Matahari Department Store – Moving From Growth To Dividend Play
We upgrade Matahari to BUY (from Neutral) with a revised DCF-derived TP of IDR10,950 (from IDR16,000, 9% upside). At current levels, we believe the downside is limited and that it offers decent risk-reward trade-offs, moving from growth to dividend play. We are projecting profit growth of 4-7% (2012- 2015: 23-49%) and dividend yields of 4-5% during 2017-2019. The dividend yield and upside to our revised TP give a total potential return of 13-14%, while the stock is trading at much lower valuations vs its peers. Our lowerend valuation for the stock is IDR9,850, derived from a dividend discount model, assuming a 100% payout ratio in 2020F from 70% during 2017F- 2019F. We trim our 2017F-2019F profits by 3-8% to factor in lower SSSG on weakness across the industry.