FOCUS Mitra Adiperkasa Company Update 06 April 2015

Transcription

1 FOCUS XXX Company Update XX XXXXX 213 FOCUS Mitra Adiperkasa Mandiri Sekuritas Analyst Matthew Wibowo Sector : Retail BUY (from Sell) Current Price Rp6, Price Target Rp7,75 (+29.2%) 52-wk range Rp6,575 - Rp4,38 Stock Data Bloomberg Code MAPI IJ Mkt.Cap (Rp bn/us$ mn) 9,96 / 766 Issued Shares (mn) 1,66 Avg. Daily T/O (Rp bn/us$ mn) 9.5/.7 Major shareholder Satya Mulia Gema Gemilang 56.% Public 44.% EPS consensus Mansek Cons Diff 215F (1.2) 216F F Share price performance 3m 6m 12m Absolute (%) (5.5) Relative to JCI (%) (17.5) A Breath of Fresh Air The MAPI deal with CVC is giving more room for improvement in terms of i) deleveraging impact from prepayment of bank loans through zero coupon bonds and ii) operational development in MAA which will unlock value for MAPI. We upgrade our call to BUY (from Sell) and new TP Rp7,75 reflecting 24x FY16 PE. A restructuring deal with CVC. MAPI has restructured its sports, footwear and children division from holding level to a newly formed subsidiary called MAP Aktif Adiperkasa (MAA). The end goal is to make MAA a publicly listed company in the next 4-5 years while CVC, through one of its subsidiary Montage Company Limited, has the option to buy 3% stake during the IPO. In the meantime, MAPI will issue 5- year zero coupon bonds to Asia Sportswear Holding (CVC) worth Rp1.5trn which then will be used to refinance its existing bank loans. The bond later will be transferred from MAPI to MAA as part of the restructuring. Lower interest expense and net gearing for MAPI. Based on our calculation, MAPI would be able to save Rp78bn, Rp161bn and Rp182bn in interest expense for periods respectively. It is worth noting that MAPI will only receive the Rp1.5trn bond proceed in May-Jun15, hence the progressive interest expense saving going forward. Forecast revision. We adjust our margins conservatively as MAPI still applies discount on selected items to bring down its inventory level. Thus, we expect margin expansion for FY15 will be more at net margin level (+16bps yoy) as a result of interest expense saving while gross (+7bps yoy) and operating margins (+2bps yoy) expansions will still be limited. In addition, with CVC's track record in Matahari Department Store (LPPF), we believe MAA can be improved over the years and contribute more to overall margin expansions. Taking those into consideration, we fine tune our top line forecast and we revise up our bottom line estimation by 9%-15% for periods. It s a Buy. We upgrade our call to Buy (from Sell) and new TP of Rp7,75 which reflects 24x FY16 PE. FINANCIAL SUMMARY YE Dec (Rp Bn) 213A 214A 215F 216F 217F EBITDA 1,22 1,73 1,217 1,469 1,919 Net Profit Fully-diluted EPS (Rp) Fully-diluted EPS growth (%) (24.2) (77.6) P/E Ratio (x) EV/EBITDA (x) P/B Ratio (x) Dividend Yield (%) ROAE (%) Source: Company ( ), Mandiri Sekuritas ( ) Please see important disclosure at the back of this report Page 1 of 8

