EVA Brief: ITMG (Indo Tambangraya Megah) - part II

If...

The market were to priced-in ITMG at 9,200...

Investors would effectively be expecting EVA growth, adjusted with sales (EVA momentum) to contract by -2.3% per year for the next 5 years.

For the past twelve months in Q2 2019,

EVA actually contracted by -2.5% compared to Q4 2018.

So, that seems to be a fair expectation*

But....

I have found that ITMG investors generally priced-in a more pessimistic outlook than reality.

Beware.

The good thing is...

At 9,200

The market is effectively viewing ITMG as a wealth destroyer..

Which is not true

So, fundamentally speaking...

If ITMG ever to trade at 9,200....

that would be a great deal.

Even if you know that investors tend to exaggerate,

which would drive share prices down further....

It is still a very good deal.

Unless....

Coal price goes down beyond 50 USD...

If it does...

You are screwed.

A detailed technical analysis of coal is here.

If you want to gain more understanding of ITMG past and current condition, read my previous analysis here.

*In reality, it would take a continued, persistent decline in coal prices for EVA momentum to be -2.3% for the next 5 years. But I have found that the market tends to be short-sighted: they look at recent data and extrapolate it. In a more formal style, the market is not efficient, but they adapt, adjusting their expectations as new data arrives (which is EVA related) – however wrong that is in the future.