P G

Procter and Gamble Company is operating in 180 countries and region all over the world. Its key driver in generating its cash flow is its business territory at USA which is more than 39 percent of its worldwide total sales. The largest segment in its revenue is coming up from Fabric care and home care which is 32 % of total revenue. The second segment is beauty product which is at 24 % of sales.

According to IMF, economic growth of USA is predicted at 2 % It means the company has good opportunity to grow better. The last sales growth in 2012-2013 is 0.6 percent. The company categorizes its territory in to five major areas which are North America, Western Europe, Asia, Latin America and CEEMEA.

	2011	2012	2013
North America	41.0	39.0	39.0
western Europe	20.0	19.0	18.0
Asia	16.0	18.0	18.0
Latin America	9.0	10.0	10.0
CEEMEA	14.0	14.0	15.0

Segments	Percentage
Fabric Care and Home Care	32
Beauty	24
Grooming	9
Healthcare	15
Baby care and Family care	20

Forecast of Net sales

There is a significant correlation between its Capital expenditure and net sales. With in simple analysis we could find its correlation is more than 0.7 which means indicating strong correlation. Based on data of economic growth of USA in 2008 -2012 and data of its worldwide net sales in 2008 -2012, there is strong correlation between economic growth of USA and its net sales. It could be concluded that USA economy still having strong influence to its revenue.

If I used CAGR of Capital expenditure in 2008 – 2012, I find its CAGR is at 6 %. Within assumption of 6 % growth of its capex in 2014, I make assumption that its worldwide sales will grow 2 % up. In another factor IMF has prediction that US economy will grow 2 percent.

The forecasting of financial condition between in 2012-2016 is as the following table:

ROE 2012 2013 2014 2015 2016 Net Profit margin 13.0 13.5 13.5 13.3 13.1 Asset Turn Over 63.3 60.4 55.9 51.4 47.7 ROA 8.2 8.2 7.5 6.8 6.2 Financial Leverage 208.5 204.6 193.0 186.8 182.1 ROE 17.2 16.8 14.5 12.7 11.3 2013 2014 2015 2016 CFO 8071.0 10254.8 10425.7 10580.5 Net Addition of Fixed Asset -3087.0 -4208.4 -4292.5 -4378.4 Free Cash Flow 4984.0 6046.4 6133.2 6202.1

From table at above the assumption of free cash flow in 2016 is forecasted to 6202.1, the result is calculated with steady net sales growth at annually in 2 % from 2014 until 2016 and capital expenditure is  at 5% net sales in 2014-205. 

The company is mature and it is the market leader in almost all segments and its territory. It causes its sales growth very low in 0-2 percent in the last five years.

The CEO encourages all employees to make innovation as in his book in Game Changer. The company tends to decrease its employee in several years. In 2008 the number of employee was 135,000. It was decreased in to 121,000 people. The company looks using more technology and more outsourcing to reduce cost and enhance its profit.

All products and its manufacture process are protected with patent and license. Its good will and intangible assets in 2013 are more than 60 percent of its total asset. That means trade mark and its patent right are valuable asset for the company as their trademarks are market leader in each segment.

UNVR

Background

Indonesia’s economy has consistent growth in its public consumption and investment. 97 % of its GDP is contributed by its domestic economy. The World Bank forecasted that Indonesia’s economy will grow 5.3 % in its report at quarter 3/2013. Its domestic economy consists of public consumption which is at 55 % of GDP and investment which is at 34 % of GDP.

Steady economy is accompanied by relatively stable inflation and healthy demographic structure with high productive age number. With that strength of Indonesia’s economy, public consumption and investment are expected continue to grow as the key driver of economic growth.

Inflation rate vs. BI Rate

Inflation rate (yoy) in 2013 is at 7.25 %, this is higher than previous year which was at 4.3 %.in order to control inflation rate government increase BI Rate at 7.5 %. With regression analysis we could find the correlation between BI rate and inflation rate in 2007-2013 with t-stat at 3.9 or bigger than 2. If BI rate is still 7.5 %, it will reduce the inflation rate from 7.25 % in to 6.90 %.

Once the inflation rate decline usually investor will expect central bank to reduce its BI rate. And people will be expected to increase their public consumption and investment.

UNVR

 UNVR is one of the favorite stocks in IHSG. In fundamental analysis, UNVR has a consistent growth in the several years as low competitiveness in Indonesia. The foreign investment such as UNVR is able to be a market leader easier. In the period of 2007 – 2013, the company has Compound annual growth rate (CAGR) at 16.1 % in its net sales. With regression analysis between non oil and gas manufacturing and net sales of the company, the possible sales growth in 2014 is at 16.1 % higher than its sales in 2013 which was at 12.7 %.

With possible lower inflation rate in 2014, public consumption will be higher. BI Rate is possible not changing and the inflation rate may have been reduced. People tend to increase its consumption include consumer goods, house hold product, food and beverage.

Good news from UNVR, the company has no long term debt. That means the company has strong internal source of fund. The company has good liquidity. 

Forecast

I used lattes CAGR to make simple assumption in sales of 2014. CAGR of 2007 -2013 is at 16.1 %. I made assumption that sales will experience consistent growth in 2014 – 2016. I took gross profit margin at 51.3 % of sales. I used assumption that the company will spend 5 % of its net sales for capital expenditure and it will be still used its short term loan as its source of fund to finance its asset.

The key ratio in 2012-2016 of its forecasting is as the following list

Ratio analysis
Net Profit margin	16.8	16.0	16.0	16.0	16.1
Asset Turn Over	227.8	230.4	175.4	145.5	126.8
ROA	38.3	36.8	28.1	23.3	20.4
Financial Leverage	302.0	313.7	203.9	171.2	155.7
ROE	115.7	115.4	57.4	40.0	31.7
Net Sales	27,303,248.0	30,757,435.0	35,678,624.6	41,387,204.5	48,009,157.3
CFO		5,751,738.0	6,616,947.3	7,539,803.3	8,747,675.8
Net Add fixed asset		1,031,438.0	1,537,871.8	1,783,931.2	2,069,360.2
Free Cash Flow		4,720,300.0	5,079,075.6	5,755,872.1	6,678,315.5