capital = Current Asset – Current Liabilities *forecast is made by replacing x in regression equation to the forecasting year
*2015-2018: actual data; 2019-2021: forecast result
 FINAL FORECAST OF CASH FLOW 17

FROM OPERATING ACTIVITIES

Free Cashflow to Equity (FCFE)

FCFE is a measure of how much
cash is available to the equity
shareholders of a company after all
expenses, reinvestment, and debt
are paid. FCFE is a measure of
equity capital usage (Kenton, 2019).
It has cash flows attribute to
owners like shareholders or entities
provi-ding equity. FCFE is chosen as
it is a change in the capital
structure.
FCFE = net profit + depreciation - increase in working
capital - investment expenses - repayment of debt
+ incurring new loans
New loans and investment expenses are taken out as the new
owner will decide unless it is already underway. The loans will
be repaid only up to the amount of the old loan. Here, it is
assumed that the loan along with investment expenses will be
at the same level as at the beginning.
FCFE = net profit + depreciation - increase in working capital
FINAL FORECAST OF CASH FLOW 18

FROM OPERATING ACTIVITIES

Free Cashflow to Equity (FCFE)

 FCFE 2019 = (27476059+ 13731410.5)/2 = 20603734.75

 FCFE 2020 = (33420729+ 14734727.7)/2 = 24077728.35
 FCFE 2021 = (39365398 + 15702164.9)/2 = 27533781.45
 SLIDE 10 9

Capital Cost
Evaluation
 20

Cost of Equity Growth Rate

Capital Asset Pricing Model

 COST OF EQUITY 21

Capital Asset Pricing Model ke = rf ​+ β ​(rm​− rf​)

Where:
Capital Asset Pricing Model (CAPM) will ke = cost of equity
be used to estimated the cost of equity. rf = rate of return of risk-free securities,
CAPM describes the relationship between β = systematic risk factor for a given company,
systematic risk and expected return for rm = rate of return on the market portfolio,
assets, particularly stocks. CAPM is (rm​− rf​) = market risk premium
widely used throughout finance for pricing
risky securities and generating expected Data
returns for assets given the risk of those β 1.19
assets and cost of capital (Kenton, 2019).
rf 4.5%
rm 5.9%
 COST OF EQUITY 22

Capital Asset Pricing Model ke = rf ​+ β ​(rm​− rf​)

ke = 4.5% + 1.19 (5.9% - 4.5%) = 6.17%

 GROWTH RATE 23

Growth rate

2.5%
As it can be seen from the final forecast of Cash Flow from operating activities, the rate of growth is
0.156 or 15.6%. However, the rate is not feasible if we want to calculate valuation to the infinity, so
it is assumed that the growth rate will be 2.5% as a result this is more achievable
compared to 15.6%. It is not too low as well as the tobacco industry usually is more stable than the
rest of the other industry eventhough there is pandemic or other factor, as Indonesian consumers
particularly will still consume tobacco/cigarette.
SLIDE 10 9

Equity
Evaluation
 EQUITY VALUATION 25

The value of equity of PT. HM Sampoerna Tbk will be estimated by relying on the Discounted Cash
Flow (DCF) as the value of an enterprise in the income approach is identical to the value of equity
meaning that the value of the current future cash flows attributable to the owners. Moreover the
forecasted period of time will be three years.

 Below is the formula for the Equity Valuation, Where:

using the indicator of FCFE. EV = equity value
RV = updated residual value
 
FCFEt = cash flow belonging to owners in year t
r = cost of capital = ke
n = the number of years covered by period of forecast
t = consecutive year number from 1 to n
g = growth rate of cash flow
 
RV has its own formula based on Gordon’s Method as below.
EQUITY VALUATION 26

 
VALUATION WITH STOCK PRICES 27
 COMPARATION OF METHODS 28

Valuation with stock prices has higher Mental and

stock price probably because it is emotional potential
estimated by averaging the stock price purchases of
from March 2019 to February 2020. shares

In following days for several months or year ahead, the stock probably lies down on that range of price until the economy
and the company is healthy again. Therefore, the valuation with stock prices has higher price than the equity valuation as
it estimates the best scenario of the company where the stocks are in good shape and the current mental of the buyers
are in its best shape to buy more while equity valuation might predicts the following years ahead
 IN CONCLUSION 29

The current valuation of stock price’s value does not

represent the market very well and the equity valuation is
the most likely better estimation.

This is a bad sign for the company and the company should
do efforts to regain back its condition for the investors.
 SLIDE 10

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