Abstract :

Downstreaming has bring significant impact for Indonesia’s economy, with higher price on goods that were processed to gain a higher value, from IDR 17 trillion (USD 1,1 billion) at the end of 2014 to IDR 326 trillion (USD 20,9 billion) in 2021, Indonesia was able to boost the value of its nickel exports by up to 19 times. However, concerns arise as there may be a lack of clarity and confidence among investors on investment potential in Indonesia’s bauxite mining business, potentially leading to the failure on increasing added value due to the inadequate numbers of bauxite smelters to support the downstreaming process.

Bauxite export ban as part of Indonesia’s effort to downstream more minerals could lead PT Cita Mineral Investindo’s growth to plateau due to their main business is in bauxite mining with products of Metallurgical Grade Bauxite. It may affect its revenue stream negatively, and limit their potential to grow even further. Bauxite industry currently aligned with Indonesia’s plan to be a big player in EV production in the future, which could contribute to the production of aluminium material and key component to EV batteries. The study will examine the valuation of PT Cita Mineral Investindo with the scenarios of organic growth and inorganic growth in an effort to market and increase their domestic sales in order to quantify the opportunities that PT Cita Mineral Investindo may have in complying with the new regulations. The study will involve Financial Ratio Analysis to assess its business condition and DCF valuation will assess the enterprise value for both growth strategy. Sensitivity analysis is performed to identify the most factor influencing the enterprise value of the company.

The enterprise value of PT Cita Mineral Investindo in the organic growth scenario is valued at IDR 9.505.697.469.283 and in the inorganic growth scenario is valued at IDR 12.018.885.689.175. Tornado chart sensitivity analysis shows that the most influencing factors are WACC and terminal growth rate. PT Cita Mineral Investindo is valued higher when it uses an inorganic growth scenario. To achieve this, PT Cita Mineral Investindo must utilize inorganic growth through a set of joint-venture and strategic partnerships.

 

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Keywords :

Bauxite, Discounted cash flow, Export Ban, growth, Strategy, Valuation

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