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Feb 22,2017 11:07:45

Retail - Tailwinds Trump Headwinds

We see stronger signs of improvement in consumer demand and expect the trend to continue, supported by better commodity prices, lower interest rates, and more investment inflows. In addition, rationalised expansion over the last few years should help retailers’ margins, in our view. As such, we believe retailers in general would do well this year. We reinitiate coverage on the sector with OVERWEIGHT. In particular, we like turnaround efforts at Mitra and Ramayana. Key risks include political instability and currency volatility that could prolong the recovery process.

  • Demand side: Gradual improvement along with economic recovery. We believe consumer confidence is key in supporting private sector spending, and we see the positive momentum potentially being boosted further by improving commodity prices in the near term, and more investment inflows in the longer term. As such, we expect retailers’ topline to grow at high single-digit to low double-digit levels in 2017F, from mid- to high single-digit growth rates in 2016.
  • Supply side: Rationalised expansion lowers pricing pressure. We think retailers’ margins should be underpinned by rationalised expansion and improved inventory levels. Retailers’ expansion over the past two years has been generally slower than previous years’, thanks to slower property completion and the weaker market. Retailers’ inventory positions have also generally improved, with some retailers already at comfortable inventory levels. We believe these conditions have eased pricing pressure and provided some upside to margins.
  • Online shopping a promising market in the longer term, but obstacles continue to drag the full unleashing of its potential in the near term. Rising income and a young population are long term key growth drivers, in our view. On the flipside, short term obstacles such as relatively high costs of good internet access and mobile devices, drag online shopping adoption. The online shopping format is set to grow as more Indonesians come online, and purchasing power grows. We believe this trend would have a disproportionately negative impact on Matahari Department Store ($LPPF) as incremental online shoppers are likely to come from Matahari’s target market segments, in our opinion.
  • Tailwinds trump headwinds. Overall, we expect profit acceleration in 2017-2018F, stemming from gradual topline growth, GP margin recovery, operating leverage as well as financial leverage. We forecast average topline growth of 10-11% in 2017-2018F, a slight improvement from previous years, supported by higher commodity prices and rising confidence level. We expect margin recovery as rationalised expansion and economic recovery gain pace. Politics and currency stability are macro wild cards, though we remain optimistic.
  • We like turnaround efforts at Mitra and Ramayana. Ideally, an investment case should be made on a company that is heading towards the fourth quadrant in Figure 1, or at least one that is pushing its asset turnover towards the first quadrant, or improving its profitability/margin towards the third quadrant. Ramayana Lestari Sentosa ($RALS) and Mitra Adiperkasa ($MAPI) are our Top Picks with relatively faster asset turnover growth and stronger margin improvements, a combination that would ultimately increase profitability. Both companies have undertaken business and management turnarounds, which were timed well with the improvement in general economic conditions. (Stifanus Sulistyo)
Dec 01,2016 23:16:30

Retail: Brighter days ahead

Roy Nicholas Mandey, head of Indonesia Retailers Association or APRINDO, stated that there was an uptick in spending in November, as opposed to slightly disappointing September and October numbers. He is confident that in December alone, the retail industry will generate IDR40tn in sales, contributing roughly about 20-25% of total full year sales, on the back of Christmas and New Year festivities. In comparison, Lebaran sales contribution is along the lines of 35-40% of total industry sales. He asserted that sales will mainly come from apparels, which we think is positive for the likes of Matahari Department Store ($LPPF), Ramayana ($RALS) and Mitra Adi Perkasa ($MAPI). Lastly, he believes that this year would be much better compared to 2015 supported by low inflation. (Investordaily)

Nov 23,2016 22:58:46

$MAPIMitra Adiperkasa will open more than 50 new F&B outlets next year, higher than the average 30 to 40 outlets. The government estimates that F&B industry will grow by 7.4%-7.8% this year.

Nov 23,2016 22:43:46

Mitra Adiperkasa ($MAPI) will add 60,000 sqm of selling area in 2017, which is at the same as this year’s 50,000-60,000sqm increase. F&B segment will be the priority of next year’s expansion and 75% of the addition will be in Java. Comment: MAPI’s next year target is slightly higher than our forecast of 45,000sqm of selling space addition.

Nov 21,2016 22:21:28

Retailers still committed to have store expansion next year

CT Corp to open 30stores (mostly located in Java) in 2017, higher than this year realization of only 5 stores. This will brings total stores to be 124 stores (Transmart, Carrefour and Groserindo) in 2017. Of 15 new stores, two of which is Groserindo, the wholesale business. Other than opening new stores, CT corp will still continuing to rebrand Carrefour to Transmart, as of now there only 15 Transmart stores, the rest is still Carrefour. Additionally, $MAPI also targeted to have 60k sqm additional new space in 2017. Java is still their favorite target for stores opening. (Bisnis Indonesia)

Nov 18,2016 10:20:45

MAPI: General Atlantic subscribes to company’s USD75mn zero coupon bonds

General Atlantic, a global growth equity firm, has invested in Mitra Adiperkasa ($MAPI) in the form of zero-coupon bonds, which are convertible into shares in MAPI’s food & beverage subsidiary, PT MAP Boga Adiperkasa (MBA), to the tune of IDR1.08tn or USD75m. MBA has over 300 stores across 24 cities in Indonesia and operates exclusive brands such as Starbucks and Pizza Express. (Bareksa)

