Ramayana Lestari Sentosa Tbk | Summary (IDR bn)

RALS.IJ

  12.3% 11.9% 12.0% 13.2%

  Net sales growth 5.9%

  EBITDA 555 561 573 647 Net profit 409 407 432 502 EPS (IDR)

  61

  61

  64

  75 EPS growth 24.5%

  BVPS (IDR) 496 520 548 585 EBITDA margin 9.5% 10.0% 10.0% 10.6% Net Profit Margin 7.0% 7.2% 7.5% 8.3% ROE

  ROA

  2016/12A 2017/12A 2018/12E 2019/12E

  8.9% 8.5% 8.7% 9.5%

  ROIC

  9.7% 9.6% 9.3% 10.9%

  P/E 19.6x 19.8x 20.4x 17.6x P/BV 2.4x 2.3x 2.4x 2.2x EV/EBITDA 13.4x 13.0x 14.3x 12.2x DPS (IDR)

  36

  36

  38

  45 Dividend yield 3.0% 3.0% 2.9% 3.4%

  Net sales 5,857 5,623 5,736 6,077

  Target Price of IDR1,450 We use an estimate of forward P/E of 19.6x (1 SD higher than the last-3- year average) as the basis of valuation method. The target price implies a 2018 P/E of 22.6x (vs the current P/E of 21.6x)

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

  Ramayana Lestari Sentosa Tbk | Summary (IDR bn)

  However, the improving consumers' purchasing power proved futile to spur

  Another to the success in maintaining 4Q17’s margin, the closing of tens of its supermarkets in 2017 was capable of stopping the last 3-year loss RALS suffered from the operation of loss-making supermarkets. In ahead years, it likely paves a way for beefing up the portion of consignment products consistently posting the last-3-year growth in sales. Headwind amid Recovery in Purchasing Power Overseeing 2018’ agricultural harvest success, supportive authority's regulations, and hike in March 2018’s core inflation, we project the consumers purchasing power, in particular the low-middle class incomes to likely recover.

  Success in Maintaining 2017’s Margin RALS posted respectively the downturn of 4.0% y-y and 0.5% y-y in net sales and net profit; still, it posted a slight growth in 2017’s margin compared to 2016’s margin. The authority’s policy left electricity tariff and subsidized petroleum price unchanged until 2019 is a takeaway factor underpinned RALS’s success in maintain 4Q17’s gross profit at the average of 40%.

  Last Price (IDR) 1,310 Price date as of Apr 02, 2018 52 wk range (Hi/Lo) 1,500 / 860 Free float 35.0% Outstanding sh.(mn) 7,096 Market Cap (IDR bn) 9,154 Market Cap (USD mn) 665 Avg. Trd Vol - 3M (mn)

  8.7 Avg. Trd Val - 3M (bn)

  10.5 Foreign Ownership 25.1%

  Trade, Services & Investment Retail Bloomberg

  Reuters RALS.JK Michael Tjahjadi

  3Q17 and 4Q17’s growths in sales. In fact, to face headwind of a given paradigm shift in consumers’ shopping trend amid the intense competition with conventional wholesale centers, RALS has to change the concept of its existing stores into Ramayana Prime .

• -

  4.0% 2.0% 6.0%

  Share Price Performance YTD

• -

  0.5% 6.1% 16.2%

  1M

  3M

  12M

  Abs. Ret. 9.2% 3.6% 18.6% 16.4% Rel. Ret. 11.0% 8.7% 20.1% 5.1% ^{800 950 1,100 1,250 1,400 Apr-17 Jul-17 Oct-17 Jan-18 RALS IJ Equity JCI Rebased}

  Please consider the rating criteria & important disclaimer Company Report | Apr 04, 2018 Ramayana Lestari Sentosa Tbk (RALS) Is loomed by Headwind Hold Dec 2018 TP (IDR) 1,450 Consensus Price (IDR) 1,338 TP to Consensus Price +8.4% vs. Last Price +10.7% Shares data

  Source: Company Data, Bloomberg, NHKS Research

  A Glance at RALS RALS is 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 to target the e-commerce segment.

  Indonesia’s Retail Industry in ASEAN Indonesia is the home to biggest population in ASEAN. It develops 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 2018’s retail business. The authoritiy’s policy left an electricity tariff and a subsidized petroleum price unchanged until 2019 is a takeaway catalyst 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 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 2,199 399 1.28% 62.5% 23.7% 91.2% 15.9x 13.0x 4.7% RALS 665 360 4.00% 39% 6.7% 11.9% 19.8x 2.3x 3.0%

• MAPI 965 789 15.24% 49% 6.3% 9.5% 39.4x 3.3x 0.3%

  Singapore

  Metro Holdings 717 1,114 15.12% 7% -1% 13.6% 4.8x 0.6x 4.4%

• Malaysia

  Parkson Holdings Bhd 113 2,270 2.07% N/A -3% -7.7% N/A 0.2x N/A

  Thailand

  Robinson PCL 2,208 846 0.34% 25% -1% 17.3% 25.1x 4.2x 2.0%

• Philippines

  SM Investments Corp 22,446 19,205 8.63% 39% 16% 10.5% 35.5x 3.6x 0.8% Source: Bloomberg, NHKS research

  Operational Performance Sales (IDR bn)| 2014 - 2017 Sales by Geography (IDR bn)| 2014 - 2017

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

  Store Sales Growth (YTD) | 2016 & 2017 Gross Sales (IDR bn)| 2017

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

  Gross, Net Profit & EBIT Margin| 2014 - 2017 Direct Purchase & Consignment Margin | 2014 - 2017

