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Good morning,
Matahari Department
Store: No More Leverage
Matahari’s profit posted impressive CAGR of
32% in 2013-2015, thanks to deleveraging, but its operating profit posted
only modest CAGR of 14% during the same period. With no more debt in its
books, we forecast slower profit CAGR of 13% in 2016-2018F. Matahari is
currently trading at relatively low multiples compared to its historical
range, and we believe this is justified given our expectations of a slower
growth profile, with further competition risk from online shops. We
reinitiate coverage with NEUTRAL and DCF-derived TP of IDR16,000 (5%
upside).This report marks the transfer of coverage to Stifanus Sulistyo.
¨ No
more growth leverage. Financial deleveraging was Matahari Department Store’s
(Matahari) biggest source of profit growth in 2013-2015.At that time, revenue
and EBIT posted CAGR of only 14%, while profit posted much faster CAGR of
32%. Without financial deleveraging, it would have only posted low- to
mid-teens earnings growth over the last four years. As it had paid down all
debts in 4Q15, we expect slower profit CAGR of 13% in 2016-2018F.
¨ Post
deleveraging, extra cash for dividends or investments? Post deleveraging,
it has extra cashflows that can be allocated for more dividends or new
investments. New investments would signal its confidence in the sector’s
prospects while higher dividends would suggest the contrary. We believe that
the most lucrative opportunities are in online shops, which appear to offer
mouth-watering long-term promise but hazy economics in the foreseeable
future. With its cash flow muscle, we believe Matahari can still afford to
invest in its e-commerce platform, mataharimall, which would strengthen its
longer-term strategic positional though returns appear vague at this point –
this is a strategic business decision with a different investment horizon
from public investors.
We forecast IDR1.8-2.5trn free cashflows
and IDR1.2-1.8trn dividends in 2016-2018F.Thissuggests that Matahari would
have IDR400-500bn extra cashflows pa after a 70-80% payout, which Matahari
could use to explore new opportunities or simply increase its payout ratio
further, in our view.
¨ Online
battle ground. Our
analysis of various data points suggest that Matahari’s key target market is
also a battle ground with online channels – particularly in “middle-middle I”
and “middle-low II” segments. Based on our estimates, digital buyer
penetration rate ranges around 15-23%,mostly from higher segments in the
“upper” to “middle-middle I” segments. Upcoming digital buyers over the next
few years will likely come more from the “middle-middle I” and “middle-low
II” segments, which are Matahari’s key target segments.
¨ Reinitiate
coverage with NEUTRAL. We reinitiate coverage with a NEUTRAL rating and
IDR16,000TP derived from 10-year DCF with 12.5% WACC and 3% terminal growth.
The stock is trading at relatively low multiples compared to its historical
range and may potentially benefit from rising commodity prices. Nevertheless,
we believe the lower multiples are justified given the company’s slower
projected growth profile, with further competition risk from e-commerce. The
stock trades at 2017F/2018F P/Es of 19/17x,with 11%/11% earnings growth and
3.7%/4.2% dividend yield in 2017F/2018F respectively. (Stifanus Sulistyo)
Link
to report: Matahari Department Store : No More Leverage
Link to Daily report: Indonesia Morning Cuppa - 080217 |
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Visit
Notes:
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Bumi Serpong Damai (BSDE IJ, BUY, TP: IDR2,650), Analyst Meeting Takeaway
During
the analyst meeting, management guided 16% YoY growth for 2017 marketing
sales to reach IDR7,225bn (15% below our initial estimate) where 49% will
come from residential (Vs 64% in FY16), 39% from commercial (Vs 27% in FY16),
and IDR840bn will be from land sales to Mitsubishi (IDR560bn in FY16).
Based
on the given information, management seems more positive this year especially
on BSD commercial lot sales due to several inquiries that has been received
with expectation to be able to sell 15 – 20 Ha. Target BSD commercial lot
itself accounts for 21% from IDR7.225bn. In regards to JV with Mitsubishi,
the Masterplan is still in progress and product launch from the JV maybe in
2018.
Maintain
Buy with TP: IDR 2,650 implying 19.3x FY17F PE with 50% discount to RNAV
while watching out for key risks such as:
i. Lower than expected pre-sales achievements
ii. Project construction delays. (Yualdo Tirtakencana Yudoprawiro)
Pura
Delta Lestari ( DMAS IJ, Not Rated), Analyst Meeting Takeaway
During
the meeting, management is guiding 2017 marketing sales to reach IDR1.5trn
with the following breakdown:
Source:
Company
Year
to date, inquiries for industrial land has reached 100 Ha with a few serious
buyers soon to be closed. Management indicated that significant sales has
been closed with official announcement scheduled for next week. We think this
sale may come from the 30 Ha sale to pharmaceutical company as mentioned on
our previous
company visit note.