Nov 14,2016 17:09:33

Indonesia: Currency update: IDR depreciation: Don’t panic
Effects of a shallow FX market; Buying opportunities exist
Based on Bank Indonesia’s data, ytd the average daily turnover for the IDR spot market is only USD1.7bn, which is shallow by regional standards, reflecting just 0.5x of GDP (exhibit 1), one of the lowest among its regional peers. Even worse is the 1M NDF market, which only trades at USD0.7bn a day ytd. Unfortunately, the NDF sometimes can influence the spot market, particularly on pressure stemming from the recent Trump election. However, given such illiquidity, we advise investors to remain calm, particularly as we believe the fundamentals in Indonesia remain largely unchanged. We note that, through years of balance sheet repair since the 1998 Financial Crisis, the Indonesian stock market’s net gearing has improved from more than 150% back then to 27.3% in 9M16. Furthermore, we believe Indonesia is currently in a good position given that its 3Q16 CAD of 1.86% is the lowest since 1Q12. In fact, we think the current situation presents buying opportunities for investors as we expect the IDR to become stronger by year-end. It is worth pointing out that there should still be around USD10bn to come in from tax amnesty repatriation between now and the end of 2016.

Sensitivity analysis: 1% weaker IDR = 0.9% market EPS
Given recent IDR gyrations, we present our latest currency sensitivity analysis on the IDR/1USD, in an effort to aid investors in better gauging their investments in Indonesia. Our study, based on 87 non-financial stocks under our coverage (62% of total JCI market capitalization), shows that each 1% IDR depreciation could lower the EPS of our covered stocks by 0.9% overall (exhibit 5). That said, it is not a surprise that a recent 3% negative swing in the NDF market spooked investors, as it could translate into a 3.6% wipeout in 2017 market EPS growth.  

Winners: Coal, Metals, Oil & Gas and Plantations

A stronger dollar should in general spell good news for sectors with dollar revenue such as Coal, Metals and Oil & Gas and Plantations (exhibit 5). By stock, our sensitivity analysis indicates that $SIMP, $WINS, $TBLA, $PTBA and $SGRO should be the major beneficiaries of IDR deprecation within our basket of stocks (exhibit 2).

Losers: Poultry, Property and Consumer Discretionary
Against a backdrop of a weaker IDR, sectors with large USD costs and borrowings should suffer: Poultry, Property and Consumer Discretionary (exhibit 5). Stock-wise, losers of a stronger dollar include heavily leveraged companies under our coverage: $SMCB, $LPKR and $MAPI (exhibit 3).

Safe havens: Mainly Construction and Telcos  

For investors seeking shelter from currency volatility, we point to the Construction and Telco sectors (exhibit 10 & 24). In terms of stocks, $JSMR, $SCMA, $SIDO and $WSKT (exhibit 4) should have their earnings relatively least altered by FX swings.

Nov 14,2016 12:37:57

The 14th stimulus - e-commerce roadmap
The government announced its 14th economic stimulus package focusing on e-commerce roadmap in Indonesia, with main emphasis on the of Small Medium Enterprises (SMEs) and e-commerce start-ups through tax inventive. Acknowledging Indonesia potential to be the biggest digital economy in Southeast Asia with 93.4m internet users and 71m smartphone users by 2020, the stimulus policy on E-commerce is timely and continue to signify government’sprolific approach to encourage robust economic activity. The roadmap for e-commerce will be prepared in 2016-2019 with targets of 1,000 technopreneurs with USD10bn valuation which brings up the e-commerce business to USD130bn in 2020.
The e-commerce business is still in early stage of development in Indonesia, with large retail companies have been embarking into this segment, with $ACES, $MAPI and $LPPF owns and operate their e-commerce platform. However, the financial benefit of this stimulus is unlikely to be immediate, and would rather be gradual. We believe with more potential development in the e-commerce segment, it could support the ad-spend growth. In the 1H16, the e-commerce has made into the top 10 largest ad-spend in Indonesia, above the like of instant noodle. As such, the media company with strong market share domination such as $MNCN and $SCMA could also benefited in the longer run. Also, growing e-commerce business could be seen as one of potential tax source for government in the future.
The government stated the road maps in 8 aspects including: i) financing, ii) taxation, iii) consumer protection, iv) education, v) logistics, vi) infrastructure, vii) cyber security, and viii) monitoring. (Helmy Kristanto)

Jul 27,2016 08:50:24
EARNINGS CALENDAR (Half Year 2016 - Estimated)

JULY 2016

Jul 25, 2016 :
$BBTN (Bank Tabungan Negara (Persero) Tbk PT)

Jul 26, 2016
$BDMN (Bank Danamon Indonesia Tbk PT)
$BMRI (Persero) Tbk PT Earnings Release - 4:00PM GMT+7