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

  Multiple Valuation Forward P/E band | Last 3 years Dynamic Forward P/E band | Last 3 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% 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) 1,310}

^{Target Price (IDR) 1,450 2016/12A 2017/12A 2018/12E 2019/12E}

^{Rating: Hold ROE 12.3% 11.9% 12.0% 13.2% ROA 8.9% 8.5% 8.7% 9.5% ROIC 9.7% 9.6% 9.3% 10.9% EBITDA/Equity 16.6% 16.4% 16.0% 17.0%}

^{In IDR bn 2016/12A 2017/12A 2018/12E 2019/12E EBITDA/Assets 12.0% 11.8% 11.5% 12.2%}

^{Net Sales 5,857 5,623 5,736 6,077 Cash Dividend (IDR bn) 242 244 253 300}

^{Growth (% y/y) 6% -4% 2% 6% Dividend Yield (%) 3.0% 3.0% 2.9% 3.4%}

^{COGS (3,655) (3,410) (3,462) (3,638) Payout Ratio (%) 59.2% 59.9% 58.7% 59.8%}

^{Gross Profit 2,202 2,212 2,273 2,439 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) (1,892) (1,991) LT Debt to Equity 0.0x 0.0x 0.0x 0.0x}

^{EBIT 369 377 382 448 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) (191) (199) Debt Ratio 0.0x 0.0x 0.0x 0.0x}

^{EBITDA 555 561 573 647 Financial Leverage 1.4x 1.4x 1.4x 1.4x}

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

^{Interest Cost - - - - Quick Ratio 2.0x 2.2x 2.4x 2.5x}

^{EBT 465 467 493 562 Cash Ratio 0.6x 0.7x 0.6x 0.8x}

^{Income Tax (57) (60) (62) (61) Par Value (IDR) 50 50 50}

^{Growth (% y/y) 22% 0% 6% 16% Share Price (IDR) 1,195 1,200 1,310 1,310}

^{50 Net Profit 409 407 432 502 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 8.8 8.8 In IDR bn 2016/12A 2017/12A 2018/12E 2019/12E 2016/12A 2017/12A 2018/12E 2019/12E}

^{Cash 604 752 626 924 Price /Earnings 19.6x 19.8x 20.4x 17.6x}

^{Inventories 834 741 844 829 Price /Book Value 2.4x 2.3x 2.4x 2.2x}

^{Other Current Assets 1,341 1,543 1,755 1,958 Price/Sales 1.4x 1.4x 1.5x 1.4x}

^{Total Current Assets 2,831 3,093 3,289 3,770 PE/EPS Growth 0.8x -43.1x 3.4x 1.1x}

^{Net Fixed Assets 1,279 1,235 1,203 1,158 EV/EBITDA 13.4x 13.0x 14.3x 12.2x}

^{Other Non Current Assets 53 80 97 81 EV/EBIT 20.2x 19.4x 21.4x 17.6x}

^{Total Assets 1,816 1,798 1,783 1,725 EV (IDR bn) 7,430 7,315 8,181 7,882}

^{ST Bank loans - - - - Sales CAGR (3-Yr) -0.8% -1.4% 1.2% 1.2%}

^{Payables 904 956 933 1,075 EPS CAGR (3-Yr) 3.4% 6.5% 9.5% 7.1%}

^{Total Current Liabilities 1,009 1,049 1,018 1,164 Basic EPS (IDR) 61 61 64 75 LT Debt - - - - Diluted EPS (IDR) 61 61 64 75 Other Non Current Liab. 301 349 371 402 BVPS (IDR) 496 520 548 585}

^{Total Liabilities 1,310 1,398 1,390 1,565 Sales PS (IDR) 871 836 853 904}

^{Shareholders' Equity 3,337 3,494 3,682 3,931 DPS (IDR) 36.0 36.3 37.7 44.7 In IDR bn 2016/12A 2017/12A 2018/12E 2019/12E 2016/12A 2017/12A 2018/12E 2019/12E Net Income 409 407 432 502 DCF (IDR bn) Deprec & Amortization 187 184 191 199 NOPAT 324 329 334 400 Chg. In Working Capital 162 261 (351) (39) +Depr./Amor. 187 184 191 199 CFO 757 852 272 662 -CAPEX (135) (140) (160) (156) Capex (135) (140) (160) (156) -Incr. (Decr.) in Working Cap. 162 261 (351) (39) CFI (587) (461) (154) (111) (Unlevered) FCFF 537 634 14 405 Dividends Paid (207) (242) (244) (253) WACC Net Borrowing - - - - Cost of Debt (Tax Adj.) 0.0% 0.0% 0.0% 0.0% CFF (411) (245) (244) (253) Cost of Equity (COE) 10.2% 11.5% 12.1% 12.2% Net Changes in Cash (240) 146 (126) 298 WACC (%) 10.2% 11.5% 12.1% 12.2% RIM Spread (FROE-COE) (%) 2.1% 0.7% 0.3% 1.4% Residual Income (IDR) 70 23 9 Indonesia 53 By Geography % Shareholders % Equity Charge 339 384 423 449 74.9 Ramayana Makmur S 55.9 EVA Hong Kong 7.8 HSBC 5.6 Invested Capital (IDR bn) 3,334 3,337 3,494 3,682 United States 5.8 Paulus Tumewu 3.7 ROIC-WACC (%) -0.5% -1.6% -2.5% -1.3% Unknown 4.9 Norges Bank 2.2 EVA (IDR bn) (15) (55) (89) (49)}

  CASH FLOW STATEMENT DCF, RIM & EVA OWNERSHIP PROFITABILITY & STABILITY _{April 2, 2018 Dec 2018 Analyst: Michael Tjahjadi}