Ramayana Lestari Sentosa

Transcription

1 2/16 3/16 4/16 5/16 6/16 7/16 8/16 9/16 10/16 11/16 12/16 1/17 2/17 (RALS IJ) More catalysts for change Trade Company Report February 23, 2017 (Maintain) Buy Target Price (12M, IDR) 1,690 Share Price (2/22/17, IDR) 1,315 Expected Return 28.5% Consensus OP (17F, IDRbn) EPS Growth (17F, %) 22.9 P/E (17F, x) 19.3 Industry P/E (17F, x) 19.1 Benchmark P/E (17F, x) 15.5 Market Cap (IDRbn) 9,331.2 Shares Outstanding (mn) 7,096.0 Free Float (mn) 2,101.1 Institutional Ownership (%) 71.3 Beta (Adjusted, 24M) Week Low (IDR) Week High (IDR) 1,510 (%) 1M 6M 12M Absolute Relative (D-1yr=100) PT. Mirae Asset Sekuritas Indonesia Retailer JCI Christine Natasya RALS January SSSG comes in soft In January 2017, same-store sales growth (SSSG) for (RALS/Buy/TP: IDR1,690) came in at 4.3%, declining 1.2%p YoY (see Figure 2). Meanwhile, total sales grew by 3.9% YoY to IDR569.6bn. By region, January 2017 SSSG was as follows: 6.6% (vs. 12.2% in January 2016) for Greater Jakarta; 1.7% (vs. 1.8%) for the rest of Java; and 3.8% (vs. 3.6%) for ex-java. Greater Jakarta showed the sharpest YoY slowdown, which we believe was caused by political instability stemming from the gubernatorial election. Nevertheless, the region s January 2017 SSSG was still significantly higher than the figure for ex-java. SSSG in ex-java saw a 20bp YoY increase, which we ascribe to the closures of several unprofitable stores. (Ex-Java s net retail sales area as a percentage of total area fell from 42.3% last year to 41%.) Ex-Java made the highest revenue contribution in January 2017, accounting for 40.9% of total revenue (+210bps from August 2016), followed by Greater Jakarta with a 34.2% contribution (+40bps from August 2016). Closures of unprofitable stores to lift margins and SSSG Early this year, RALS shut down four stores (three supermarkets and one department store). We attribute the closures of the supermarkets, which were located in Pondok Gede (Greater Jakarta), Dinoyo (East Java), and Panam (Sumatra), to their unprofitability. On the other hand, the closure of the department store, which was located in Blok M (Greater Jakarta), was caused by the expiry of its lease. Amid tight competition from minimarkets, mom-and-pop stores, and wet markets, the supermarket business appears to be the main drag on RALS. Hence, going forward, we expect additional closures of unprofitable supermarkets to lift SSSG going forward. We project RALS supermarket margin to expand to 13.2% in 2018, up 175bps from 11.5% in Pushing for a larger consignment contribution RALS is targeting increased consignment sales via logistics and greater space allocation. We expect higher consignment sales to support RALS revenue growth. Gross margin, however, is likely to slide given that, in the fashion segment, consignment margins are lower (around 25%) than outright sales margins (around ). However, OP margin is unlikely to be significantly affected, given that the wages of salespeople are paid by consignment brands. We also expect a larger consignment contribution to lead to an increase in customers on the back of diversification in product offerings. (The top consignment brands focus on shoes, while outright sales are mainly comprised of apparel.) All in all, we believe higher consignment sales will translate into higher productivity per m². FY (Dec.) 12/13 12/14 12/15 12/16 12/17F 12/18F Revenue (IDRbn) 7, , , , , ,320.7 Gross Profit 2, , , , , ,616.6 Operating Profit Net profit EPS (IDR/share) EV/EBITDA P/E ratio (x) P/BV ratio (x) ROE 13% 11% 10% 11% 13% 13% ROA 9% 8% 7% 8% 10% 9% Note: NP refers to net profit attributable to controlling interests estimates Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.

