COMPANY VALUATION FOR PRIVATE PLACEMENT : CASE STUDY PT PRAKARSA ENVIRO INDONESIA. FINAL PROJECT By: NIM: 29320137 Master of Business Administration Program School of Business and Management Institut Teknologi Bandung January 2024 Teguh Iman Riadi 1 VALUASI PERUSAHAAN UNTUK MELAKUKAN PENAMBAHAN MODAL: STUDI KASUS PT PRAKARSA ENVIRO INDONESIA Teguh Iman Riadi NIM: 29320137 Master of Business Administration Program, Institut Teknologi Bandung, 2023 Pembimbing: Dr. Erman Sumirat, SE., MBuss., CSA., CRP., CIB., Ak. ABSTRAK PT Prakarsa Enviro Indonesia dikenal sebagai perusahaan dalam bidang pengolahan air. Perusahaan sedang membutuhkan modal untuk melakukan ekspansi bisnis. Penambahan modal melalui penjualan saham secara spesifk adalah salah satu cara yang dipertimbangkan oleh pemangku kepentingan. Oleh karena itu perlu ditentukan berapa nilai perusahaan dan harga lembar per saham yang tepat untuk perusahaan ini. Beberapa analisa yang akan dilakukan adalah menganalisa kesehatan finansial perusahaan, termasuk evaluasi terhadap pendapatan dan jumlah hutang yang dimiliki. Peluang dan situasi perusahaan dari dalam maupun luar pun akan dianalisa. Kemudian, dua metode digunakan untuk menentukan valuasi perusahaan: pertama, melalui penilaian aset fisik; kedua, melalui estimasi pendapatan masa depan. Dari penilaian ini, rekomendasi mengenai harga saham yang tepat dapat diberikan. Penelitian ini didasari oleh pertanyaan kepada para pemangku kepentingan, serta dokumen-dokumen resmi dari perusahaan. Harapannya, hasil dari penelitian ini dapat membantu calon investor PT Prakarsa Enviro Indonesia dalam pengambilan keputusan. Keywords: Valuasi, Discounted Free Cash Flow, Pengolahan Air, Saham 2 COMPANY VALUATION FOR PRIVATE PLACEMENT: CASE STUDY PT PRAKARSA ENVIRO INDONESIA Teguh Iman Riadi NIM: 29320137 Master of Business Administration Program, Institut Teknologi Bandung, 2023 Final Project Counsellor: Dr. Erman Sumirat, SE., MBuss., CSA., CRP., CIB., Ak. ABSTRACT PT Prakarsa Enviro Indonesia is a company in the water treatment business. They are looking to grow and need more money to do it. Recognizing this, the company is contemplating a private placement strategy, necessitating a robust valuation to ensure informed decision-making. To lay the foundation for this assessment, a comprehensive financial ratio analysis was executed, offering crucial insights into the company's liquidity, profitability, and debt raio. This rigorous analysis facilitates a nuanced understanding of the organization's fiscal robustness. Parallelly, a detailed external and internal analysis was undertaken to discern the organization's relative position amidst the industry dynamics and to identify intrinsic strengths and potential vulnerabilities. For the valuation process, two primary methodologies were employed: Net Asset Value (NAV) and Discounted Free Cash Flow to the Firm (DFCFF). The NAV method, given the capital-intensive nature of the wastewater management industry, offered a tangible valuation perspective. In contrast, DFCFF provided a forward-looking appraisal, projecting the company's prospective financial trajectory. Based on these valuations, an informed share price was ascertained, a pivotal metric for potential stakeholders in the private placement. This research, grounded in stakeholder inquiries, company valuation techniques, and in-depth document analysis, endeavors to furnish a holistic evaluation of PT Prakarsa Enviro Indonesia. It aims to serve as an academic compass, guiding potential stakeholders in comprehending the firm's prospective positioning within the water treatment paradigm. Keywords: Valuation, Discounted Free Cash Flow, Private Placement, Water Treatment 3 VALIDATION PAGE COMPANY VALUATION FOR PRIVATE PLACEMENT: CASE STUDY PT PRAKARSA ENVIRO INDONESIA By: TEGUH IMAN RIADI NIM: 29320137 Master of Business Administration Program Business Leadership Approving, Counsellor Dated on December 19, 2023 Dr. Erman Sumirat, SE., MBuss., CSA., CRP., CIB., Ak. NIP: 2017-875-17 5 ACKNOWLEDGEMENT First, I would like to express my praise and gratitude to Allah subhanahu wa ta'ala, because with His blessings I was able to complete this final project. Overall, it has been an amazing journey for my studies at SBM ITB. On this occasion, I would also like to express my gratitude and appreciation to the people for their support, guidance, and assistance in completing this final project: 1. To my family 2. Dr. Erman Sumirat, SE., MBuss., CSA., CRP., CIB., Ak. as my counsellor who always gives great assistance, feedback and his valuable time for author to make and finish this final project. 3. All the lecturers of Blemba 28 SBM ITB for all the knowledge sharing and lesson during the study. 4. Classmates in Blemba 28 for the great friendship and teamwork during our study in SBM ITB. 5. All the Students Service for their support and help during the study. I realize that my research is far from perfect. Any input, suggestion and criticism are more than welcome. It is with my great hope that this final project can give valuable insight and inspire everyone that access it. Jakarta, October 2023 Teguh Iman Riadi teguh_riadi@sbm-itb.ac.id 6 Table of Contents ABSTRAK .................................................................................................................................... 1 ABSTRACT .................................................................................................................................. 2 VALIDATION PAGE ................................................................................................................... 3 ACKNOWLEDGEMENT ............................................................................................................. 5 CHAPTER 1 INTRODUCTION .......................................................................................... 10 1.1. Background ............................................................................................................................. 