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Stock Price Valuation of PT. Erajaya Swasembada Tbk. (ERAA) Using Discounted Cash Flow Method

Bagas Naufal Prayitno, Sylviana Maya Damayanti


Abstract. Indonesian GDP increased at a quite impressive rate during the 2014 – 2018 (World Bank, 2018). However, according to Economic Report on Indonesia 2017 by Bank Indonesia, the recovery of household consumption is relatively slow compared to the recovery of GDP which is caused more by the recovery of natural resources export (Bank Indonesia, 2017). Despite that, Indonesian consumer spending on mobile phone and accessories is always increasing year-on-year from 2013 to 2017 of (Survei Sosial Ekonomi Nasional, 2013, 2014, 2015, 2016, 2017). In 2013, Indonesian monthly Per Capita Consumer Spending for Mobile Phone and Accessories was only IDR 1749 and kept increasing, even almost tripled to IDR 5145 in 2017. If there is one publicly traded company that can reap a very big benefit from that, it will be PT. Erajaya Swasembada Tbk (ticker code: ERAA). Despite the digital disruption with online marketplace growing very fast, ERAA is still a leading importer, retailer and distributor of mobile devices in Indonesia with a market share of 33% in 2017. However, in 2018 the stock of Erajaya rose by 200% in 2018 in the midst of global uncertainty. By the end of 2018, the price of ERAA was IDR 2,200. At a glance, ERAA may seem overvalued. The investors may face hard time deciding whether ERAA is still investment worthy knowing that it has soared even in the midst of sideways market in 2018. However, the investors have to do a valuation to actually know whether an asset, in this case ERAA’ stock, is actually overvalued or not. One of the methods to do valuation is using discounted cash flow valuation (DCF) which is done to know the intrinsic value of a company.

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