2 Target market to expand: Increased digital advertising Given its focus on low- and middle-income consumers, RALS currently does not have any significant direct competitors. However, we believe the company s target market can still be expanded, considering that recent store renovations have resulted in increased customer satisfaction and new product development. In addition, RALS is well-known for its ability to keep costs low, especially in terms of advertising spending. To manage advertising expenses, RALS is increasing its activities on social media platforms such as Facebook, Instagram, Twitter, and YouTube, which offer low-cost opportunities. Recently, RALS has been promoting its stores via LastDay Production, a well-known Indonesia-based YouTube channel established in LastDay Production makes short videos that can draw up to with 5mn views. We believe advertising via digital platforms can broaden RALS target market, as social media users are mostly middle-income consumers with gadgets and internet access. Retain Buy with TP of IDR1,690/share RALS shares have corrected by 13% over the past two weeks, due to expectations for soft revenue recognition prior to Lebaran season. Nevertheless, we believe Lebaran sales will be stronger YoY. We retain our 12-month target price of IDR1,690/share, which corresponds to a P/E of 24.8x. Currently, RALS is trading at 19.3x 2017F P/E, equivalent to its five-year average multiple. 2

3 Figure 1. Revenue breakdown by region Figure 2. Sales vs SSSG 100% 90% 80% 70% 60% 50% 30% 20% 10% 0% Ex Java Rest of Java Greater Jakarta 38.8% 39.0% 39.1% 39.2% 39.7% 40.9% 27.4% 27.2% 27.1% 27.0% 26.7% 24.90% 33.8% 33.7% 33.8% 33.8% 33.6% 34.20% Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 IDRbn Sales SSSG Jan-16 Jan % 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Figure 3. RALS SSSG by region Figure 4. Net retail sales area (2016F) 14% 12% Jan-16 Jan-17 Greater Jakarta 10% 8% 6% 4% 2% 6.6% 1.7% 3.8% 41% 32% Rest of Java Outer Island 0% Greater Jakarta Rest of Java Ex Java 27% Figure 5. RALS featured on famous YouTube channel Figure 6. Store count by region (2016F) Greater Jakarta Rest of Java Outer Island 31 Source: YouTube, 3

4 Figure 7. Outright sales vs. consignment gross margin Figure 8. Sales contribution per segment 45% GPM for fashion consignment GPM for fashion direct purchase 100% Consignment Supermarket (direct purchase) Fashion (direct purchase) 90% 80% 33% 37% 43% 35% 70% 60% 30% 50% 25% 20% 3M14 6M14 9M14 FY14 3M15 6M15 9M15 FY15 3M16 6M16 9M16 24% 30% 20% 10% 0% 32% 32% 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Figure 7. Social media feedback Figure 8. RALS aims to increase consignment sales by 20% YoY Figure 9. Consignment growth targets by category Figure 10. Sales and productivity quadrant (% growth) 27 Consignment growth sales target Shoes Mens Ladies Kids Bags Beauty Others 4

5 Figure 11. RALS target market: 68% of population Figure 12. RALS vs. peers on social media Figure 13. RALS P/E band ( x ) Std Dev Std Dev 22 Avg PER 17-1 Std Dev 12-2 Std Dev 7 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Source: Bloomberg, 5

6 (RALS/Buy/TP: IDR1,690) Income Statement (Summarized) Balance Sheet (Summarized) Year end Dec 31 (IDRbn) E 2017E 2018E Year end Dec 31 (IDRbn) E 2017E 2018E Revenue 7,786 8,383 8,824 9,321 Assets COGS (3,537) (3,732) (3,884) (4,093) Cash 844 1, ,717 Gross Profit 1,996 2,284 2,454 2,617 Receivables Opex (1,762) (1,929) (2,054) (2,180) Inventories Operating Profit Others 1,129 1,122 1,752 1,310 Other income/(expenses) 17 (2) Total current assets 2,831 3,146 3,573 3,948 Profit before income tax Fixed assets - net 1,333 1,268 1,219 1,170 Income tax expenses (29) (39) (48) (51) Advances Minority interest Others Net profit Total non-current assets 1,744 1,743 1,694 1,678 EBITDA Total Assets 4,575 4,889 5,267 5,627 Liabilities and equity Growth & margins E 2017E 2018E ST bank loans & CM Net Revenue -5.6% 8.7% 5.3% 5.9% Trade payables 900 1,017 1,059 1,115 EBITDA -14.7% 32.8% 10.1% 3.0% Others current liabilities Net profit -5.5% 17.2% 22.8% 6.0% Total current liabilities 961 1,083 1,139 1,202 Profitability (%) Long term debt Gross margin 36.1% 38.0% 38.7% 39.0% Others Operating margin 4.2% 5.9% 6.3% 6.5% Total non-current liabilities EBITDA margin 7.6% 9.3% 9.7% 9.4% Total liabilities 1,241 1,367 1,465 1,559 Minority interests Cash Flow (Summarized) Shareholders' equity 3,334 3,522 3,802 4,067 Year end Dec 31 (IDRbn) E 2017E 2018E CF from operation Net profit Depreciation/amortization Ratio analysis Year end Dec E 2017E 2018E Change in working capitals (6) 138 (8) 19 Current ratio Others 42 (45) 11 8 Quick ratio CF from operation Debt to equity CF from Investments Net debt to equity (0.3) (0.3) (0.2) (0.4) Net capex (104) (113) (119) (126) Others 125 (1) (630) 406 CF from investments 22 (113) (749) 280 CF from financing activity Increase/(decrease) in debt Increase/(decrease) in equity Dividend payments (192) (205) (197) (242) Others (129) CF from financing activity (320) (202) (162) (215) Net changes in cash (256) 780 Beg cash balance , Non-cash adjustment Ending cash 844 1, ,717 Source: Mirae Asset Sekuritas Research 6

