The 3 ways BWPT is incredibly undervalued
Decemebr 31st 2018
⏰ 3 minute read
⏰ 3 minute read
IR on share price?
Years ago, almost 9 years ago, when I first started in investor relations, I was given some advice by a great friend who’s also an analyst. He told me to never discuss the share price. I have never ever obeyed that rule & I talk about the share price all the time. After all isn’t that what we are all here for? So here goes again.
Subs
Email
This time, I’d like to share the 3 ways I think our BWPT share price is very undervalued at the current level after another tough year in 2018. The first way is related to this email list. As mentioned before, we started this list in January 2018 & since the start we’ve had just over 2 signups a day.
List
That has added up to reach 740 signups by the end of the year. There have been some mistaken ones, some unhappy ones & a few unsubscribes as a result. Also an amazing number of analysts who registered have now moved on & their emails are no longer valid. But mostly the list is intact & growing.
BWPT
Perhaps not surprisingly the level of new subscribers has followed the share price movement, certainly over a few months. But at the end of the year, while the subscribers were up, the share price fell. So there is quite a large gap now. The level of subscribers implies the shares should be closer to Rp200.
Years ago, almost 9 years ago, when I first started in investor relations, I was given some advice by a great friend who’s also an analyst. He told me to never discuss the share price. I have never ever obeyed that rule & I talk about the share price all the time. After all isn’t that what we are all here for? So here goes again.
Subs
This time, I’d like to share the 3 ways I think our BWPT share price is very undervalued at the current level after another tough year in 2018. The first way is related to this email list. As mentioned before, we started this list in January 2018 & since the start we’ve had just over 2 signups a day.
List
That has added up to reach 740 signups by the end of the year. There have been some mistaken ones, some unhappy ones & a few unsubscribes as a result. Also an amazing number of analysts who registered have now moved on & their emails are no longer valid. But mostly the list is intact & growing.
BWPT
Perhaps not surprisingly the level of new subscribers has followed the share price movement, certainly over a few months. But at the end of the year, while the subscribers were up, the share price fell. So there is quite a large gap now. The level of subscribers implies the shares should be closer to Rp200.
Sales & production
Production
The second way is comparing our most basic & essential financial measure which is our sales. Sales are of course related with our production. Production has been our big story of 2018. Back in early 2015 when we first became EHP, 1Q fruit production was 296k tons. 4Q of 2018 we reached 520k tons +75%.
Sales
Sales are of course affected by price. Prices in 2018 were terrible & reached the lowest level since we listed in 2009. That’s reduced the impact of production on sales, but sales have still risen since we became EHP, in 2015 1Q sales were Rp735bn. By2018 3Q we reached Rp960bn & should be close to that in 4Q, +30%.
BWPT
As you might imagine, BWPT share price had quite closely followed the fruit production up to early 2018. But now there’s a big gap. Early 2015 BWPT was Rp400 & so current production & sales would imply a share price of over Rp400, but we are at Rp164!. Because of losses? Remember depreciation is now Rp650bn so any loss smaller than that is really a profit.
Production
The second way is comparing our most basic & essential financial measure which is our sales. Sales are of course related with our production. Production has been our big story of 2018. Back in early 2015 when we first became EHP, 1Q fruit production was 296k tons. 4Q of 2018 we reached 520k tons +75%.
Sales
Sales are of course affected by price. Prices in 2018 were terrible & reached the lowest level since we listed in 2009. That’s reduced the impact of production on sales, but sales have still risen since we became EHP, in 2015 1Q sales were Rp735bn. By2018 3Q we reached Rp960bn & should be close to that in 4Q, +30%.
BWPT
As you might imagine, BWPT share price had quite closely followed the fruit production up to early 2018. But now there’s a big gap. Early 2015 BWPT was Rp400 & so current production & sales would imply a share price of over Rp400, but we are at Rp164!. Because of losses? Remember depreciation is now Rp650bn so any loss smaller than that is really a profit.
Surplus
Cash
That leads on to the 3rd way the share are cheap. Ultimately shareholders want to get paid to own the shares. Now we have stopped new planting we are starting to make cash money. The depreciation cost is non cash & it’s tax deductible meaning increasingly even more cash available to pay back to investors.
Capital payback
The way we can see this is in our cash flow statement & using the net amount of cash flow from finance (bank loans & equity raising). Before this was rising because the operations weren’t making money net of investment. So we had to increase our bank loans & raise money in the rights issue.
BWPT
When this capital raising was going up, it’s not surprising the share went down because of dilution from interest expenses & new shares. But for the last 3 years including 2018 this measure has started to fall as we have been paying down debt. This fall will accelerate as palm oil prices rise which they are & already implies the share should be above Rp500.
Cash
That leads on to the 3rd way the share are cheap. Ultimately shareholders want to get paid to own the shares. Now we have stopped new planting we are starting to make cash money. The depreciation cost is non cash & it’s tax deductible meaning increasingly even more cash available to pay back to investors.
Capital payback
The way we can see this is in our cash flow statement & using the net amount of cash flow from finance (bank loans & equity raising). Before this was rising because the operations weren’t making money net of investment. So we had to increase our bank loans & raise money in the rights issue.
BWPT
When this capital raising was going up, it’s not surprising the share went down because of dilution from interest expenses & new shares. But for the last 3 years including 2018 this measure has started to fall as we have been paying down debt. This fall will accelerate as palm oil prices rise which they are & already implies the share should be above Rp500.
Arbitrage
Yes it’s been another tough year for palm oil prices & for our BWPT share price. The stock return has been negative again. Yes we are running a loss. But remember this is not a cash loss. Cash flow is now firmly positive. That cash will grow faster & will be paid ultimately to shareholders. These 3 measures make BWPT look very undervalued .
Thank you for your support in 2018 & a very happy new year 2019.
Sebastian
Yes it’s been another tough year for palm oil prices & for our BWPT share price. The stock return has been negative again. Yes we are running a loss. But remember this is not a cash loss. Cash flow is now firmly positive. That cash will grow faster & will be paid ultimately to shareholders. These 3 measures make BWPT look very undervalued .
Thank you for your support in 2018 & a very happy new year 2019.
Sebastian