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