## Replace

November 20th, 2019

⏰ 1 minute read

⏰ 1 minute read

Slump

As our shares are suddenly very weak, it’s understandable that investors are shocked, upset, confused. No one is more all those things than we are. But the stock market is a big market & while shares can & do trade with wild volatility, there’s always some underlying value which tends to act as an support level. Here’s one perspective.

Value?

When industries or companies financials are going down, valuation becomes both more difficult, but also easier because investors can only look at the most basic numbers. For big assets like plantations this is normally the enterprise value or EV. It’s the combined value of the net debt & equity, or what you would have to pay to buy the whole company.

EV

In our case the numbers are Rp9,299bn for the net debt & at Rp92/share x 31.5bn shares, Rp2,898bn for the equity. A total of Rp12,197bn. To make this number make sense, it’s divided by the nucleus plantation total hectares which is 127,403 as of 3Q. This gives you Rp95.7m per hectare (or $6,800).

Replacement

To make sense of this number we can compare it with what it cost to build our company. This is captured in our depreciation. Depreciation was Rp160bn in the 3Q. Multiply by 4 quarters & 20 years that’s a total cost of Rp12,800bn. Divided by our 120,529 mature hectares (depreciating) that’s Rp106m a hectare. Multiplied by the total hectares 127,403 is Rp13,462. Minus the net debt Rp9,299 is equity value Rp4,163bn or Rp132 a share.

Minimum

Hope you made it through that maths backwards & forewords. The next question would be is replacement a good number? Well, if should be pretty conservative because that’s the average cost over a 20 year period from the first planting in 1997 to today. For sure the more recent cost of planting is higher than that...

Sebastian

As our shares are suddenly very weak, it’s understandable that investors are shocked, upset, confused. No one is more all those things than we are. But the stock market is a big market & while shares can & do trade with wild volatility, there’s always some underlying value which tends to act as an support level. Here’s one perspective.

Value?

When industries or companies financials are going down, valuation becomes both more difficult, but also easier because investors can only look at the most basic numbers. For big assets like plantations this is normally the enterprise value or EV. It’s the combined value of the net debt & equity, or what you would have to pay to buy the whole company.

EV

In our case the numbers are Rp9,299bn for the net debt & at Rp92/share x 31.5bn shares, Rp2,898bn for the equity. A total of Rp12,197bn. To make this number make sense, it’s divided by the nucleus plantation total hectares which is 127,403 as of 3Q. This gives you Rp95.7m per hectare (or $6,800).

Replacement

To make sense of this number we can compare it with what it cost to build our company. This is captured in our depreciation. Depreciation was Rp160bn in the 3Q. Multiply by 4 quarters & 20 years that’s a total cost of Rp12,800bn. Divided by our 120,529 mature hectares (depreciating) that’s Rp106m a hectare. Multiplied by the total hectares 127,403 is Rp13,462. Minus the net debt Rp9,299 is equity value Rp4,163bn or Rp132 a share.

Minimum

Hope you made it through that maths backwards & forewords. The next question would be is replacement a good number? Well, if should be pretty conservative because that’s the average cost over a 20 year period from the first planting in 1997 to today. For sure the more recent cost of planting is higher than that...

Sebastian