Aug 1, 2011

Gajah Tunggal vs Multistrada Sarana

Valuation of two Indonesia's tire makers PT Gajah Tunggal Tbk (GJTL) and PT Multistrada Arah Sarana Tbk (MASA) is not cheap anymore.
Referring to Gajah Tunggal's earning per share in June at Rp121 per share, price to earning ratio (PER) of GJTL on Friday last week was 28.51x, which is not to far from Multistrada Sarana at 27.14x. Based on net sales, Gajah Tunggal is 4.22x larger than Multistrada. Gajah Tunggal gained 56.82% from late January 31 to July 29, while Multistrada posted nearly 100% gain during the same period.
But, if you have money and want to spend it into tire-based stocks, which company do you pick? It is uneasy to pick one company among Gajah Tunggal and Multistrada as both firms have similar PER.
Let's check the performance of the first half!
At the bottom line, Gajah Tunggal and Multistrada booked an increase in net profit. Gajah Tunggal posted Rp421.92 billion in 1H 2011, a 1.67% increase from Rp415.01 billion in 1H 2010, mostly underpinned by foreign exchange gain which rose 134.72% to Rp164.56 billion from Rp70.11 billion. Multistrada reported a 36.19% increase to Rp121.74 billion net profit from Rp89.39 billion net profit.
At the operational line, Gajah Tunggal's operating profit lowered 33.94% to Rp441.40 billion from Rp668.14 billion on the back of higher cost of goods sold which surged 32.19%. 
Multistrada reported a 23.67% increase in operating profit to Rp151.91 billion from Rp122.83 billion, reducing its margin to 11.02% from 12.19%.
Gajah Tunggal's revenue rose 20.99% to Rp5.82 trillion from Rp4.81 trillion, while Multistrada made a 36.63% increase to Rp1.38 trillion from Rp1.01 trillion.
Cash from operations
Gajah Tunggal reported -Rp233.36 billion in cash from operations in 1H 2011 as a result of cash paid to suppliers and employees from Rp234.45 billion a year earlier.
Multistrada was still able to crease Rp106.71 billion cash from operations in 1H 2011, a 7.95% increase from Rp98.85 billion a year earlier.

Disclosure: No position at the stock mentioned above.

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