Matahari Department Store Tbk (LPPF)

Matahari Department Store (LPPF) Tbk

  Slight Decline in 3Q18’s Performance Company Report | Nov 2, 2018 Underpinned by Sales of Retail Segment

  On annual basis, LPPF’s 3Q18 performance slightly lowered. Revenue grew by

Hold

  2.9% y-y to IDR1.86 trillion backed by the growth of 4.6% in sales of the retail segment. Nevertheless, the

  slight decline in consignment sales and the hike of Dec 2019 TP (IDR) 5,480

5.1% y-y in COGS decelerated the overall margins and bottom line. Consensus Price (IDR) 9,033

  Furthermore, net profit depleted 9.5% y-y. On the other side, LPPF’s SSSG TP to Consensus Price -39.3% (same store sales growth) nearly diving 26.0% in 3Q17 only surged to 3.6% in

  vs. Last Price +13.5% 3Q18. Despite the slight growth in SSSG, 9M18’s sales edged up 3.1% y-y.

  Shares data

  LPPF’s strategy for building collaborations with other brands, e.g. Disney,

  Last Price (IDR) 4,850

  Marvel, and activewear brands such as Nike and Puma is a potent driver for

  Price date as of Oct 31, 2018

  retail growth. Yet,

  the strategy is less successful to boost its revenue. In contrast 52 wk range (Hi/Lo) 11,650 / 4,650

  to the less fruitful strategy, 3Q18’s sales through matahari.com climbed 24.2% y-

  Free float (%)

  84.1 y, prompted by the change of shopping trend from offline to online. Outstanding sh.(mn) 2,918 Market Cap (IDR bn) 14,094

  To launch One New Store in 4Q18 Market Cap (USD mn) 936

  Despite no new store launched in 3Q18, LPPF will launch a new store in Gresik,

  Avg. Trd Vol - 3M (mn)

  11.0 East Java. Sales contribution from Java Island (outside greater Jakarta areas) hit Avg. Trd Val - 3M (bn)

  67.5

  53.6% in 3Q18. it projects the launch of 5 new stores in 2019 (vs. 3 new stores

  Foreign Ownership 71.3% launched in FY18E) and the closure of 3 less profitable stores.

  Trade, Services & Investment Target Price IDR5,480 Retail

  We use an estimate of forward P/E of 7.5x (2SD lower than the last 2-year

  Bloomberg LPPF IJ

  average). The target price implies a 2018E P/E of 8.1x. Now, LPPF is traded at a

  Reuters LPPF.JK 2018E P/E of 7.1x.

  Share Price Performance Matahari Department Store Tbk | Summary (IDR bn) 2017 2018E 2019F 2020F

  Revenue 10,024 10,380 10,739 11,183

  Revenue growth 1.3% 3.6% 3.5% 4.1%

  EBITDA 2,670 2,802 2,975 3,164 Net Profit 1,907 1,981 2,126 2,258 EPS (IDR) 654 679 728 774

  EPS growth 3.9% 7.3% 6.2%

• -5.6%

  YTD

  1M

  3M

  12M

  BVPS (IDR) 798 1,019 1,272 1,536

  Abs. Ret. -51.7% -29.5% -39.2% -52.4%

  EBITDA margin 26.6% 27.0% 27.7% 28.3%

  Rel. Ret. -43.5% -27.7% -36.0% -49.2%

  NPM 19.0% 19.1% 19.8% 20.2% ROE 91.2% 74.7% 63.6% 55.1% ROA 37.1% 34.3% 32.5% 30.7% ROIC 81.2% 66.8% 57.1% 50.2% P/E 15.3x 7.1x 6.7x 6.3x P/BV 12.5x 4.8x 3.8x 3.2x

Michael Tjahjadi

  EV/EBITDA 10.3x 4.3x 3.7x 3.3x

• 62 21 797 6202, ext:114

  DPS (IDR) 457 475 510 510

  michael@nhsec.co.id Dividend yield 4.6% 9.8% 10.5% 10.5%

  Source: Company Data, Bloomberg, NHKS Research Please consider the rating criteria & important disclaimer

  Source: Company, NHKS Research LPPF Quarterly Net Profit | 3Q16 - 3Q18

  Source: Company, NHKS Research LPPF Quarterly Revenue (IDR bn) | 3Q16 - 3Q18

  Margin Ratios | 3Q17 - 3Q18 Source: Company, NHKS Research

  Number of Stores | 2014 - 2019E Source: Company, NHKS Research

  Performance Highlights SSSG by Region | 1Q16 - 3Q18

  Source: Company, NHKS Research Third Quarter Gross Revenue by Region

  Source: Company, NHKS Research

  3Q18 review (IDR bn)