2 MAPI - At a Glance FIGURE 1. MAPI FINANCIAL PERFORMANCE Rpbn 18, 16, 14, 12, 1, 8, 6, 4, 2, F 216F Revenue Gross profit Operating profit Net profit FIGURE 2. WE EXPECT MARGIN TO GROW STEADILY % F 216F Gross margin Operating margin Net margin FIGURE 3. MARKET SHARES Banks Pay Rp1.5trn in bank loan Montage Company Limited Mitra Adiperkasa (MAPI) Rp1.5trn Zero Coupon Bond Ownership Zero Coupon Bond will be entitled to MAA CVC Ownership Montage Company Limited FIGURE 4. PROFITABILITY COMPARISONS VERSUS PEERS Brands under MAA Adidas Foot Gear Oshkosh B'Gosh Speedo Adidas Golf Hasbro Payless Sports Station Airwalk Honma Planet Sport Sports Warehouse Bandai Kidz Station Puma Spy Gear Barbibe Mizuno Reebok Tabata Converse New Balance Rockport Takara Tomy Crocs Nike Royal Sporting House Taylor Made Diadora Nike Golf Skechers Travelogue Ecco Oakley Soccer Station MAP Aktif Adiperkasa (MAA) Option to own 3% at IPO FIGURE 5. EPS GROWTH TREND FIGURE 6. LEVERAGE TREND Rpbn (X) (%) (2) (x) F 216F 217F Interest expense Net gearing (RHS) Dec-8 Dec-9 Dec-1 Dec-11 Dec-12 Dec-13 Net Debt/Equity (NDE) Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-2 Interest Cover [RHS] Please see important disclosure at the back of this report Page 2 of 8

3 Notes At the Edge of Transformation MAPI s restructuring should bring benefit in terms of i) positive deleveraging impact from bank loan prepayments and ii) better operational execution in MAA with the involvement of CVC in the management. Those factors will bring positive impact towards MAPI s financial performance in FY15 onwards. A structural reform. MAPI had an agreement for reorganization with newly formed MAP Aktif Adiperkasa (MAA) to spin off its company's active business. The new subsidiary will cover 35 brands and 878 outlets under sport, golf, active, kids, payless (under Putra Agung Lestari) as well as garment manufacturing plant (Mitra Garindo Perkasa). As part of the transformation, MAPI will also issue a zero coupon bond with 5- year tenor to Asia Sportswear Holding (CVC) which then will be used to refinance its existing bank loans. The bond later will be transferred from MAPI to MAA as part of the restructuring. Based on our discussion with the company, bond proceeds will be received in May-June15 after approval from EGM. The end goal is to make MAA a publicly listed company in the next 4-5 years while CVC, through one of its subsidiary Montage Company Limited, has the option to buy 3% stake during the IPO. We believe in the meantime CVC will put key people in MAA to improve its performance. Currently, the active division s main challenge is in its inventory level which in FY14 dragged down MAPI s overall performance. FIGURE 7. MAPI DEAL FOR ACTIVE AND KIDS DIVISION CAN BE CLASSIFIED IN THREE PHASES Phase 1 Phase 2 Phase 3 FIGURE 8. FUND FLOW AND OWNERSHIP STRUCTURE OF THE DEAL Montage Company Limited Ownership CVC MAPI separates sports, children and footwear to a newly formed subsidiary (MAP Aktif Adiperkasa) MAPI owns 1% of MAP Aktif Adiperkasa (MAA) MAPI issued zero coupon bond with 5 years tenor to Asia Sportswear Holding (CVC) amounting Rp1.5trn The proceed will be used to refinance MAPI s existing loan MAA will be listed within the next 4 5 years. Montage Company Limited (CVC) has option on MAA IPO to own 3% of the company. Banks Pay Rp1.5trn in bank loan MitraAdiperkasa (MAPI) Rp1.5trn Zero Coupon Bond Zero Coupon Bond will be entitled to MAA Ownership Montage Company Limited Source: Company, Mandiri Sekuritas MAP Aktif Adiperkasa (MAA) Source: Company, Mandiri Sekuritas Option to own 3% at IPO Deleveraging will kick in first. MAPI will receive the Rp1.5trn zero coupon bond proceed by mid this year which then will be used to pay bank loans in which as of FY14 was Rp1.9trn. Based on