Ramayana Lestari Sentosa

Transcription

1 Ramayana Lestari Sentosa Price is in the market Electricity hikes affect buying power The government s plan to increase the price of electricity in July 21 by 18% for household users utilizing above 9 kwh or 1% (blended all segment) will affect inflation rate. Bank Indonesia predicts that the inflation rate will increase around,5%, which will weaken consumer buying power at least until the yearly salary Upah Minimum Regional adjustment. The new electricity tariff will pose some impact on RALS since energy represents 15% of total operating expense, or 3% of total revenue. Market price has fully reflected company value Year to date, RALS share price has increased by 43,5% and the Jakarta consumer index has edged up by 42,9%. This outperformed the Jakarta Composite index which only increased by 15%. Currently, RALS is trading at 16,8X PE 211 while the Jakarta composite index is trading at 14,9X PE 211. With ROE 21 projected at 14,6%, we see that the current market price has fully reflected the fair value of RALS. More store to be opened outside Java RALS plan to expand its stores in 21 is already underway. Year to date, the company has expanded 32, sqm. Another additional 25, sqm and 3, sqm are expected to be opened in 3Q and 4Q 21, respectively. This brings to a total of 87, sqm, representing 11% of current RALS gross space. Most of the stores will be opened outside Java as it will enjoy an average of 5% higher gross profit than in the greater Jakarta and Java areas. Harry Wijaya Harry@bps.co.id Stock Data Price Rp Target Rp Recommendation 52-weeks range Rp Market Cap (Rp bn) Outstanding shares (mn shares) Daily average volume ( shares) Daily average value (Rp mn) Shareholders Ramayana Makmur Sentosa Paulus Tumewu Public 96 9 HOLD 51 1,1 6,781 7,64 3,436 2,962 56,1% 3,7% 4,2% Along with store expansions, the supermarket division will also increase its contribution to total revenue in terms of size and percentage. Going forward, the supermarket division strives to improve its poor gross profit quality. In general, the supermarket business will be able to generate a 16-2% gross profit margin, while RALS supermarket unit is expected to generate a 1-13% gross profit margin. Recommendation HOLD, TP Rp9 Based on a DCF valuation, we determine RALS target price to be at Rp9, implying a 17,2X FY1 PE and 15,7X FY11 PE. Given inflation pressures and the current demanding valuation, we recommend a HOLD on the counter. RALS is currently trading at multiples of 18,3X FY1 PE. Financial Highlights In IDR million 27A 28A 29A 21F 211F Revenue 4,893 5,526 5,459 6,24 7,12 Gross Profit 1,324 1,524 1,471 1,598 1,819 Operating Profit Net Profit EPS Stock Price 1,2 1, Jan-3 Jan-4 Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Source: Bloomberg Key Ratios 27A 28A 29A 21F 211F P/E (X) P/BV (X) ROA 12.7% 14.3% 1.4% 1.7% 1.5% ROAE 17.9% 19.2% 13.9% 14.6% 15.%

2 Inflation and cost structure Since June 29, Indonesia has the benefit of a low and stable inflation rate of below 4%. However, from June 29 until May 21, the composite index has gained a total of 38%. As a result, inflation figures in May 21 for the first time reached above 4% to a figure of 4.16%, driven mostly by food price increases due to abnormal weather conditions. Pushed by an electricity tariff increase, consensus expects inflation figure in June 21 to reach 4,66%, which will consequently put pressure on consumer purchasing power. Most of RALS operating expenses were allocated to salaries (34%) and electricity (16%). The expected 16% electricity tariff increase for business users, to become effective in July 21, will pose some impact on RALS total expenses. Inflation VS Composite index figures RALS Operating cost structure JCI Inflation Transport, Promotion & Others, 2% Maintenance, 3% Salaries, 34% Dec-6 Jun-7 Dec-7 Jun-8 Dec-8 Jun-9 Dec-9 Source : Bloomberg Rental, 8% Depreciation, 11% Electricity, 16% Positive catalyst has been factored in Year to date, RALS share price has increased by 43,5% while the Jakarta consumer index has edged up by 42,9%. The Jakarta Composite index only increased by 15%. Historically, RALS was trading at an average of 15,4X its rolling PE. With the current price already at its peak at 18,3X FY1 PE, we see that all the upsides have already been reflected in the share price. Rolling PE RALS VS Jakarta Consumer Index RALS JAK Consumer Jan-2 Jan-3 Jan-4 Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Stdev +1: 18,6X Avg: 15,4X Stdev -1: 12,3X Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Source : Bloomberg Source : Bloomberg 2