  3Q18

  3Q17

  4Q17

  1Q18

  2Q18

  4Q18E Actual Estimate y-y q-q surprise

  Revenue 1,810 2,476 1,962 3,954 1,862 1,888 2.9% -52.9% -1.4% 2,603

  1.5% -55.1% -4.4%

  Gross Profit 1,118 1,490 1,223 2,528 1,134 1,186 1,600

  Gross Margin 61.7% 60.1% 62.3% 63.9% 60.9% 62.8% 61.5%

• -0.8% -3.0% -1.9%

  EBIT 204 498 302 1,385 184 236 -9.6% -86.7% -22.0% 622

  EBIT Margin 11.3% 20.1% 15.4% 35.0% 9.9% 12.5% -1.4% -25.1% -2.6% 23.9%

  EBITDA 278 577 372 1,460 265 315 -4.7% -81.9% -15.9% 705

  EBITDA Margin 15.3% 23.3% 19.0% 36.9% 14.2% 16.7% -1.1% -22.7% -2.5% 27.1%

Net Profit 167 402 247 1,098 151 188 -9.5% -86.3% -19.5% 485

  Net Margin 9.2% 16.2% 12.6% 27.8% 8.1% 9.9% -1.1% -19.7% -1.8% 18.6% Source: Bloomberg, NHKS research Earnings revision (IDR bn) 2018E 2019F 2020F

  10,380 10,739 11,183

• Revised Revenue
>Previous 10,423 10,828 11> -Change -0.4% -0.8% -0.9%

  6,486 6,710 6,986

• Revised Gross Profit
• Previous 6,548 6,783 7,068
• Change -0.9% -1.1% -1.2%
• Revised 62.5% 62.5% 62.5% Gross Margin

  62.8% 62.6% 62.6%

• Previous EBIT -Revised 2,494 2,662 2> -Previous 2,550 2,704 2
• Change -2.2% -1.6% -1.7%

  24.0% 24.8% 25.3%

  EBIT Margin -Revised

• Previous 24.5% 25.0% 25.5% EBITDA -Revised 2,802 2,975 3> -Previous 2,856 3,026 3
• Change -1.9% -1.7% -1.6%

  27.0% 27.7% 28.3%

  EBITDA Margin -Revised

• Previous 27.4% 27.9% 28.5%
• Revised

  Net Profit 1,981 2,126 2,258

• -Previous 2,016 2,155 2,293
• -Change -1.8% -1.4% -1.5%
• Revised 19.1% 19.8% 20.2% Net Margin

  19.3% 19.9% 20.3%

• Previous

  Source: NHKS research

  LPPF at A Glance

  LPPF is a retail company running its business through Matahari brand. It was founded in 1958 as the children apparel situated in Central Jakarta. Its businesses covering retail sales, consignment, and service revenues target the low to middle-income classes. Having 155 stores situated in 74 cities across Indonesia, it dominates the retail market share in Indonesia. It performs expansion by launching new stores and developing the online platform with a view to strengthening its market share. Moreover, it also implements the strategy perfecting marketing and merchandising programs using big data analytics.

  Indonesia’s Retail Industry in ASEAN

  Indonesia is the home to the most populous nation in ASEAN. It develops Indonesia as an obviously lucrative market for the retail industry. LPPF, RALS, MAPI with their stores across Indonesia dominate the retail market in Indonesia. Besides, the stable commodity prices also advance LPPF’s outside Java’s revenue, particularly in 2Q18. The retail industry in the ASEAN markets is sluggish; for instance, Singapore-based and Thailand-based retail industries mark the negative sales growth figures. This backdrop causes the retailers in ASEAN to strictly curb the operational cost with a view to balancing the market. In contrast to its peers in ASEAN, Indonesia-based retailers are capable of posting higher margin than are its peers in ASEAN.

  ASEAN Retailers Company Market Revenue Net Profit Net Profit Asset Net ROE P/E Company Cap LTM LTM Growth P/BV (USD mn) Margin LTM LTM (USD mn) (USD mn) (USD mn) LTM Indonesia

  LPPF 936 399 737 136 -0.86% 18.5% 85.6% 7.4x 5.7x RALS 566 360 411 41 36.52% 9.9% 15.7% 14.3x 2.2x MAPI 882 841 1,326 46 91.23% 3.5% 14.0% 22.9x 2.6x

  Singapore

  Metro Holdings 658 1,299 100 113 57.75% 112.9% 10.49% 6.0x 0.6x

  Malaysia

  Parkson Holdings Bhd 86 2,219 978 (24) 17.75% -2.5% -4.30% N/A 0.2x

  Thailand

  Robinson PCL 2,177 846 814 89 2.02% 10.9% 18.26% 24.7x 4.3x

  Philippines

  SM Investments Corp 20,357 19,205 7,596 670 5.67% 8.8% 10.72% 31.5x 3.3x

  Source: Bloomberg

  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 Update Target Price Revision Date Rating Target Price Last Price Consensus vs Last Price vs Consensus

  03/02/2018 Buy 13,750 (Dec 2018) 10,800 12,751 +27.3% +7.8% 05/07/2018 Buy 11,250 (Dec 2018) 9,400 12,485 +19.7% -9.9% 09/28/2018 Buy 9,270 (Dec 2019) 6,925 9,611 +33.9% -3.5% 11/01/2018 Hold 5,480 (Dec 2019) 4,830 9,033 +13.5% -39.3%

  Source: NHKS research, Bloomberg Analyst Coverage Rating Closing and Target Price 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

   Buy : Greater than +15%

   Hold : -15% to +15%  Sell : Less than -15% Summary of Financials

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