Articles

The Financial Performance and Stock Valuation of Coal Mining Company in Indonesia (Case Study: Pt. Abm Investama Tbk (ABMM))

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Indonesia, the world’s largest supplier of coal, may profit from the uncertainties surrounding the present geopolitical situation. According to experts, the current high price of coal could be stable through the end of 2022, before declining moderately in 2023, but remain well above its five-year average. Therefore, investing in coal companies’ stock right now is a good idea. Theoretically, investing in the stocks of any firm whose primary business is in the coal industry will result in a profit. The issue is deciding which stock to purchase to increase the portfolio’s return. Value investing, often known as finding an undervalued firm with a great potential for growth, is the main goal of the research. The first step of this study is to observe the coal mining sector, and analyze the problem that occurs. Then, a simple screening valuation method using PBV and PER is conducted to choose the appropriate company to evaluate. Next, external factor analysis using PESTEL analysis and Porter’s Five Forces analysis is conducted. Afterward, internal factor analysis using Financial Ratios and F-Score is conducted to evaluate the problem that lies within the company. Finally, to summarize, SWOT analysis is conducted to analyze the advantages and disadvantages of the company’s business environment that provide a thorough knowledge of the company’s competitive advantages. Furthermore, an absolute valuation method is carried out to produce the company’s intrinsic value. The financial performance of ABMM when viewed from its financial statement from 2017 – 2021 is strongly increased in 2021, but stagnant in 2017 – 2020. After obtaining the valuations result through three absolute valuation method, the normalized earnings valuation shows an upside of IDR 2,317 or  77%, the DCF valuation shows an upside of IDR 2,193 or 73%, and lastly, the Monte Carlo Simulation shows an upside of IDR 2,233 or 74%. Therefore, from all three method, ABMM current stock price is considered as undervalued. According on the findings, this study advises purchasing ABMM shares. The present stock price was found to be undervalued using three absolute valuation methods, which means that anyone who purchases the stock at the current price of IDR 3,000 will see a capital gain on their investment.

Implementation of Magic Formula and Acquirer’s Multiple Stock Investment Strategy in The Indonesia Stock Exchange

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The Indonesia Capital Market has experienced a significant increase in investors from 2019 until now. The increase in the number of new Indonesian capital market investors is dominated by people under 30 years who prefer to invest in stocks and mutual funds. This increase in new investors does not follow by high financial literacy. Research regarding financial literacy and investment return in Indonesia showed that financial literacy affects investment return. Therefore, Indonesia’s new investors will most likely experience losses due to their lack of financial literacy. Even though there are equity funds for novice stock investors that help them minimize the error they would make if they invest themselves, they cannot choose the equity funds randomly since most equity funds cannot beat the market benchmark. This study proposed using the Magic Formula and Acquirer’s Multiple as an investment strategy for new investors in Indonesia. Both Magic Formula and Acquirer’s Multiple generated an average annual return greater than the market and Indonesia Equity Funds listed since 2016 with an average return of 26,24% and 26,32% annually. The Sharpe ratio of both methods also generated a higher ratio than the market, where Magic Formula generated an average Sharpe ratio of 0,930 annually, while Acquirer’s Multiple generated an average ratio of 1,038. The acquirer’s Multiple is recommended for novice investors because it outperforms the Magic Formula and the market in terms of actual annual returns and risk-adjusted returns.