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Unilever Indonesia: Caution Is Still Warranted

May 02, 2018 1:15 AM ETPT Unilever Indonesia Tbk (UNLRF), UNLRYUL, UN
ALT Perspective profile picture
ALT Perspective


  • A year ago, I wrote about how Unilever Indonesia was a leading consumer products name, but trading at a then-P/E of 52.66, it was already fairly valued.
  • Since then, the stock has gone nowhere, trading just below the level seen in the same period last year.
  • I highlight in this article what are the key balance sheet items I am monitoring.

Revisiting The Range-Bound Trading Thesis Of Unilever Indonesia

A year ago, I wrote about how Unilever Indonesia (OTCPK:UNLRF, OTCPK:UNLRY) was a leading consumer products name in the Southeast Asian country which it was based in, but trading at a then-P/E of 52.66, it was already fairly valued (PRO+ article). Furthermore, there are strong international competitors, such as The Procter & Gamble Company (NYSE:PG), Japan's Kao Corporation (OTCPK:KAOCF, OTCPK:KCRPY), UK's Reckitt Benckiser Group (OTCPK:RBGPF, OTCPK:RBGLY) and established local rivals such as PT Wings Surya, which manufactures soaps, detergents and toiletries. I concluded with the following price expectation:

"Hence, I am of the opinion that the optimism towards the company's prospects has been baked in the share price which would likely trade rangebound between IDR45,000 and IDR50,000."

The stock traded on the Indonesia Stock Exchange and was priced at Rp46,800 per share. Fast forward to today, the share price is almost unchanged at Rp46,150 per share. Nimble traders, however, had opportunities to profit from the volatility, as the stock closed as high as Rp55,900 on the last trading day of 2017. Since a year has elapsed, I shall revisit the company's financials and prospects to see if the thesis for a range-bound trading of the stock remains valid.

Profit/Loss Statement Review

Unilever Indonesia's fiscal year follows that of the calendar year. In 2017, the company increased its revenue by 2.9 percent and its net profit by 9.6 percent over the previous year. This is, of course, a remarkable feat except when the stock trades for a P/E above 50x, but it gets worse. For the first quarter of 2018, its revenue fell 0.9 percent year on year (y/y) to IDR 10.74 trillion (US$773 million), while its net profit declined 6.21 percent (y/y).

Payments To Parent Company Accounting For A Larger Proportion Of

This article was written by

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I am honored to have been categorized as a 5-Star financial expert and ranked among the top 2% of financial bloggers on TipRanks in 2017/18. For a period, I was among the top 3 “Opinion Leaders” for Insider Ownership and Services, as well as top 5 for Long Ideas and Fund Holdings. I am an avid reader of market news and company publications with the aim of improving my investment acumen. I enjoy expressing my findings and opinions through writings. My appreciation and understanding of business strategies improved to a whole new level since completing an MBA (Distinction) from a FT100 MBA school. I have worked in companies with businesses that span multiple industries, according me with the exposure to a myriad of sectors.Check out my Author's Picks and over 190 Editor's Picks, among the highest in Seeking Alpha, if not the most.

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