ESTIMATING THE EQUITY VALUE OF PT SMARTFREN TELECOM TBK. USING DISCOUNTED CASH FLOW AND RELATIVE VALUATION

• Main Author: Ramadhan Bazargan, Farhan
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/57215
• Institution: Institut Teknologi Bandung

The development of technology has changed the telecommunications industry, both globally and domestically, so that telecommunications companies have benefited as internet service providers where currently the internet has become a primary need for the community. Coupled with the Covid-19, where many people carry out activities online, this encourages people to have internet which will certainly benefit telecommunications companies in Indonesia. PT Smartfren Telecom Tbk (FREN) is one of the leading telecommunications service providers in Indonesia which is part of the Sinar Mas group. As a telecommunications company, FREN should benefit from developments in the telecommunications industry, however, its financial condition is not in line with the company's profit. FREN has an increasing trend in revenue from 2015 to 2020 with a CAGR of 21%. However, FREN always suffers losses in the same year. Based on current phenomena, this motivates the study of analyzing the intrinsic value of FREN and comparing it with the market price and the industry. In addition, this study will also provide recommendations for investors The valuation method used in this study are discounted cash flow (DCF) with a free cash flow to firm (FCFF) model and relative valuation with EV/EBITDA. Based on the results of the calculation, the market price of FREN's shares is considered too high where the intrinsic value of FREN ranges from Rp51 to Rp78 which is lower than the closing price (July 16, 2021) which is Rp112. Therefore, the author suggests for investors who already have it, this is a signal to sell because it has been overvalued so there will be potential losses from 28% to 54%, and for interested investors, it is better to make in-depth observations regarding the company to be more convinced regarding decisions to invest. It is also important to note that the condition of a stock that has been valued higher does not necessarily mean the price cannot go higher and does not mean the price will go down.