Chapter 2

Figures converted from Indonesian Rupiah at historical FX rates — see data/company.json.fx_rates. Ratios, margins, and multiples are unitless and unchanged.

The cash that actually arrives

Saratoga's reported earnings are almost entirely fair-value marks. The cash that reaches the holding company is dividends from investees, and in 2025 that stream, net of every holding-company cost, came to $137.6 million — 9.6% of the $1.31 billion market capitalisation. Four-fifths of it came from two coal companies that together are 28% of the portfolio's value. This chapter separates the two flows and sets out what the single covering forecast says.

The audited cash flow statement is the cleanest window into the business. It shows six line items that recur every year — dividends collected, interest collected, interest paid, staff paid, tax paid, other operating payments — and two that are discretionary: proceeds from selling investments, and cash deployed into new ones. Stripping the discretionary items out gives a recurring cash result that ties exactly to the reported operating cash flow.

Source: audited consolidated statements of cash flows, years ended 31 December 2025 and 2024 [1]; subtotals derived.

$137.6 million of recurring cash income in 2025 is $0.0101 per share against the 27 July 2026 close of $0.0968 — a 9.6% cash yield on the market price, and 3.8% on the $3.62 billion net asset value the company publishes [2]. On the 2024 base of $245.5 million the same arithmetic gives $0.0181 per share and 16.6%. The two years bracket the range, and the difference between them is almost entirely one variable: how much coal paid out.

The holding company's own cost base barely moves. Staff payments ran $7.3 million in 2024 and $7.1 million in 2025 [3]; accrual operating expenses were $14.0 million against an internal target of $16.0 million, or 0.39% of net asset value [4]. Interest paid was $10.6 million in 2025 and will fall: borrowings were $87.0 million at year-end and $47.8 million at 31 March 2026, against $52.3 million of cash and $9.4 million of time deposits [5].

Across five years the gross flows tell the same story with more amplitude.

Sources: FY2021 Annual Report, Consolidated Statements of Cash Flow [6]; FY2022 [7]; FY2023 [8]; FY2024 [9]; FY2025 [10].

2022 is the outlier that matters for calibration: $1,313 million of disposal proceeds and $1,189 million redeployed in the same year [11]. Much of that was a restructuring of the Tower Bersama holding, in which shares were sold to Bersama Digital Infrastructure Asia while a group company subscribed for Bersama Digital shares, taking effective ownership of Tower Bersama from 34.23% to 31.26% [12]. Gross proceeds at this company are not evidence of monetisation on their own; the redeployment line has to be read alongside them.

Reported profit is a mark, not a receipt

The income statement runs on a different engine. Over five years the fair-value line swings from a $1,709 million gain to an $898 million loss and back to a $248 million gain, while dividend and interest income never leaves a band of $116 million to $239 million.

Sources ($ million): FY2022 Annual Report, Review of Operations [13]; FY2023 [14]; FY2024 [15]; FY2025 [16].

The tax line moves with the marks too. Deferred tax was a $100.1 million charge in 2024 and a $44.9 million credit in 2025 [17], against cash income tax actually paid of $0.3 million and $1.6 million [18]. Three lines of the profit and loss account — the fair-value gain, the deferred tax, and therefore the bottom line — are opinions about prices rather than transactions.

The first quarter of 2026 is the cleanest single illustration. Reported profit was $319.3 million, or $0.0236 per share, on a $414.7 million fair-value gain and a $90.0 million deferred tax charge; dividend and interest income recognised in the quarter was $0.4 million [19]. The cash statement for the same three months shows $42.3 million of dividends actually collected and $5.8 million deployed [20]; the related-party receivable fell from $43.9 million to $1.6 million over the quarter [21], a balance the company attributes largely to dividends receivable from Alamtri Resources [22]. Dividend income is recognised on declaration, and declarations cluster in the second and third quarters, so a single quarter's income statement says almost nothing about the year's cash.

Sources: profit from the Review of Operations tables, FY2022 and FY2025 Annual Reports [23], [24]; cash dividend receipts from the cash flow discussions [25], [26].

Where the value sits and where the income comes from

The dividend income breakdown is disclosed by investee every year, and for anyone holding the shares for the cash it is the most consequential table in the annual report.

Sources: dividend income breakdown tables, FY2022 Annual Report [27], FY2024 [28], FY2025 [29]; coal is Adaro Energy Indonesia, renamed Alamtri Resources Indonesia, plus Adaro Andalan Indonesia from 2025.

Coal's share of dividend income has been 67%, 74%, 77%, 82% and 79% in the five years to 2025 [30], [31], [32]. It has never been below two-thirds. The 2025 fall in total dividend income, from $234.7 million to $162.3 million, was Alamtri cutting from $193.5 million to $90.9 million, partly offset by $38.0 million of first-time dividends from Adaro Andalan after the thermal coal separation [33].

Set that against where the portfolio value actually sits at 31 December 2025.

Source: derived from the net asset valuation table and the dividend income breakdown, FY2025 Annual Report [34], [35].

The two largest holdings by value — Tower Bersama at $1,119.8 million and Merdeka Copper Gold at $648.4 million, together 48% of the $3,646.1 million portfolio [36] — supplied 8% of dividend income between them, Merdeka none at all [37]. The two coal companies, 28% of value, supplied 79%. The discount is a claim on towers and copper; the yield is a claim on coal. One share certificate delivers both, but they are not the same asset and they will not decline or recover together.

That divergence also explains why the mark and the cash moved in opposite directions in 2025. Tower Bersama and Merdeka added $203.9 million and $197.0 million of fair-value gains while Alamtri and Adaro Andalan subtracted $276.0 million [38] — net asset value per share rose 12% to $0.2666 [39] in the same year cash dividend receipts fell 41% [40].