10 1.2. Company Profile ................................................................................................................... 11 1.2.1 Vision and Mission ............................................................................................................................................ 12 1.2.2 Organizational Chart ........................................................................................................................................ 12 1.2.3 Company Product and Service .................................................................................................................. 12 1.3. Business Issues .................................................................................................................... 15 1.4. Research Question .............................................................................................................. 16 1.5. Research Scope and Limitations .................................................................................. 16 CHAPTER 2 BUSINESS ISSUE EXPLORATION ...................................................... 17 2.1 Issue Exploration ................................................................................................................... 17 2.2 Conceptual Framework ....................................................................................................... 18 2.3 Literature Review ................................................................................................................... 19 2.3.1 Private Placement .............................................................................. Error. Bookmark not defined. 2.3.2 Previous Research............................................................................................................................................ 20 2.4 Company and Industry Analysis ..................................................................................... 20 2.4.1 External Analysis ............................................................................................................................................... 21 2.4.2 Internal Analysis ................................................................................................................................................. 31 2.5 Financial Ratio ........................................................................................................................ 33 2.5.1 Liquidity Ratio ...................................................................................................................................................... 33 7 2.5.2 Debt Ratio .............................................................................................................................................................. 34 2.5.3 Profitability Ratio ................................................................................................................................................ 35 2.6 Company Valuation............................................................................................................... 36 2.6.1 Valuation Framework....................................................................................................................................... 36 2.7.2 Valuation Method ......................................................................................................................................... 38 CHAPTER 3 RESEARCH METHODOLOGY ............................................................... 46 3.1 Research Design .................................................................................................................... 46 3.2 Data Collection Method ....................................................................................................... 48 3.3 Data Analysis Method .......................................................................................................... 48 3.3.1 Qualitative Analysis .......................................................................................................................................... 48 3.3.2 Quantitative Analysis ....................................................................................................................................... 48 CHAPTER 4 BUSINESS SOLUTION ............................................................................. 50 4.1 Financial Performance Analysis ..................................................................................... 50 4.1.1 Liquidity Ratio ...................................................................................................................................................... 50 4.1.2 Debt Ratio .............................................................................................................................................................. 52 4.1.3 Profitability Ratio ................................................................................................................................................ 55 3.2 Valuation of PT Prakarsa Enviro Indonesia ............................................................... 58 4.2.1 Valuation Using Net Asset Value.............................................................................................................. 59 4.2.2 Valuation Using Discounted Free Cash Flow to Firm ................................................................... 60 4.3 Share Price & Total Shares ............................................................................................... 69 4.3.1 Sensitivity Analysis ........................................................................................................................................... 71 CHAPTER 5 CONCLUSION AND RECOMMENDATION ....................................... 72 5.1 Conclusion ................................................................................................................................ 72 5.2 Recommendation ...................................................................................................................