THE VALUATION OF PT. ERAJAYA SWASEMBADA TBK.

• Main Author: Naufal Prayitno, Bagas
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/38674
• Institution: Institut Teknologi Bandung

Indonesian economic has grown impressively for the past ten years. It is also reflected in the Indonesian stock market which grew too along with the economic growth. Despite the economic growth in 2018, the Indonesia Stock Exchange went sideways and closed -2.5% for the year. Nevertheless, there were a few stocks that performed well and one of it, is the stock of PT. Erajaya Swasembada Tbk.’s stock (ticker name: ERAA). This may be caused by the fantastic growth of revenue and EPS in the past few years. The revenue from 2014-2018 rose by a CAGR of 24.52% with 43% growth in 2018 alone. The EPS in 2018 skyrocketed by 150%. At a glance, Erajaya may seem already overvalued since the stock price rose by 200% in 2018 which also made ERAA the 7th top gainers in 2018, even in the midst of global uncertainty and a sideway market, However, one has to do valuation to really know whether a stock is overvalued or not. The author decided to calculate the value of Erajaya using discounted cash flow method specifically Free Cash Flow to the Firm, to know the value of the company and the fair intrinsic price of Erajaya’s or the equity value of it. The author also did a relative valuation to know how Erajaya’s stock is performing relatively by comparing Price-Earning (PE) multiples and Price to Book Value (PBV) multiples and analyzed it by combining time-series analysis and cross-sectional analysis. In the end, the author hopes to give a conclusion and recommendation to the investors and general public and aid their investment decision in Erajaya. The study conducted found that Erajaya still has room to grow, supported by some upcoming key events in the mobile world including the introduction of foldable smartphone and 5G network, the regulation that is to be enacted to ban blackmarket phone trading, added with the increase in market size driven by Indonesian population growth and increasing smartphone penetration. The calculation resulted that the value of Erajaya is IDR 28,329,989,000,000. The fair value of Erajaya’s stock is IDR 2,942.40 and implying a 33.75% potential upside compared to the closing price of December 31st, 2018, which was IDR 2,200. It is also traded below the average of multiple of its comparable peers. The PE of Erajaya in 2018 is only 8.03 compared to peers’ average of 29.13. The PBV of Erajaya in 2018 is only 1.45, also far below peers’ average of 2.53. This implies that Erajaya’s stock is undervalued thus the author recommends investor to invest in Erajaya’s stock.