Debt first, dividend last

What Saratoga does with the cash has followed a consistent order of priority, and the dividend has come last in it. The record of distributions, by the year each was paid:

Sources: dividend tables, FY2022 Annual Report [41], FY2023 [42], FY2025 [43]; the 2026 amount from Indonesian press coverage of the May 2026 general meeting [44]. The 2021 payment is shown adjusted for the five-for-one split.

The $0.00568 paid in June 2026 is the largest per-share amount in the company's listed history, and the $77.1 million total is the second distribution of that order in four years: $66.1 million, or $0.00488 per share, went out in June 2023 [45]. What followed is the more instructive part: distributions fell to $18.5 million and then $12.0 million [46] across 2024 and 2025 — the two years in which the company deployed $357.9 million into new investments [47] and drew $219.0 million of bank loans to help fund it [48]. In 2025 the priority reversed: $281.1 million of loans were repaid against $175.9 million drawn and deployment halved [49], leaving borrowings at $87.0 million and loan-to-value at 0.8% [50]. The large dividend arrived only once the balance sheet was clean.

There is no formula behind any of this, and the company says so. Its stated policy is that dividends require sufficient profit or positive retained earnings and are subject to the board's recommendation and shareholder approval, with no payout ratio specified [51]. The meeting that approved the 2026 payment framed it as 19.13% of FY2025 net profit of $439.2 million [52] — a percentage of a number that was itself 57% fair-value gain on investments [53]. The same ratio applied to the 2023 loss year would have produced nothing.

My read is that the dividend at Saratoga is a residual rather than a claim: it is what remains after management has decided how much to invest and how much debt to carry, and those two decisions come first. The strongest fact against that reading is the 2026 sequence itself — the payment was raised sevenfold in a year when dividend receipts fell 41%, which is a deliberate step up rather than residual behaviour. A second year would settle it: a payment near $0.0055 per share for FY2026 alongside continued deployment would establish a policy where none is written down.

Forward estimates, and how thin they are

Management publishes no forward financial guidance. The FY2025 annual report states that as an investment holding company it does not set quantitative targets for investment deployment, realised gains or net profit, and the section headed "Target for 2026" says the company sets formal annual targets only for operating expenses [54], [55]. There are no earnings calls and no transcripts in any period, so there is no management commentary to model against either.

That leaves a single sell-side model. The figures below are the consensus as compiled for this report, with one contributing estimate on earnings and dividends, converted throughout at the most recent rate.

Source: consensus estimates as compiled for this report; one contributing analyst on earnings and dividends. The 2025 row is the estimate, not the reported outcome.

Two things are worth extracting from it, and one warning.

The model strips fair value out entirely. Its forecast operating result is roughly minus $13.8 million to minus $16.5 million a year — the holding company's cost base and nothing else — with dividends carried below that line. The widely quoted "EPS growth" figures for Saratoga therefore compare a normalised forecast against a mark-inclusive actual: the 2025 estimate of $0.0036 sits against reported basic earnings of $0.0297 per share, converted at the same rate for comparability [56], and the resulting "decline" for 2026 is an artefact of the two bases, not a forecast of deterioration.

On its own terms, the model puts normalised earnings at $0.0082 per share for 2026 and $0.0107 for 2027. At $0.0968 that is 11.9 times 2026 and 9.0 times 2027. The dividend line reads $0.0057 for 2026 — within rounding of the $0.00568 already paid in June — then $0.0043 for 2027, a 25% reduction. Whether that reflects a view on sustainability or simply a payment-year convention cannot be determined from the data available; either way, the one house modelling this stock does not carry the June amount forward as a run rate. The mean twelve-month price target is $0.157, and one covering broker cut its target to $0.143 from $0.165 in July 2025.

The warning is reconciliation. The model's 2025 normalised net income of $49.4 million is well below the $137.6 million of recurring cash the audited cash flow statement shows [57]. Whatever normalisation produces that gap is not disclosed, and with a single contributor there is no second model to triangulate against. These estimates are one house's view and should be read as such rather than as a market consensus.

The more useful forward number comes from management by way of the press: a target of $100–150 million of new investment a year, in healthcare, renewables, digital infrastructure and consumer [58]. Placed against the FY2025 recurring cash base of $137.6 million, the deployment target alone absorbs 73% to 110% of it, and the 2026 dividend absorbs a further 61%. Together they claim 134% to 171% of recurring cash income.

That is not a solvency observation. With $47.8 million of borrowings against $61.6 million of cash and deposits at 31 March 2026 [59] and a $3.6 billion portfolio behind it, the company has ample capacity to borrow or sell. It is an observation about which of the three uses gets cut when coal dividends fall, and the 2024 and 2025 record answers it: the dividend did.

What would change the read

Three developments would move this analysis materially, and each is observable within a year. Alamtri and Adaro Andalan declaring 2026 dividends at or above 2025 levels would confirm the cash base at roughly $138 million; the sensitivity is straightforward, since every $30 million of lost coal dividends is 22% of that base and $0.0022 per share. Tower Bersama or Merdeka Copper Gold initiating a meaningful distribution would begin to close the gap between where the value sits and where the income comes from, and would be the most valuable single change to the cash profile. And a written payout policy — a stated share of dividends received rather than a percentage of a mark-to-market profit — would convert the largest per-share dividend in the company's history from an event into a claim, which is the difference between a 5.9% yield that can be underwritten and one that cannot.

Web research was unavailable throughout this run, so no broker note, investee dividend announcement or post-March-2026 disclosure could be checked beyond what the corpus and the compiled estimate data contain. The composition of the portfolio itself is treated in Portfolio and Discount; what this chapter adds is that the cash and the value inside it are carried by different assets.