3 Better GDP growth in 21 to elevate revenue Despite a negative 1,2% y-o-y drop in sales volume for full year 29, the sales figure has improved in late 29 and continues to improve in 21 as the economic environment recovers. Note that the company has never experienced negative sales growth prior to the economic crisis. The sales figure is projected to improve supported by the predicted 5,5% GDP growth in 21, which is much higher than 4,3% in 29. In addition, the sales number in 1Q 21 has reached Rp1,11 trillion, presenting a 15% increase y-o-y. RALS revenue Revenue (IDR ' bilion) Net Profit (IDR ' billion) GDP growth RALS monthly revenue % 5.7% 5.5% 6.1% 3. 5.% % Q9 1Q1 8.% 6.% 4.% 2.% Jan-8 Apr-8 Jul Oct-8 Jan-9 Apr-9 Jul Oct-9 Jan-1 Apr-1 1Q1 performance is on target RALS gross profit margin is well maintained at the level of 32%. However, net profit dropped to Rp25,49 billion, or 4% lower y-o-y due to a Rp7,89 billion foreign exchange loss in 1Q1. This contrasts to a Rp14,9 billion foreign exchange gain in 1Q9. Historically, 1Q revenue represents 18% of annual sales. Year to date, the company s sales figure is inline with our target forecast for FY1. However, the electricity tariff increase plan in July may negatively affect the company s forecasted peak sales figure as inflation is impacted. In addition, the estimated sales during the 3Q September (Lebaran holiday) may have negative effects as people will have less discretionary income as a result of higher electricity costs. On the company s expenses side, the new tariff poses a 16% increase on average for business users, translating to 2,4% increase to RALS operating expenses. RALS 1Q 21 Financial Highlights In IDR Billion 1Q 1 1Q 9 +/(-) FY1 F Achieve (%) Revenue 1, % 6,24 18% COGS % 4,642 18% Gross Profit % 1,598 18% Operating Profit % 396 5% Pre-tax profit % 449 6% Net Profit % 37 7% Gross Margin 32% 31% Operating Margin 2% 1% Net Margin 3% 5%, Batavia Prosperindo Sekuritas 3

4 Supermarket business decreases RALS blended gross margin The supermarket business keeps increasing its contribution to RALS total revenue. The supermarket business was 29% of total revenue in 29. The business was previously designed as a complement to its main fashion business and is expected to generate enough income to cover operating expenses during low season sales. The company s supermarket division underperforms its peers by only generating a 1-13% gross profit margin, while its peers like ALFA & HERO can bring an average gross profit margin of 21% in 29. As the supermarket division is getting bigger both in terms of size and revenue contribution to RALS, the company is now putting a more serious effort to improve the division s gross profit quality. The current threat for RALS supermarkets is the recent development of mini-market stores around RALS supermarket locations. Supermarket contribution to total revenue Gross Margin Supermarket Fashion Toy, stationary, houseware Supermarket Fashion Toys, Sta., Houseware RALS 1% 75% 5% 9.9% 9.4% 9.% 8.8% 8.2% 9.2% 62.5% 62.1% 62.1% 61.9% 62.7% 58.2% 4.% 3.% 2.% 25% 27.6% 28.5% 28.9% 29.3% 29.1% 32.6% % Q1 1.%.% Develop more outside Jakarta & Java RALS plans to expand its business outside greater Jakarta and Java as it provides higher productivity (in terms of revenue/sqm) and better profit margins due to the relatively few competitors in the area. RALS has opened a store in Abepura (Papua) to further penetrate the untapped East Indonesian market. This store will be used also as the warehouse for other upcoming branches in the area (a new store in Sorong is under construction and will be opened soon in early 211). In some areas, RALS is the market leader and the only department store player. At times, RALS was even seen as an entertainment center for the people in the area; thus, RALS can offer a wider product selection to serve low to high class segments. As a result, a higher-than-usual profit margin can be expected. Year to date, RALS has opened 32, sqm of new stores in Cinere, Padang, and Abepura (Papua). Additional stores of 25, sqm is expected to open at Samarinda in 3Q 21 as well as an approximate total of 3, sqm of new stores at Balikpapan, Pekanbaru, and Padalarang in 4Q 21. Greater Jakarta contribution to total sales Gross Profit Margin 1% 8% Greater Jakarta Rest of Java Outside Java 33% 35% 36% 42% 43% Gross Profit (%) Jakarta Rest of Java Ex-Java 3.% 6% 4% 23% 25% 26% 24% 25% 2.% 2% 43% 41% 38% 34% 32% % % YTD 4

