Saratoga Investama Sedaya (SRTG IJ)

Making the most of dividend windfall

SRTG received a huge dividend windfall in 2022 and utilized it for deleveraging and investing in consumer-related companies in 2023. The company is looking to invest around USD150 mn in 2023 and the company already spent around USD74 mn as of 1Q23.

Huge dividend income for deleveraging and more investments. SRTG received a significant amount of dividends last year (up by more than 50% yoy) which mainly came from its coal mining portfolio, Adaro Energy, which accounted for more than 70% (IDR1.9 tn) of the total dividends and interest income in 2022 (IDR2.59 tn). SRTG utilized this huge dividend windfall for deleveraging and investing in several businesses. Currently, SRTG’s total debt stands at just IDR691 bn or way lower than last year’s level of IDR1.5 tn, while the net debt to NAV ratio currently sits at just 0.6% vs. 1.1% in 2022. We believe that this strongly indicates that SRTG has ample room to improve its leverage ratio to support its investment activity going forward.

Aside from deleveraging, SRTG is also investing in a fast-growing cosmetic company and increasing its stake in a cold chain logistics company in 2023. The company is looking to invest around USD150 mn in 2023 and as of 1Q23 the company had already spent around USD74 mn.

Investing in a leading beauty and health clinic chain. At the beginning of 2023, SRTG made an investment in ZAP clinic, which is among Indonesia’s top 3 leading beauty and health clinic chains, and SRTG currently holds a significant minority ownership. ZAP currently operates around 73 clinics around Indonesia. ZAP has evolved into a comprehensive laser clinic that offers routine care services with an online booking and data system across all branches, providing customers with seamless access to treatments at any ZAP location.

Increasing ownership in its logistics company. SRTG has also increased its stake in its cold chain logistics solution, MGM Bosco Logistic (MBL), from 32% to 62.9%. MBL is Indonesia’s leading cold chain logistics company and serves as a proxy for the consumer sector. MBL is planning to increase the number of its cold storage facilities (currently 4) and improve the penetration of its logistics solutions.

Maintain BUY. At this stage, as SRTG’s commodities’ portfolio share prices have declined significantly in 2023, our SOTP based TP has also been adjusted accordingly to IDR3,530 with a 25% discount assigned to NAV. Currently, SRTG is trading at almost a 50% discount to its NAV.