our calculation, MAPI would be able to save Rp78bn, Rp161bn and Rp182bn in interest expense for periods respectively. It is worth noting that MAPI will only receive the Rp1.5trn bond proceed in May-Jun15, hence the progressive interest expense saving going forward. Further, as the bond is considered to be non interest bearing debt, gearing level for MAPI will also drop significantly from 1.1x to.4x and.3x for 214, 215 and 216 periods respectively. Please see important disclosure at the back of this report Page 3 of 8

4 FIGURE 9. MAA HAS 35 BRANDS AND 878 OUTLETS AS OF FY14 Brands under MAA Adidas Foot Gear Oshkosh B'Gosh Speedo Adidas Golf Hasbro Payless Sports Station Airwalk Honma Planet Sport Sports Warehouse Bandai Kidz Station Puma Spy Gear Barbibe Mizuno Reebok Tabata Converse New Balance Rockport Takara Tomy Crocs Nike Royal Sporting House Taylor Made Diadora Nike Golf Skechers Travelogue Ecco Oakley Soccer Station FIGURE 1. INTEREST EXPENSE SAVING WILL BE FULLY IN EFFECT BY FY16; EXPECT DROP IN NET GEARING LEVEL Rpbn (X) F 216F 217F Interest expense Net gearing (RHS) Will the CVC-LPPF case be repeated in MAPI? Based on our discussion with MAPI, CVC will put key people in MAA's board of directors. Looking at the CVC-LPPF case with around 32% ownership, the private equity put 3 out of total 6 directors. The management's goal is to improve the company s performance and increase its profitability. Eventually, the improvement in performance will be reflected in share performance. CVC entered LPPF in 29 with Rp7.2trn or equivalent to around 72% ownership. It then did several placement from with total proceeds of Rp23.5trn or equivalent to 33% ROI. We believe CVC should do the same thing with MAA in which they will improve its performance pre-ipo in 4-5 years time. If we assume conservatively the value of MAA to be 3x of current value and other divisions remaining flat, thus MAPI s value should be around Rp13trn. FIGURE 11. LPPF STOCK PERFORMACE SINCE CVC INITIAL INVESTMENT UNTIL RECENT PLACEMENT Placement 4% Placement 11.4% FIGURE 12. CVC INVOLVEMENT IN MAA HAS THE POTENTIAL TO UNLOCK MAPI VALUE MAA Valuation Market cap (Rpbn) - assuming Rp1.5trn is equivalent to 3% 5, MAA revenue FY14 (Rpbn) 3,217 MAA net income FY14 (Rpbn) 154 Implied P/S 1.6 Implied P/E 32.5 CVC 72% Placement 6.5% Placement 8.1% MAPI valuation in 3 years time MAA market cap (Rpbn) - assuming performance improvement 15, Portion for MAPI 7% Additional value from MAA 1,5 MAPI market cap (Rpbn) prior to announcement - net of MAA 2,445 MAPI market cap total - assuming other divisions constant 12,945 MAPI current market cap 1,5 Potential upside 23.3% Source: Bloomberg Forecast revision. We adjusted our margins conservatively as MAPI still applies discount on selected items to bring down its inventory level. Thus, we expect margin expansion for FY15 will be more at net margin level (+16bps yoy), as a result of interest expense saving, while gross (+7bps yoy) and operating margins (+2bps yoy) will still be limited. In addition, with CVC's track record in Matahari Department Store (LPPF), we believe MAA can be improved over the years and contribute more to overall margin expansions. Taking those into consideration, we fine tune our top line forecast and we revise up our bottom line estimation by 9%-15%. Please see important disclosure at the back of this report Page 4 of 8

