Stock Valuation of PT. Tempo Scan Pacific Tbk

• Main Author: Rahman Iskandar/29116430, Berni
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/26087
• Institution: Institut Teknologi Bandung

Global prescription drug sales are to grow at an annual compound rate of 6.5 percent in the next five years with worldwide sales of drugs is to reach USD 1.06 trillion in 2022. The main driver of growth in pharmaceutical industry is expected to be in emerging markets. PT Tempo Scan Pacific Tbk, one of the largest pharmaceutical company in Indonesia, is experiencing decline in stock price during mid-April 2017 until mid-April 2018. The decline in stock price also occurred for Indonesian pharmaceutical companies, the main factor is depreciating value of Indonesian Rupiah to US Dollar from September 2017 until April 2018. However, only PT Tempo Scan Pacific Tbk stock price that is steadily declining while the competitors’ stock price fluctuate. <br /> <br /> Based on the problem, the main objective of this research is to figure intrinsic value of PT. Tempo Scan Pacific Tbk; the valuation will be conducted based on conceptual framework. The conceptual framework of this research starts from identifying external and internal conditions of PT. Tempo Scan Pacific Tbk. (TSPC). And then followed by SWOT analysis, risk analysis and stock valuation in order to provide recommendations for investors whether to buy or sell TSPC stock. Internal analysis results indicate the company’s financial performance is below the industry during year 2017 and generally performing worse than last year. External analysis shows that the company is currently facing challenges in its external environment; rising US dollar currency rate as the Fed plans to raise its fund rate throughout year 2018 and supply chain disruption for imported raw material originated from China. <br /> <br /> For valuation, absolute valuation and relative valuation are used to figure the target price of the company’s stock price. Absolute valuation consist of discounted cash flow (DCF) method and dividend discount model. Relative valuation will use price-to-earnings (PER) multiple and enterprise value/earnings before interest, taxes and depreciation (EV/EBITDA) method. In addition, sensitivity analysis is performed for DCF method to figure which factors that affect the intrinsic value the most. For sensitivity analysis, Tornado chart and Monte Carlo simulation are performed. From DCF method, the target price is IDR 1,545 per share (3.44 percent below market price of IDR 1,600 per share), dividend discount model yields target price for the company’s stock price of IDR 1,593 per share (0.44 percent below market price). Relative valuation shows different results; PER multiple yields the target price of IDR 1,689 per share (5.62 percent above market price) but in EV/EBITDA multiple the target price is IDR 1,244 per share (22.25 percent below market price). <br /> <br /> Based on valuation results, the recommendation for investors is to sell PT Tempo Scan Pacific Tbk stock since intrinsic value per share of the company is below market price per 8 June 2018 and considering high volatility of company’s stock. <br /> <br /> As for the company, the recommendations are based on internal and external analysis: capitalize on good reputation as main selling point and create promotional campaigns to gain more market share, create work contract with suppliers and establish partnership with environmental-friendly to obtain competitive price for raw materials and ensure steady stream of raw materials, increase efficiency in manufacturing division and plan ahead to maintain production output level during raw material shortage. <br />