Re-visiting BIRD (Blue Bird)

We have seen significant rebound from previously mentioned projected confluence zone. That brings to my mind, how economically sound is it potentially?

I seek potential gain of 50% or more in my stock investment. BIRD offers that potential IF it could trade at its book value. That means it is a proposition that BIRD finally becomes a wealth-neutral rather than wealth-destroyer as it is now.

Here is how the numbers work. Currently, BIRD has invested capital of IDR 6,6 T. Add IDR 700 Billion of cash in hand and subtract debt of IDR 1,4 T, BIRD equity value without any franchise value would be IDR 5,9 T. Divide that number with its shares outstanding of 2.500 million, and BIRD share price without franchise value consideration is IDR 2.350/share.

At this writing, BIRD is trading at IDR 1.000/share. Sweet potential IF it could be a wealth-neutral.

The problem is, Blue Bird is not a wealth-neutral. It has been a wealth-destroyer soon after its IPO. And it just keeps getting worse as shown clearly by its EVA.

2 big issues lie at the core of BIRD deteriorating condition: sales and operating expenses.

Gojek and Grab are the obvious reason for sales. Opex big numbers are remuneration and maintenance. Used or not, taxi cars need to be maintained. And with other taxis brands essentially disappeared, Blue Bird now has more drivers.

What 2.350/share (wealth-neutral) entails is this: BIRD has to be able, somehow, to lift its condition considerably. We are talking about a pace of EVA momentum of 3,6% per year for at least 5 years. Or, in graphic:

That looks like a V-recovery shape. And BIRD has no history of recovery so far since its IPO. It is an unprecedented proposal, with or without COVID-19.

But, who knows? Maybe COVID changes things considerably. If social distancing is close to people’s hearts, then more people would prefer getting a taxi. GOJEK would become more of a delivery service. But there is still Go and Grab Car. So, the opportunity will remain limited. If anything, COVID would further press BIRD to be more automated, and less drivers.