7 APPENDIX 1 Important Disclosures & Disclaimers Disclosures As of the publication date, PT Daewoo Securities Indonesia, and/or its affiliates do not have any special interest with the subject company and do not own 1% or more of the subject company's shares outstanding. Stock Ratings Industry Ratings Buy Relative performance of 20% or greater Overweight Fundamentals are favorable or improving Trading Buy Relative performance of 10% or greater, but with volatility Neutral Fundamentals are steady without any material changes Hold Relative performance of -10% and 10% Underweight Fundamentals are unfavorable or worsening Sell Relative performance of -10% * Ratings and Target Price History (Share price (----), Target price (----), Not covered ( ), Buy ( ), Trading Buy ( ), Hold ( ), Sell ( )) * Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months. * Although it is not part of the official ratings at Daewoo Securities, we may call a trading opportunity in case there is a technical or short-term material development. * The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst s estimate of future earnings. The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic conditions. Analyst Certification The research analysts who prepared this report (the Analysts ) are registered with the Korea Financial Investment Association and are subject to Korean securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws and regulations thereof. Opinions expressed in this publication about the subject securities and companies accurately reflect the personal views of the Analysts primarily responsible for this report. Mirae Asset Daewoo Co., Ltd. ( Mirae Asset Daewoo ) policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst s area of coverage, and the Analysts do not serve as an officer, director or advisory board member of the subject companies. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report. No part of the compensation of the Analysts was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report but, like all employees of Mirae Asset Daewoo, the Analysts receive compensation that is determined by overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading and private client division. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or Mirae Asset Daewoo except as otherwise stated herein. Disclaimers This report is published by Mirae Asset Daewoo, a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange. Information and opinions contained herein have been compiled in good faith and from sources believed to be reliable, but such information has not been independently verified and Mirae Asset Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein or of any translation into English from the Korean language. In case of an English translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this report. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of the local business environment, its common practices, laws and accounting principles and no person whose receipt or use of this report would violate any laws and regulations or subject Mirae Asset Daewoo and its affiliates to registration or licensing requirements in any jurisdiction shall receive or make any use hereof. This report is for general information purposes only and it is not and shall not be construed as an offer or a solicitation of an offer to effect transactions in any securities or other financial instruments. The report does not constitute investment advice to any person and such person shall not be treated as a client of Mirae Asset Daewoo by virtue of receiving this report. This report does not take into account the particular investment objectives, financial situations, or needs of individual clients. The report is not to be relied upon in substitution for the exercise of independent judgment. Information and opinions contained herein are as of the date hereof and are subject to change without notice. The price and value of the investments referred to in this report and the income from them may depreciate or appreciate, and investors may incur losses on investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur. Mirae Asset Daewoo, its affiliates and their directors, officers, employees and agents do not accept any liability for any loss arising out of the use hereof. Mirae Asset Daewoo may have issued other reports that are inconsistent with, and reach different conclusions from, the opinions presented in this report. The reports may reflect different assumptions, views and analytical methods of the analysts who prepared them. Mirae Asset Daewoo may make investment decisions that are inconsistent with the opinions and views expressed in this research report. Mirae Asset Daewoo, its affiliates and their directors, officers, employees and agents may have long or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as principals or agents. Mirae Asset Daewoo and its affiliates may have had, or may be expecting to enter into, business relationships with the subject companies to provide investment banking, market-making or other financial services as are permitted under applicable laws and regulations. No part of this document may be copied or reproduced in any manner or form or redistributed or published, in whole or in part, without the prior written consent of Mirae Asset Daewoo. 7

