STOCK VALUATION OF PT TIGA PILAR SEJAHTERA FOOD AFTER DIVESTITURE OF RICE BUSINESS

• Main Author: Dwi Fitri 29116503, Aglentia
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/25108
• Institution: Institut Teknologi Bandung

In 2017, the stock price of PTTiga Pilar Sejahtera Food,Tbk has been decrease significantly. The company faced serious problem in one of its subsidiary namely PT Indo BerasUnggul (rice trader). PT Indo BerasUnggul had been sold subsidized government rice with premium label which is not suitable of the quality, it leads to the company sued by its action. The fraud case also affects the revenue of rice business. It makes the revenue of rice business declined in 2017, the revenue of rice business cannot cover its COGS and its operating expenses which are too high, therefore the company suffered loss in 2017. Because of financial difficulties in 2017, the company can’t pay its debt that will mature in 2018 and 2019. In order to pay its debt and also eliminates the negative perspective from investors, the company takes the strategic decision to divest its rice business and will be focus in one business line which is food business. <br /> <br /> This research aims to further investigate the impact of divestiture on the company’s financial performance, especially on its stock price by identifying external and internal conditions as well as describing the related business risks that affect the performance and value of the company, and assessing whether PT. Tiga Pilar Sejahtera Food, Tbkis undervalued or overvalued than the market. This research was conducted using two valuation models, namely absolute valuation models and relative valuation models as a comparison with other food and beverage companies. Absolute valuation models use free cash flow to the firm (FCFF) method, while relative valuation models use price-to-earnings ratio (PER). <br /> <br /> The company's revenue will decrease at the beginning of divestiture year by 61% of its previous total revenue, the revenue in 2018 will be IDR 3,032,545 million. But the food business has a higher margin than the rice business so by focused on the food business, the company's revenue will be back to the revenue in 2015 and 2016 in the next four years. The revenue projection will be increased by 18.76%, using CAGR assumption only from the food business. Moreover, the company's cash flow will be healthier compared with the previous year.The absolute valuation resulted in intrinsic value of IDR 620with the potential rise of 154% of the market price of IDR 168 on May 31th, 2018 which means AISA shares are considered cheaper by the market or undervalued. From the relative valuation generated PER of 1.72while the average industry generated PER of 23.70which indicates the market sentiment toward AISA’s stock is less preferable compared with its competitors. <br /> <br /> From the valuation and external analysis, the buy recommendation is suggested to the investor with the target price of IDR 620 with a potential increase of 154%. On the other hand,from internal analysis the investors should consider about the company’s implementation of Good Corporate Governance to anticipate the fraud case will happen again <br />