IMPACT OF EXCISE TAX HIKE TO STOCK VALUE (A Case Study of PT. Hanjaya Mandala Sampoerna, Tbk)

• Main Author: Bagus Adhi Wijaya, Putu
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/45902
• Institution: Institut Teknologi Bandung

Cigarette industry in Indonesia had contributed around 8% to the state revenue in 2018, and this number are expected to increase in 2020 due to higher excise tax rate for cigarette industry which believed can boost the state revenue. Thus, it made the cigarette one of the most important industry in Indonesia. However, the cigarette’s excise tax hike that will be effective in January 1st, 2020 will have significant impact to all of the cigarette companies in Indonesia. The biggest cost of goods sold component of cigarette companies were the excise tax expense, thus, a significant increase on excise tax will reduce the company’s profitability. The significant decrease in company’s profitability could affect the company’s stock performance. In order to help the investors how to react to this situation, the intrinsic valuation of the company is required. This is not the first time the Indonesia’s government increasing the cigarette excise tax. Since 2011, there are seven times excise tax hike. Despite the seven times excise tax increase in eight years, uniquely, it doesn’t have quite big impact to the cigarette companies financial performance. It is true that due to the excise tax hike, the cigarette sales volume were decreasing, in line with Indonesia’s government purpose to reduce the number of smokers in Indonesia. But, an increase of excise tax is always followed by an increase of cigarette retail price. And the result can be seen in HMSP’s revenue which was always increasing during the same period with relatively stable gross profit margin. Evaluating the company’s financial performance in the past five years and conducting absolute or often called intrinsic valuation of HMSP are believed to be important in order to help the investors how to act while the cigarette companies stock were all tumbled since the beginning of the year. This study examined both absolute and relative valuation of HMSP. Absolute valuation was used to determine the worth or intrinsic value of HMSP. FCFE method was used to calculated the intrinsic value of the company. As for relative valuation, P/E price band and P/E standard deviation band were used. Absolute and relative valuation models were both calculated and had suggested that the current stock price of IDR 1,900 of HMSP is undervalued. The intrinsic value calculated from absolute valuation models was IDR 2,252.98 and from relative valuation models was IDR 3,140 and IDR 3,090. Both models shows significantly high intrinsic value for HMSP, with potential return above 15%, it should attract the prospective investors to buy the company’s stock.