RALS Limited Growth Rooms in Short Term 20180516 NHKS Company Report (English)

  Dividend yield 3.0% 3.0% 2.8% 2.9%

  EPS growth 24.6%

  The 3 new stores certainly boost sales during Ramadhan season, yet in low season, its contribution to sales remains opaque. We further overview that its focus on lifestyle-concept stores likely takes effect on long-term performance.

  Target Price of IDR1,400 We use an estimate of forward P/E of 20.9x (1SD higher than the last 2– year average) as the basis for valuation method. The target price implies a 2018E P/E of 21.4x (Vs. the current P/E of 21.1x).

  2016/12A 2017/12A 2018/12E 2019/12E

  Net sales 5,857 5,623 5,717 5,860

  Net sales growth 5.9%

  EBITDA 555 560 601 627 Net profit 409 407 440 451 EPS (IDR) 61 60 65 67

  BVPS (IDR) 496 520 550 579 EBITDA margin 9.5% 10.0% 10.5% 10.7% Net Profit Margin 7.0% 7.2% 7.7% 7.7% ROE

  However, the upbeat consignment sales of 41.2% whittled away the net sales by 2.6% y-y into IDR1.05 trillion. On the other side, the decline in direct purchase sales sent gross margin and net margin higher into 39.6% and 1.4% respectively. In light of its plan to raise the consignment sales in 2018, we project that the 2018’s net sales hardly grows significantly.

  12.2% 11.9% 12.2% 11.9%

  ROA

  8.9% 8.5% 8.8% 8.6%

  ROIC

  9.7% 9.6% 10.1% 10.1%

  P/E 19.7x 19.8x 21.1x 20.6x P/BV 2.4x 2.3x 2.5x 2.4x EV/EBITDA 13.4x 13.1x 13.8x 13.1x DPS (IDR) 36 36 38 40

  Boosting Stores Expansion ahead of Ramadhan Season Ahead of Ramadhan season, it launched 3 new stores with lifestyle concept in April–May. Of notes, the 3 stores are located in greater Jakarta areas— contribute 37% to its overall gross sales in 1Q18.

  Upbeat Consignment Suppressing Net Sales RALS succeeded to post the growth of 2.5% y-y and 411% y-y into IDR1.52 trillion and IDR14.7 trillion in gross sales and net profit respectively.

• 1.4%

  Abs. Ret. 15.0% -4.2% 16.0% 0.7% Rel. Ret. 23.1% 3.0% 27.4%

  Please consider the rating criteria & important disclaimer Company Report | May 16, 2018 Ramayana Lestari Sentosa Tbk (RALS) Limited Growth Rooms in Short Term Hold Dec 2018 TP (IDR) 1,400 Consensus Price (IDR) 1,420 TP to Consensus Price

  vs. Last Price +1.4% Shares data

  Last Price (IDR) 1,380 Price date as of May 15, 2018 52 wk range (Hi/Lo) 1,500 / 860 Free float 35.0% Outstanding sh.(mn) 7,096 Market Cap (IDR bn) 9,792 Market Cap (USD mn) 693 Avg. Trd Vol - 3M (mn)

  7.8 Avg. Trd Val - 3M (bn)

  10.2 Foreign Ownership 25.2%

  Trade, Services & Investment Retail Bloomberg RALS.IJ Reuters RALS.JK Michael Tjahjadi

• 62 21 797 6202, ext:114 michael@nhsec.co.id

  Ramayana Lestari Sentosa Tbk | Summary (IDR bn)

• -

  4.0% 1.7% 2.5%

• -

  0.5% 8.3% 2.6%

  Source: Company Data, Bloomberg, NHKS Research

  Share Price Performance YTD

  1M

  3M

  12M

• 1.9%

  A Glance at RALS RALS is a retail-based company selling apparels and accessories through Ramayana Department Store, and selling groceries through Spar Supermarket. Targeting the low- middle class consumers, it operates 116 stores: 76 stores situated in Java Island and 40 stores situated outside Java Island.

  To cushion the sluggish market circumstances, RALS cooperating with F&B tenants, cinemas, and specialties shops offers a lifestyle-based concept through Ramayana Prime Store; indeed, it cooperates with Lazada, Tokopedia, and Shopee to target the e- commerce segment.

  Indonesia’s Retail Industry in ASEAN Indonesia is the home to the biggest population in ASEAN. It furthers Indonesia into the lucrative market for the retail business. LPPF, RALS, MAPI with their stores across Indonesia dominate the retail market in Indonesia.

  The Indonesian Retailers Association (Aprindo) targets the growth of 9% in the 2018’s retail business. The authorities' policies leaving electricity tariffs and subsidized petroleum prices unchanged until 2019 are takeaway catalysts for the recovery in consumers’ purchasing power until 2019.

