PT Sariguna Primatirta Tbk (CLEO) sells bottled mineral water. Its business has been remarkable, generating positive and increasing EVA since it went public. EVA went from IDR 59 Billion in 2016 to IDR 75 Billion, generating remarkable EVA momentum of 3% over that period.
CLEO managed to do that by making aggressive growth despite losing a bit of its profitability. In fact, ROIC was down from 26% in 2016 to 21% in 2018. Sales growth, on the other hand, was a remarkable 31% on average from 2015-2018. By no means CLEO just sat idly milking its growth. Its growth was earned by investing. Its invested capital (end of year) grew significantly from IDR 282 Billion in 2015 to IDR 703 Billion in 2018.
What is more remarkable is how investors value this company. After thinning its debts last year, investors effectively valued CLEO as a company with NPV (Net Present Value) of IDR 220 Billion. At WACC of 10%, CLEO actually managed to increase its EVA to IDR 75 Billion last year. That translates into NPV of IDR 746 Billion if we assume EVA stays the same.
Frankly, I do not see any reasons why investors think NPV would shrink considerably if we assume the market right now gives the right value. Usually, when prices are rising persistently for some time, investors effectively pricing a much larger NPV in the future than what a company has realistically achieved. This is a rare instance.
Comments