New
residential products will also be launched to anticipate and target the
working population along the surrounding 3 industrial estates with a price
tag ranging from IDR800mn – 1bn/unit. Meanwhile, ASP for industrial land for
this year may range from IDR1.7 – 1.8 million/sqm.
Currently
DMAS has the largest industrial net saleable land bank amongst its peers at
1,076 Ha and it is trading at 12.2x FY17F consensus PE implying 32% discount
to consensus NAV. (Yualdo Tirtakencana
Yudoprawiro)
Surya
Semesta Internusa (SSIA IJ, Under Review), Analyst Meeting Notes
For
2017, management is guiding 20 Ha of industrial land sales with estimated ASP
US$150/sqm Vs 10.4 Ha land sold with US$125/sqm in 2016. Meanwhile, its
construction subsidiary Nusa Raya Cipta (NRCA IJ, Not Rated) is aiming for
IDR3.3 trn of new contracts with revenue targeted to achieve IDR2.9trn. Capex
allocation for 2017 will be IDR1.5trn where 69% will be for property
projects, 25% for office projects, 5% for Hotel projects, and the remaining
for NRCA.
The
company is in the middle of divesting its Cipali toll road stake for
IDR2.5trn to Astratel with EGMS scheduled on 22 March 2017. The proceeds will
be used to acquire 500 Ha of land in Subang, together with 531 Ha acquired in
2016 will make their land bank in Subang to be over 1,000 Ha.
Management
also plans to enter a toll road tender (as a minority stakeholder ~20%) that
will stretch 38 Km from Cipali toll road in the middle of Subang to Patimban
port. Investment cost for this toll road project is estimated around IDR 5
trn. Assuming the plan to realize, Subang may attract both foreign and
domestic investors to the industrial area because the location is near to the
new Patimban port and Kertajati airport both expected to commence operation
in 2019. Management also estimate that the company can start selling Subang
in 2019 following completion of infrastructure and developments in 2018.
Other
future company plans also include high-rise residential development in the
mid sector with ASP ranging from IDR15-20 mn/sqm that will have synergy with
NRCA and development of office space in Kuningan area with gross area of
85,000 sqm that will contribute to recurring income in 2021.
SSIA
is currently trading at 6.6x FY17F consensus PE with 51% discount to
consensus NAV. We will be reviewing our forecast to better represent 2017
target, Subang acquisition, and toll road divestment. (Yualdo Tirtakencana Yudoprawiro)
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Media
Highlights:
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Economics
Foreign exchange reserves slightly increased to USD116.9bn in Jan Corporates
Arwana’s higher January sales YoY
Bumi Resources’ shareholders approves
IDR35.1trn right issue at IDR926 per share
Sentul City sets right issue price at
IDR112 per share
Food and beverages industry is projected to
grow by 8.5% YoY
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Our
Recent Publication:
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Economics update:
Economic Growth Moderated Further In 4Q16
Link to report: Economic
Growth Moderated Further In 4Q16
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Reinitiating
Coverage: Ramayana Lestari – Playing Offense
Link to report: Ramayana
Lestari : Playing Offense
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Sector News Flash:
Regional Oil & Gas - Keep a Vigilant Eye On Middle East Tensions
Link to report: Keep
a Vigilant Eye On Middle East Tensions
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Sector update:
Regional Plantation - Share Prices Lagging CPO Prices
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Sector update:
Consumer Non-cyclical - Higher Selling Prices In January
Link to report: Higher
Selling Prices In January
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Economic update: Inflation Picked Up
in January
Link to report: Inflation
Picked Up in January
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Results review: XL Axiata - Reinventing For The
Future
Link to report: XL
Axiata : Reinventing For The Future
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Economic update: Money Supply Rises, Loan Growth
Curbs At End 2016
Link to report: Money
Supply Rises, Loan Growth Curbs At End 2016
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Result review: Bank Rakyat
Indonesia - The Biggest Micro Lender Story Continues
Link to report: Bank
Rakyat Indonesia : The Biggest Micro Lender Story Continues
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Company update:
Garuda Metalindo - Key
Beneficiary Of 2W Sales Recovery
Link to report: Garuda
Metalindo : Key Beneficiary Of 2W Sales Recovery
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Best regards,
Helmy Kristanto
Director
Head of Indonesia
Research
PT. RHB Securities
Indonesia
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