5 FIGURE 13. MAPI FORECAST REVISION Forecast Change Old New Change Rpbn Revenues 13,813 16,565 19,615 13,87 16,453 19,48 % -1% -1% COGS (7,145) (8,511) (9,979) (7,36) (8,654) (1,81) 3% 2% 1% Gross profit 6,667 8,54 9,636 6,511 7,8 9,399-2% -3% -2% Opex (5,952) (7,7) (8,349) (5,864) (6,924) (8,161) -1% -2% -2% Operating Profit , ,238-1% -11% -4% Net interest (37) (287) (283) (229) (126) (11) -25% -56% -64% Interest income % % % Interest expense (355) (335) (331) (277) (174) (15) -22% -48% -55% Pretax income , ,152 9% 11% 15% Income taxes (119) (27) (3) (13) (23) (346) 9% 11% 15% Net profit % 11% 15% Minority Interest () () () () () () % -1% -1% Net profit of owner % 11% 15% Margins Gross margin 48.3% 48.6% 49.1% 46.9% 47.4% 48.2% (1.33) (1.22) (.88) Operating margin 5.2% 5.9% 6.6% 4.7% 5.3% 6.4% (.52) (.62) (.2) Pretax 2.9% 4.2% 5.1% 3.1% 4.7% 5.9% Net margin 2.% 2.9% 3.6% 2.2% 3.3% 4.1% Source: Mandiri Sekuritas estimates Upgrade to Buy, new TP Rp7,75. We upgrade our call to Buy (from Sell) and roll over our valuation, resulting in a new target price of Rp7,75, reflecting 24x FY16 PE. It is worth noting that brands under MAA were the main drag for MAPI s FY14 performance with inventory issues. We believe with CVC's expertise in retail business and key people in MAA s management, the performance should improve over the next 3-4 years. However, we see several key risks on MAPI which include: i) competition from new brands, ii) weakening exchange rate, and iii) limited purchasing power from fuel price dynamics. FIGURE 14. MAPI FORWARD PE BAND PE (x) StDev +1 StDev Mean -1 StDev Jan-9 Aug-9 Feb-1 Sep-1 Apr-11 Oct-11 May-12 Dec-12 Jul-13 Jan-14 Aug-14 Mar-15 Source: Bloomberg, Mandiri Sekuritas estimates Please see important disclosure at the back of this report Page 5 of 8

6 MAPI FY14 Result Highlights Below expectation. MAPI's revenue was in-line with our and consensus estimates with Rp11.8trn (+21%yoy), but net profit was below estimates (5% ours and 43% cons.) with only Rp73bn (-78%yoy). We saw gross margin improvement in 4Q14, which was a sign of less product discounting and leading to better operating level as well. However, MAPI had a Rp74bn tax expense in 4Q14 period which then brought the earnings to net loss position of Rp38bn. We should have a clearer picture on tax expenses once fully detailed financials have been released. Inventory and gearing remained high. As per FY14, inventory level stood at 177 days, well above normal level of around 15 days. Further, at this point MAPI still has relatively high gearing level for retailers at 1x. Thus, the performance will still be likely to be dragged down by high interest expense going forward. In addition, we see some discounting will still continue, though not as aggressively as before, to help bring down inventory level, especially for sport items. FIGURE 15. MAPI FY14 RESULTS Rpbn 4Q14 3Q14 Q-o-Q 4Q14 Y-o-Y FY14 FY13 Y-o-Y % of Mansek % of cons Revenue 3,158 3,162 % 2,816 12% 11,822 9,734 21% 13% 1% Gross profit 1,53 1,359 11% 1,431 5% 5,47 4,849 13% 12% 11% Operating Profit % % % 99% 98% Pre-tax profit % % % 92% 87% Net profit (38) 11-45% 1-138% % 5% 43% Margins Gross 47.6% 43.% 5.8% 46.3% 49.8% Operating 5.3% 2.% 8.3% 4.4% 7.7% Pre-tax 1.1%.5% 5.9% 1.6% 5.% Net profit -1.2%.3% 3.6%.6% 3.4% Source: Company Please see important disclosure at the back of this report Page 6 of 8