5 HOLD, with target price of Rp9 Based on our valuation using the discounted free cash flow model, our target price for RALS is Rp9 with an assumed WACC of 12,2% and 5% terminal growth. At our target price, RALS will be trading at 15,7X FY11 PE. Given the electricity inflation pressures in the coming months as well as current RALS valuation which is already at its peak, we recommend a HOLD on RALS. Ramayana Lestari Sentosa: DCF Valuation FY11F FY12F FY13F FY14F FY15F EBIT (+) Depreciation & Amortisation (-) Tax (86) (97) (12) (111) (114) (-) Capex (35) (35) (3) (3) (3) (+/-) Changes in WC (4) 2 Free Cash Flow (Rp billion) WACC 12.2% 12.2% 12.2% 12.2% 12.2% PV of Free Cash Flow (Rp billion) Total PV of FCF (Rp billion) 1,418 Terminal Value (Rp billion) 7,326 PV of Terminal Value 4,127 Net total cash (Rp billion) 826 Total value (Rp billion) 6,37 Shares Outstanding (mn shares) 7,64 Value Per Share (Rp) 9 (Rounded from Rp92) Valuation Assumption Risk Free Rate 9.% Risk Premium 5.% Beta.77 Cost of equity 12.8% Cost of debt 9.4% Target debt to equity ratio 2% WACC 12.2% Terminal growth rate 5% 5

6 INCOME STATEMENT (in IDR billion) F 211F Revenue 4,893 5,526 5,459 6,24 7,12 COGS 3,569 4,2 3,987 4,642 5,283 Gross Profits 1,324 1,524 1,471 1,598 1,819 Operating Expenses 957 1,17 1,15 1,22 1,38 Operating Profits Interest Income Interest Expense Loss on Forex Others - net Total Other Income Pretax Profits Income Tax Net Income BALANCE SHEETS (in IDR billion) F 211F Cash & equivalents ST investments Trade receivables Other receivables Merchandise inventory - net Advances & prepaid expenses Current portion of LT rent Total Current Assets 1,836 1,698 1,759 1,89 2,155 Property & Equipment - Net ,79 1,195 Prepaid LT rent Contract value 941 1,76 1,141 1,216 1,291 Cumulative expired portion Current portion Net Guarantee deposit Others Advances for Fixed Asset Purchase Total Other Assets TOTAL ASSETS 2,886 3,4 3,29 3,469 3,839 Trade payables Other payables Accrued expenses Taxes payables Total Current Liabilities Deferred tax liabilities Employees benefits liabilities Total Non-Current Liabilities TOTAL LIABILITIES ,54 Stock Capital Premium on capital stock Share option Unrealised gain on securities available for sale Retained earnings 1,695 1,96 2,22 2,143 2,345 TOTAL EQUITY 2,154 2,327 2,473 2,594 2,796 TOTAL LIABILITIES & EQUITY 2,886 3,4 3,29 3,48 3,85 CASH FLOWS (in IDR billion) F 211F Net Profit Depreciation and amortisation Changes in Working Capital Changes in other CA/CL Others CFO Fixed assets capex Long Term Rent capex Changes in other investments Other non-ca CFI Dividend payment Equity financing Others CFF

7 Research Team Head Office Chase Plaza, 12th Floor Jl.Jend.Sudirman Kav 21, Jakarta 1292 Tel : Fax : Yusuf Ade Winoto Head of Research yusuf@bps.co.id Strategy, Banking, Coal Hendrik Cement, Construction hendrik@bps.co.id Jap Harry Wijaya Research Assistant harry@bps.co.id Wilim Hadiwijaya Research Assistant wilim@bps.co.id Branches Bandung Jl.Jend Gatot Subroto No.47 C, Bandung 4262 Tel : Fax : Medan Jl.Ir Djuanda No.16-J, Medan 2157 Tel : Fax : Surabaya Jl.Sulawesi No.56, Surabaya 6281 Tel : Fax : Malang Jl.Kahuripan No.5, Malang Tel : Fax : Palembang Jl.Rajawali No D - Palembang Tel : (hunting) Fax : Yogyakarta Jl Magelang No 91 - Yogyakarta Makassar Ruko Ruby No.9 Jl. Boulevard Panakukang - Makasar Batavia Prosperindo Sekuritas Investment Ratings: BUY expected total return of 1% or more; HOLD expected total return of -1% to 1%; SELL expected total return of -1% or more. Expected total return is defined as 12-month total return (including dividends). DISCLAIMER The information contained in this report has been taken from sources we deem reliable, however, PT. Batavia Prosperindo Sekuritas or its affiliates, cannot guarantee its accuracy and completeness. The views expressed in this report accurately reflect personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations and/or views in this report. Nothing in this report constitutes a representation that any investment strategy or recommendation contained herein is suitable or appropriate to a recipient s individual circumstances. This report is published solely for information purposes and should not be considered as a solicitation or an offer to buy or sell any securities. Neither PT. Batavia Prosperindo Sekuritas nor any of its affiliates and/or employees accepts any liability for any direct or consequential losses arising from any use of this publication. Copyright and database rights protection exists in this publication and it may not be reproduced, distributed and/or published by any person for any purpose without prior consent of PT. Batavia Prosperindo Sekuritas. All rights are reserved. Our report is also available at Bloomberg, BPSJ <GO> ISI Emerging Market,