Jul 27, 2016
$AALI (Astra Agro Lestari Tbk PT)
$HMSP (Hanjaya Mandala Sampoerna Tbk PT)
$LPPF (Matahari Department Store Tbk PT)
$MPPA (Matahari Putra Prima Tbk PT)
$PTBA (Bukit Asam (Persero) Tbk PT)

Jul 28, 2016
$ASII (Astra International Tbk PT)
$BEST (Bekasi Fajar Industrial Estate Tbk PT)
$BJBR (PT Bank Pembangunan Daerah Jawa Barat dan Banten Tbk)
$DOID (Bloomberg)
$NCO (Vale Indonesia Tbk PT)
$JPFA (Bloomberg)
$PSAB (Bloomberg)
$SSMS (Bloomberg)
$SMGR (Semen Indonesia (Persero) Tbk PT)
$UNTR (United Tractors Tbk PT)
$UNVR (Unilever Indonesia Tbk PT)

Jul 29, 2016
$ASRI (Alam Sutera Realty Tbk PT)
$ADHI (Bloomberg)
$BSDE (Bumi Serpong Damai Tbk PT)
$BNGA (Bloomberg)
$BNLI (Bloomberg)
$BNII (Bloomberg)
$BKSL (Bloomberg)
$BHIT (Bloomberg)
$BISI (Bloomberg)
$CPIN (Bloomberg)
$CTRA (Ciputra Development Tbk PT)
$CTRP (Bloomberg)
$ELSA (Bloomberg)
$GIAA (Bloomberg)
$GJTL (Bloomberg)
$GGRM (Gudang Garam Tbk PT)
$NKP (Bloomberg)
$INTP (Indocement Tunggal Prakarsa Tbk PT)
$INDF (Indofood Sukses Makmur Tbk PT)
$ICBP (Indofood CBP Sukses Makmur Tbk PT)
$INDY (Bloomberg)
$KARW (Bloomberg)
$KAEF (Bloomberg)
$KIJA (Bloomberg)
$KLBF (Kalbe Farma Tbk PT)
$KRAS (Bloomberg)
$LPKR (Lippo Karawaci Tbk PT)
$LSIP (Perusahaan Perkebunan London Sumatra Indonesia Tbk PT)
$MAPI (Bloomberg)
$PWON (Bloomberg)
$PNBN, $PNLF, $PNIN (Bloomberg)
$PTPP (Bloomberg)
$RALS (Bloomberg)
$SMRA (Bloomberg)
$TBLA (Bloomberg)
$TLKM (Telekomunikasi Indonesia (Persero) Tbk PT)
$TOTL (Bloomberg)
$WSKT (Bloomberg)

Aug 1, 2016
$HRUM (Harum Energy Tbk PT)
$SSIA (Surya Semesta Internusa Tbk PT)

Aug 10, 2016
$ITMG (Indo Tambangraya Megah Tbk PT)

Aug 12, 2016
$EXCL (XL Axiata Tbk PT)

Aug 29, 2016
$ADRO (Adaro Energy Tbk PT)
$ANTM (Aneka Tambang (Persero) Tbk PT)
$BBRI (Bank Rakyat Indonesia (Persero) Tbk PT)
$ISAT (Indosat Tbk PT)
$PGAS (Perusahaan Gas Negara (Persero) Tbk PT)


Sep 13, 2016
$SMCB (Holcim Indonesia)

Apr 19,2016 12:45:00
MAPI: Expecting Margin Improvement
Pada laporan keuangan historis, MAPI mencatat laba bersih turun -61,5% yoy di FY2015, serta -76,1% yoy di FY2014 disebabkan pemberian blanket discount pada penumpukan inventory yang terjadi sejak tahun 2013 (inventory level 179 days). Pada FY 2015, inventory level tercatat di level 167 days, dimana angka tersebut telah sesuai dengan target manajemen. Kami meyakini dengan target inventory level yang telah sesuai, blanket discount tidak akan lagi dilakukan pada tahun ini serta margin akan kembali pulih. Selain itu, katalis makro seperti stabilitas rupiah juga kami yakini akan menjadi katalis positif bagi MAPI. Terkait ekspansi, MAPI menargetkan penambahan 60.000 sqm untuk berbagai gerai. MAPI juga telah mulai meluncurkan loyalty program, MAP Club, sejak awal tahun 2016. Selain itu, MAPI juga telah merilis e-commerce, MAPeMall, pertengahan tahun lalu. Sebagai kesimpulan, kami merekomendasikan BUY untuk MAPI dengan target harga Rp. 5.200/saham mencerminkan PER 26,4x di tahun 2016. 

Feb 15,2016 12:00:53
MAPI mentargetkan pertumbuhan penjualan di 2016 sebesar 13%yoy dari perkiraan pertumbuhan di 2015 sebesar 7,3%. Dalam nilai Rp14,2 – 14,3 triliun dari Rp12,68 triliun. MAPI akan menambah luas gerai 65.000 m2 (sekitar 10%) dari luas gerai di akhir 2015 sebesar 687.000m2. Same Store Growth (SSG) akan naik dari di 2015 sebesar +5% menjadi +7% di 2016. Sebesar 60% barang berasal dari impor.