  The retail industry in ASEAN market is sluggish, marking the negative sales growth figures in Singapore and Thailand, for instance. This backdrop causes the retailers in ASEAN to strictly curb the operational cost with a view to balancing market. Nonetheless, in 2017, most of the retailers consistently posted high price-earnings ratio and two-digit ROE. In the margin outlook, Indonesia retailers succeeded in posting higher margin than its ASEAN peers’ margins are.

  ASEAN Retailers Market Cap Total Asset Sales Gross Operating Dividend Company ROE P/E P/BV (USD mn) (USD mn) Growth Margin Margin Yield

  LPPF 1,901 399 1.28% 62.5% 23.7% 81.7% 14.0x 10.4x 5.0% RALS 693 360 4.00% 39% 6.7% 12.2% 22.2x 2.6x 2.6%

• MAPI 975 841 15.24% 48% 6.9% 16.4% 21.9x 3.1x 0.5%

  Singapore

• Metro Holdings 717 1,114 15.12% 7% 1% 13.6% 5.0x 0.7x 4.3%

  Malaysia

• Parkson Holdings Bhd 109 2,270 2.07% N/A 3% 7.7% N/A 0.2x N/A

  Thailand

• Robinson PCL 2,188 846 0.34% 25% 1% 16.9% 25.1x 4.1x 2.0%

  Philippines

  SM Investments Corp 21,474 19,205 8.63% 39% 16% 10.4% 33.5x 3.4x 0.9% Source: Bloomberg, NHKS research

  Operational Performance Gross Sales (IDR bn)| 1Q16 - 1Q18 Net Sales by Geography in First Quarter (IDR bn)

  Source: Company, NHKS research Source: Company, NHKS research

  Store Sales Growth (YTD) | 2016 - 2018 Net Profit (IDR bn)| 1Q16 - 1Q18

  Source: Company, NHKS research Source: Company, NHKS research

  Margin Ratios | 1Q17 - 1Q18 Gross Sales by Region | 1Q18

  Source: Company, NHKS research Source: Company, NHKS research

  Multiple Valuation Forward P/E band | Last 2 years Dynamic Forward P/E band | Last 2 years

  Source: NHKS research Source: NHKS research

  Rating and target price Date Rating Target Price Last Price Consensus vs Last Price vs Consensus

  04/04/2018 Hold 1,450 1,310 1,338 +10.7% +8.4% 05/15/2018 Hold 1,400 1,380 1,420 +1.4% 1.4%

• Source: Bloomberg, NHKS research

  Closing and Target Price Analyst Coverage Rating

  Source: Bloomberg Source: NHKS research

  NH Korindo Sekuritas Indonesia (NHKS) stock ratings

  1. Period: End of year target price

  2. Rating system based on a stock’s absolute return from the date of publication : Greater than +15%

   Buy : -15% to +15%  Hold : Less than -15%  Sell

  Summary of Financials

DISCLAIMER

INCOME STATEMENT BALANCE SHEET

  

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errors, omissions, misstatements, negligence, inaccuracy arising herefrom. All rights reserved by PT NH Korindo Sekuritas Indonesia ^{RALS Summary Last Price (IDR) 1,380}

^{Target Price (IDR) 1,400 2016/12A 2017/12A 2018/12E 2019/12E}

^{Rating: Hold ROE 12.2% 11.9% 12.2% 11.9% ROA 8.9% 8.5% 8.8% 8.6% ROIC 9.7% 9.6% 10.1% 10.1% EBITDA/Equity 16.6% 16.4% 16.7% 16.5%}

^{In IDR bn 2016/12A 2017/12A 2018/12E 2019/12E EBITDA/Assets 12.0% 11.8% 12.0% 11.9%}

^{Net Sales 5,857 5,623 5,717 5,860 Cash Dividend (IDR bn) 242 240 257 269}

^{Growth (% y/y) 6% -4% 2% 3% Dividend Yield (%) 3.0% 3.0% 2.8% 2.9%}

^{COGS (3,655) (3,410) (3,413) (3,497) Payout Ratio (%) 59.2% 59.0% 58.4% 59.5%}

^{Gross Profit 2,203 2,212 2,303 2,363 DER 0.0x 0.0x 0.0x 0.0x}

^{Gross Margin 38% 39% 40% 40% Net Gearing 0.0x 0.0x 0.0x 0.0x}

^{Operating Expenses (1,834) (1,836) (1,883) (1,933) LT Debt to Equity 0.0x 0.0x 0.0x 0.0x}