7 Mitra Adiperkasa Profit & Loss YE Dec (Rp Bn) 213A 214A 215F 216F 217F Revenue 9,734 11,822 13,87 16,453 19,48 Gross Profit 4,849 5,47 6,511 7,767 9,399 Oper. Profit ,238 EBITDA 1,22 1,73 1,217 1,469 1,919 Net Interest (233) (376) (229) (126) (11) Interest Expense (24) (382) (277) (174) (15) Interest Income Forex Losses/Gains Net Other (33) Pre-Tax Profit ,152 Income Tax (157) (119) (13) (22) (346) Others Minority Interests Net Profit Cash Flow YE Dec (Rp Bn) 213A 214A 215F 216F 217F Operating Profit ,238 Net Interest (233) (376) (229) (126) (11) Depr & Amort Other expenses/income (33) Other Gain / Loss Tax (157) (119) (13) (22) (346) Chg in Working Capital (74) (387) (134) (211) (431) Other Oper. Cash Flow 33 (4) Oper. Cash Flow ,89 Capital Expenditure (957) (637) (5) (5) (6) FCF (OPCF after Capex) (85) (443) Other Investing CF (162) (232) (272) CF From Investing (94) (66) (662) (732) (872) Net Chg in Debts (285) Equity Funds Raised (54) 67 Dividend (71) (33) (15) (61) (13) Other Financing CF (2) (3) CF From Financing (2) (346) (13) Non-Recur. Inc (Exp) Extraord. Inc(Exp) Net Change in Cash (158) (123) 114 Cash at beginning Cash at End Valuation YE Dec 213A 214A 215F 216F 217F PER (x) EV/EBITDA (x) P/BV (x) P/CF (x) Dividend Yield (%) Balance Sheet YE Dec (Rp Bn) 213A 214A 215F 216F 217F Cash & ST Investment Acct. Receivable Inventory 2,942 3,23 3,345 3,696 4,29 Others 851 1,87 1,248 1,481 1,753 Current Assets 4,464 5,162 5,616 6,149 7,214 Investments Fixed Assets 2,59 2,548 2,478 2,352 2,271 Others ,145 1,358 1,68 Total Assets 7,88 8,686 9,239 9,859 11,93 Curr. Liabilities 3,995 3,842 2,585 3,57 3,61 Acct. Payable 1,25 1,136 1,173 1,385 1,632 ST Borrowings 1,658 1, Others 1,132 1,191 1,398 1,658 1,963 Long-Term Liabilities Long-Term Payable Others 83 1,812 3,325 3,4 3,4 Total Liabilities 5,38 6,77 6,333 6,52 7,72 Shareholder s Equity 2,428 2,69 2,96 3,339 4,21 Key Ratios YE Dec 213A 214A 215F 216F 217F Growth (% YoY) Sales EBIT (1.3) (3.1) EBITDA 9.1 (1.7) Net Profit (24.2) (77.6) Profitability (%) Gross Profit Margin Oper. Margin EBITDA Margin Net Margin ROAA ROAE Leverage Net Debt / Equity (%) (6.8) (2.2) (4.7) EBITDA/Gross Int. (x) Per Share Data (Rp) EPS CFPS BVPS 1,463 1,53 1,79 1,97 2,381 DPS Please see important disclosure at the back of this report Page 7 of 8

8 Mandiri Sekuritas A subsidiary of PT Bank Mandiri (Persero) Tbk Plaza Mandiri 28 th Floor, Jl. Jend. Gatot Subroto Kav , Jakarta 1219, Indonesia General: , Fax : (Equity Research), (Equity Sales) RESEARCH John Rachmat Head of Equity Research, Strategy john.rachmat@mandirisek.co.id Tjandra Lienandjaja Banking tjandra.lienandjaja@mandirisek.co.id Handoko Wijoyo Construction, Toll Road handoko.wijoyo@mandirisek.co.id Hariyanto Wijaya, CFA, CFP, CPA Plantation, Heavy eq., Energy hariyanto.wijaya@mandirisek.co.id Herman Koeswanto, CFA Consumer, Poultry herman.koeswanto@mandirisek.co.id Liliana S Bambang Property, Building Material liliana.bambang@mandirisek.co.id Ariyanto Kurniawan Telecom, Coal & Metal Mining ariyanto.kurniawan@mandirisek.co.id Matthew Wibowo Retail matthew.wibowo@mandirisek.co.id Rizky Hidayat Property, Media rizky.hidayat@mandirisek.co.id Vanessa Ariati Tanuwijaya Banking, Health Care vanessa.tanuwijaya@mandirisek.co.id Aldian Taloputra Economist aldian.taloputra@mandirisek.co.id Leo Putra Rinaldy Economist leo.rinaldy@mandirisek.co.id Aditya