8 Distribution United Kingdom: This report is being distributed by Mirae Asset Securities (UK) Ltd. in the United Kingdom only to (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Order ), and (ii) high net worth companies and other persons to whom it may lawfully be communicated, falling within Article 49(2)(A) to (E) of the Order (all such persons together being referred to as Relevant Persons ). This report is directed only at Relevant Persons. Any person who is not a Relevant Person should not act or rely on this report or any of its contents. United States: This report is distributed in the U.S. by Mirae Asset Securities (USA) Inc., a member of FINRA/SIPC, and is only intended for major institutional investors as defined in Rule 15a-6(b)(4) under the U.S. Securities Exchange Act of All U.S. persons that receive this document by their acceptance thereof represent and warrant that they are a major institutional investor and have not received this report under any express or implied understanding that they will direct commission income to Mirae Asset Daewoo or its affiliates. Any U.S. recipient of this document wishing to effect a transaction in any securities discussed herein should contact and place orders with Mirae Asset Securities (USA) Inc., which accepts responsibility for the contents of this report in the U.S. The securities described in this report may not have been registered under the U.S. Securities Act of 1933, as amended, and, in such case, may not be offered or sold in the U.S. or to U.S. persons absent registration or an applicable exemption from the registration requirements. Hong Kong: This document has been approved for distribution in Hong Kong by Mirae Asset Securities (HK) Ltd., which is regulated by the Hong Kong Securities and Futures Commission. The contents of this report have not been reviewed by any regulatory authority in Hong Kong. This report is for distribution only to professional investors within the meaning of Part I of Schedule 1 to the Securities and Futures Ordinance of Hong Kong (Cap. 571, Laws of Hong Kong) and any rules made thereunder and may not be redistributed in whole or in part in Hong Kong to any person. All Other Jurisdictions: Customers in all other countries who wish to effect a transaction in any securities referenced in this report should contact Mirae Asset Daewoo or its affiliates only if distribution to or use by such customer of this report would not violate applicable laws and regulations and not subject Mirae Asset Daewoo and its affiliates to any registration or licensing requirement within such jurisdiction. Mirae Asset Daewoo International Network Mirae Asset Daewoo Co., Ltd. (Seoul) Mirae Asset Securities (HK) Ltd. Mirae Asset Securities (UK) Ltd. Global Equity Sales Team Mirae Asset Center 1 Building 26 Eulji-ro 5-gil, Jung-gu, Seoul Korea Suites , 11th Floor Two International Finance Centre 8 Finance Street, Central Hong Kong 41st Floor, Tower Old Broad Street, London EC2N 1HQ United Kingdom China Tel: Tel: Tel: Mirae Asset Securities (USA) Inc. Mirae Asset Wealth Management (USA) Inc. Mirae Asset Wealth Management (Brazil) CCTVM 810 Seventh Avenue, 37th Floor New York, NY USA 555 S. Flower Street, Suite 4410, Los Angeles, California USA Rua Funchal, 418, 18th Floor, E-Tower Building Vila Olimpia Sao Paulo - SP Brasil Tel: Tel: Tel: PT. Mirae Asset Sekuritas Indonesia Mirae Asset Securities (Singapore) Pte. Ltd. Mirae Asset Securities (Vietnam) LLC Equity Tower Building Lt. 50 Sudirman Central Business District Jl. Jend. Sudirman, Kav Jakarta Selatan Battery Road, #11-01 Singapore Republic of Singapore 7F, Saigon Royal Building 91 Pasteur St. District 1, Ben Nghe Ward, Ho Chi Minh City Vietnam Indonesia Tel: Tel: Tel: (ext.110) Mirae Asset Securities Mongolia UTsK LLC Mirae Asset Investment Advisory (Beijing) Co., Ltd Beijing Representative Office #406, Blue Sky Tower, Peace Avenue 17 1 Khoroo, Sukhbaatar District Ulaanbaatar Mongolia 2401B, 24th Floor, East Tower, Twin Towers B12 Jianguomenwai Avenue, Chaoyang District Beijing China 2401A, 24th Floor, East Tower, Twin Towers B12 Jianguomenwai Avenue, Chaoyang District Beijing China Tel: Tel: Tel: (ext. 3300) Shanghai Representative Office 38T31, 38F, Shanghai World Financial Center 100 Century Avenue, Pudong New Area Shanghai China Ho Chi Minh Representative Office 7F, Saigon Royal Building 91 Pasteur St. District 1, Ben Nghe Ward, Ho Chi Minh City Vietnam Tel: Tel: