Delta Dunia Makmur (DOID) – BUY (Maintain)
Price: Rp63 – Target Price: Rp95
Cheap valuation worth the risk
Despite a very weak 1Q15, DOID has performed well in 2015 with EBIT increasing by +7.8% and EBITDA flat at 9M15 YoY despite a reduction of OB by 5%. DOID continues to improve operational efficiencies with gross margin reaching its highest level (22.3% at 9M15) since 2010 despite the weak coal price. We believe that DOID’s market correction in 2015 (-67% YTD) has been overdone on debt and industry concerns as DOID’s strong EBITDA and FCF demonstrates a well-run company that will be able to meet its cash needs and debt obligations. We see DOID’s current valuation (‘16E 2.9x EV/EBITDA and 1.7x PE) being overly cheap providing strong upside potential with DCF based target price of Rp95 (+51% upside).