STOCK VALUATION ANALYSIS OF PT SINAR MAS AGRO RESOURCES AND TECHNOLOGY TBK USING FREE CASH FLOW TO THE FIRM AND RELATIVE VALUATION

• Main Author: Ramiza, Fitradi
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/77459
• Institution: Institut Teknologi Bandung

Indonesia is the largest producer and exporter of palm oil in the world with a production of 46 million tonnes of crude palm oil. PT SMART Tbk (SMAR) is one of the largest palm oil companies in Indonesia with a total plantation area of 136,402 hectares in 2022. The Indonesian government implemented the B35 biodiesel policy in February 2023, indicating there is potential for growth in the increased use of palm oil as a biodiesel blend. The positive sentiment from the B35 program, which will continue into the B40 program, is expected to boost domestic market demand for biodiesel, consequently impacting SMAR's sales revenue. The purpose of this research is to identify SMAR's business performance, intrinsic value, and propose solutions to close the value discrepancy. This study employs a quantitative approach to calculate stock valuations and a qualitative for making assumptions. The data utilized encompasses secondary sources, which include annual reports, journals, and financial websites. Several analyses are conducted in this study, namely financial statement analysis, financial ratio analysis, PESTLE analysis, Porter’s Five Forces analysis, absolute valuation using free cash flow to the firm, and relative valuation using price-to-earnings ratio (PER), price-to-book value (PBV), and EV/EBITDA. The financial ratio analysis performed in this study encompasses liquidity ratios, solvency ratios, profitability ratios, activity ratios, and market ratios. SMAR's intrinsic value based on FCFF analysis is Rp 10,280 per share, while the market price during this study period is Rp 5,200 per share, indicating that SMAR is undervalued. The results of the relative valuation analysis show that SMAR is also undervalued compared to similar companies in the palm oil industry. Thus, in general SMAR is considered undervalued, indicating a potential opportunity for investors in SMAR shares.