Articles

Stock Valuation of PT Widodo Makmur Perkasa TBK by Using Discounted Cash Flow Method and Relative Valuation

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 The emergence of Covid-19 in Indonesia caused an economic decline in 2019-2020. This also has an impact on the capital market in Indonesia, which is shown by the decline in the Composite Stock Price Index (IHSG) which was seen at the beginning of 2020 at the level of 6,300 and decreased to 3,900 in March 2020. However, the number of investors in Indonesia has increased every year, the same as the increase number of companies that have conducted an initial public offering (IPO) and listed their shares on the Indonesian Stock Exchange (BEI). One of the companies conducting an initial public offering is PT Widodo Makmur Perkasa Tbl. (WMPP) in 2021. This company has the potential to continue to grow knowing that Indonesia’s population is expected to continue to grow at a growth rate of 1.25 percent per year, and the Indonesian economy will grow by 5.31 percent in 2022, exceeding the growth rate in 2021 it is 3.70 percent, and is expected to continue to increase every year. In addition, the urban population in Indonesia is expected to reach 66.6% in 2035 and 70% in 2045. This study aims to find out whether WMPP companies are valued too low or too high using the DCF and Relative Valuation methods. Apart from that, this research also carried out external and internal analysis to see the company’s potential. The method used to analyze external conditions in company analysis is PESTEL and the author uses VRIO analysis to determine internal conditions.

The findings of the study reveal that this company’s industrial sector is attractive to investors because this industry has a significant contribution to the development of Indonesia’s GDP; this can be a trigger for the Government of Indonesia to continue to support this sector. Apart from that, increasing people’s income and the company’s concern for the environment can be an attraction for investors. However, the only problem is disease outbreaks in cows and chickens which can trigger a decline in income.

Based on the result of the VRIO analysis, this company has sustainable competitive advantages such as a large number of assets with quite a lot of production capacity.  This company also has a vertical integration business and diverse products & business units.

The result of the WMPP company valuation based on relative valuation show that the WMPP company has a lower PER, PBV and EV to EBITDA than those of the average of similar companies or can be said to be undervalued. However, the WMPP company’s EV to Sales is higher than that of the average of similar companies, indicating that the stock is overvalued. Furthermore, based on the Discounted Cash Flow (DCF) result, the intrinsic value of this company is IDR -55, but the share price is IDR 50. This shows that WMPP is overvalued.

Comparing Company Valuation Before and After IPO Study Case PT Pertamina Geothermal Energy Tbk

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Affordable energy resources of energy play a crucial role in economic and social development to support food production, availability of water supply and sustainable healty lifestyle. In order to avoid long-term scarcity resulting from the continuous use of non-renewable energy sources, we must explore all potential renewable energy source that align with concernes about climate change and other environmental issues. As a continuation of the Indonesian government’s efforts to generate clean and environmental friendly energy, PT Pertamina Geothermal Energy (PGE) was established in 2006. It has contributed 82% of the installed geothermal energy capacity in Indonesia. By leveraging Indonesia’s location within the Ring of Fire as one of the world’s geothermal energy hubs, PGE has been supplying electricity to more than 2 million households in Indonesia with a potential emission reduction of 9.7 million tons of CO2 per year. To achieve sustainable business growth, PGEO is optimizing production in its operational areas by expanding installed capacity. In the company consideration, IPO is an appropriate step to financing the expansion. The author compares the company’s value before and after the IPO to determine the short-term impact of the IPO, helping investors gauge their confidence in making investment decisions in PGEO.

This study utilizes secondary data from prospectuses, financial statements, annual reports, sustainability reports, company-published documents, as well as data from IDX.co.id and IDN Financials.com. The data was collected and analyzed to understand evaluate financial performance, and assess the company’s value before and after the IPO. The calculation of the company’s intrinsic value is conducted using the Discounted Cash Flow Valuation method for the pre-IPO period against the company’s financial projections for the years 2019 to 2022 and for the post-IPO period against the company’s financial projections for the years 2024 to 2028, using discount rates of 8.25% and 8.65% for each. In resulting the intrinsic value pre-IPO is IDR 1.141,28 and the intrinsic value post-IPO is IDR 1.300,86. The stock price of PGEO at its IPO on February 23, 2023, was IDR 875, while the adjusted closing price on December 29, 2023, was IDR 1,170. This study founds that the market price of PGEO’s stock, both before and after the IPO, are overvalued.