^{EBIT 368 377 420 430 Capitalization Ratio 0.0x 0.0x 0.0x 0.0x}

^{EBIT Margin 6% 7% 7% 7% Equity Ratio 0.7x 0.7x 0.7x 0.7x}

^{Depreciation (187) (184) (181) (197) Debt Ratio 0.0x 0.0x 0.0x 0.0x}

^{EBITDA 555 560 601 627 Financial Leverage 1.4x 1.4x 1.4x 1.4x}

^{EBITDA Margin 9% 10% 11% 11% Current Ratio 2.8x 3.0x 3.2x 3.3x}

^{Interest Cost - - - - Quick Ratio 2.0x 2.2x 2.4x 2.6x}

^{EBT 465 467 507 519 Cash Ratio 0.6x 0.7x 0.9x 0.9x}

^{Income Tax (57) (60) (67) (68) Par Value (IDR) 50 50 50}

^{Growth (% y/y) 22% 0% 8% 3% Share Price (IDR) 1,195 1,200 1,380 1,380}

^{50 Net Profit 409 407 440 451 Total Shares (mn) 6,723 6,723 6,723 6,723 Net Profit Margin 7% 7% 8% 8% Market Cap (IDR tn) 8.0 8.1 9.3 9.3 In IDR bn 2016/12A 2017/12A 2018/12E 2019/12E 2016/12A 2017/12A 2018/12E 2019/12E}

^{Cash 604 752 968 1,051 Price /Earnings 19.7x 19.8x 21.1x 20.6x}

^{Inventories 834 741 792 791 Price /Book Value 2.4x 2.3x 2.5x 2.4x}

^{Other Current Assets 1,341 1,543 1,628 1,830 Price/Sales 1.4x 1.4x 1.6x 1.6x}

^{Total Current Assets 2,831 3,093 3,446 3,729 PE/EPS Growth 0.8x -40.6x 2.5x 8.0x}

^{Net Fixed Assets 1,279 1,235 1,173 1,108 EV/EBITDA 13.4x 13.1x 13.8x 13.1x}

^{Other Non Current Assets 53 80 67 69 EV/EBIT 20.2x 19.4x 19.8x 19.1x}

^{Total Assets 1,816 1,798 1,692 1,637 EV (IDR bn) 7,430 7,315 8,310 8,227}

^{ST Bank loans - - - - Sales CAGR (3-Yr) -0.8% -1.4% 1.1% 0.0%}

^{Payables 904 956 995 1,025 EPS CAGR (3-Yr) 3.4% 6.5% 10.3% 3.4%}

^{Total Current Liabilities 1,009 1,049 1,093 1,121 Basic EPS (IDR) 61 60 65 67 LT Debt - - - - Diluted EPS (IDR) 61 60 65 67 Other Non Current Liab. 301 349 350 356 BVPS (IDR) 496 520 550 579}

^{Total Liabilities 1,310 1,398 1,443 1,477 Sales PS (IDR) 871 836 850 872}

^{Shareholders' Equity 3,337 3,494 3,695 3,889 DPS (IDR) 36.0 35.7 38.2 40.0 In IDR bn 2016/12A 2017/12A 2018/12E 2019/12E 2016/12A 2017/12A 2018/12E 2019/12E Net Income 409 407 440 451 DCF (IDR bn) Deprec & Amortization 187 184 181 197 NOPAT 323 328 364 374 Chg. In Working Capital 162 261 (92) (173) +Depr./Amor. 187 184 181 197 CFO 757 852 529 476 -CAPEX (135) (140) (122) (130) Capex (135) (140) (122) (130) -Incr. (Decr.) in Working Cap. 162 261 (92) (173) CFI (587) (461) (73) (136) (Unlevered) FCFF 537 633 331 268 Dividends Paid (207) (242) (240) (257) WACC Net Borrowing - - - - Cost of Debt (Tax Adj.) 0.0% 0.0% 0.0% 0.0% CFF (411) (242) (240) (257) Cost of Equity (COE) 10.2% 12.5% 10.0% 12.2% Net Changes in Cash (240) 148 216}

^{83 WACC (%)}

^{10.2% 12.5% 10.0% 12.2% RIM Spread (FROE-COE) (%) 2.1% -0.3% 2.6% 0.0% Residual Income (IDR) 69 (9) 89 Indonesia 1 By Geography % Shareholders % Equity Charge 339 416 351 451 74.8 Ramayana M 55.9 EVA Hong Kong 7.8 HSBC 5.6 Invested Capital (IDR bn) 3,334 3,337 3,494 3,695 United States 5.9 Paulus Tumewu 3.7 ROIC-WACC (%) -0.5% -2.6% 0.4% -2.1% Unknown 4.9 Norges Bank 2.2 EVA (IDR bn) (16) (88) 14 (77)}

  CASH FLOW STATEMENT DCF, RIM & EVA OWNERSHIP PROFITABILITY & STABILITY _{May 15, 2018 Dec 2018 Analyst: Michael Tjahjadi}