Sastrawinata Shipping aditya.sastrawinata@mandirisek.co.id Wisnu Trihatmojo Research Assistant wisnu.trihatmojo@mandirisek.co.id Yudha Gautama Research Assistant yudha.gautama@mandirisek.co.id Kelvin Wijaya Research Assistant Kelvin.wijaya@ mandirisek.co.id INSTITUTIONAL SALES Lokman Lie Co-Head Institutional Equities lokman.lie@mandirisek.co.id Silva Halim Co-Head Institutional Equities silva.halim@mandirisek.co.id Andrew Handaya Institutional Sales andrew.handaya@mandirisek.co.id Cindy Amelia P. Kalangie Institutional Sales cindy.amelia@mandirisek.co.id Jane Theodoven Sukardi Institutional Sales jane.sukardi@mandirisek.co.id Janefer Amanda Soelaiman Institutional Sales janefer.soelaiman@mandirisek.co.id Karmia Tandjung-Nasution Institutional Sales karmia.tandjung@mandirisek.co.id Mirna Santikara Salim Institutional Sales santikara.salim@mandirisek.co.id Oos Rosadi Institutional Sales oos.rosadi@mandirisek.co.id Vera Ongyono Institutional Sales vera.ongyono@mandirisek.co.id Yohan Setio, CFA Institutional Sales yohan.setio@mandirisek.co.id Zahra Aldila Niode Institutional Sales zahra.niode@mandirisek.co.id Kusnadi Widjaja Equity Dealing kusnadi.widjaja@mandirisek.co.id Edwin Pradana Setiadi Equity Dealing edwin.setiadi@mandirisek.co.id RETAIL SALES Boy Triyono Plaza Mandiri boy.triyono@mandirisek.co.id Boy Triyono Pondok Indah boy.triyono@mandirisek.co.id Yohanes Triyanto Kelapa Gading yohanes.triyanto@mandirisek.co.id Hendra Riady Mangga Dua hendra.riady@mandirisek.co.id Indra Mas'ari Bandung indra.mas ari@mandirisek.co.id Yogiswara P. Yogyakarta yogiswara.perdana@mandirisek.co.id Widodo Solo widodo@mandirisek.co.id Linawati Surabaya Linawati@mandirisek.co.id Bambang Suwanto Malang bambang.suwanto@mandirisek.co.id Ruwie Medan Tiara ruwie@mandirisek.co.id Aidil Idham Palembang aidil.idham@mandirisek.co.id Yuri Ariadi Pontianak yuri.ariadi@mandirisek.co.id INVESTMENT RATINGS: Indicators of expected total return (price appreciation plus dividend yield) within the 12-month period from the date of the last published report, are: Buy (1% or higher), Neutral (-1% to1%) and Sell (-1% or lower). DISCLAIMER: This report is issued by PT. Mandiri Sekuritas, a member of the Indonesia Stock Exchanges (IDX) and Mandiri Sekuritas is registered and supervised by the Financial Services Authority (OJK). Although the contents of this document may represent the opinion of PT. Mandiri Sekuritas, deriving its judgement from materials and sources believed to be reliable, PT. Mandiri Sekuritas or any other company in the Mandiri Group cannot guarantee its accuracy and completeness. PT. Mandiri Sekuritas or any other company in the Mandiri Group may be involved in transactions contrary to any opinion herein to make markets, or have positions in the securities recommended herein. PT. Mandiri Sekuritas or any other company in the Mandiri Group may seek or will seek investment banking or other business relationships with the companies in this report. For further information please contact our number or fax ANALYSTS CERTIFICATION: Each contributor to this report hereby certifies that all the views expressed accurately reflect his or her views about the companies, securities and all pertinent variables. It is also certified that the views and recommendations contained in this report are not and will not be influenced by any part or all of his or her compensation.