Matahari Putra Prima (MPPA IJ)

Transcription

1 Equity Research Company Update Thursday, 10 August 2017 SELL Maintain Last price IDR 555 Target Price IDR 450 Upside/Downside -22.2% Previous Target Price IDR 990 Stock Statistics Sector Bloomberg Ticker Retail MPPA.IJ No of Shrs (mn) 5,378 Mkt. Cap (Rpbn/USDmn) 3,012/223 Avg. daily T/O (Rpbn/USDmn) 20.1/2.3 Major shareholders PT Multipolar Tbk 50.2 Prime Star Investment Pte. Ltd Estimated free float (%) 23.7 Net Profit Consensus 2017F 2018F 2019F Danareksa (41) Consensus (81) Danareksa/Cons n/a 5% 1% MPPA relative to JCI Index Source : Bloomberg Adeline Solaiman (62-21) ext 3503 adeline.solaiman@danareksa.com Natalia Sutanto (62-21) ext 3508 natalia.sutanto@danareksa.com Matahari Putra Prima (MPPA IJ) Competition bites We maintain our SELL recommendation on MPPA with a lower TP of IDR450. Tighter competition and the risk of depressed purchasing power remain the key challenges facing the company in 2H17. We think there will be limited growth in 2018 for MPPA given the lack of a clear strategy in addition to tighter competition. Trading at a lofty valuation of 72x 2018F P/E, SELL! Limited growth in 2018 given the lack of a clear strategy. Tighter competition from rival hypermarkets and minimarket players is the key challenge faced by MPPA. Without a clear strategy or business advantage, we believe that MPPA may continue to underperform in According to Nielsen, the growth of hypermarket players was almost flat in 1H17, or much weaker than either that of minimarket players or modern retailers (exhibit 1). Competition may become even fiercer going forward. Flat revenues expected in 2017F as tighter competition bites. We trim our 2017F and 2018F revenue forecasts by 2.5% and 3.8% yoy, respectively. More encouragingly, we still hope to see 5 new store openings in 2H17 from 1 hypermart, 2 foodmart primo outlets, and 2 Boston health and beauty stores, with total additional gross retail space of about 9,650sqm. Store closures cannot be ruled out this year, however especially in Java. Against this backdrop, we forecast flat 2017F revenues growth of +0.2% yoy. 2017F gross margins contraction while its cost-cutting strategy will only have a limited impact this year. We have toned down our 2017F gross margin forecast from 16.9% to 16.2% (2016: 17.0%) given that the company s aggressive in-store promotions are likely to continue over the coming quarters. The management s cost-cutting strategy may not bear much fruit this year, in our view, owing to the challenging business environment following a sluggish 1H17. As a result, we reduce our 2017F operating margin estimate to 0.2%. SELL with a lower TP of IDR450. We believe that the outlook for MPPA in 2H17 remains extremely challenging. The poor profitability is even expected to translate into net losses this year. We are more upbeat on 2018F, however, and still hope to see an improvement in revenues growth and a bigger impact from its cost-cutting drive. We maintain our SELL call on the stock with a lower TP of IDR450 based on DCF valuation (WACC: 12.4%; terminal growth: 3%) implying 57.8x P/E 2018F. The risks to our call include a recovery in purchasing power. Key Financials Year to 31 Dec F 2018F 2019F Revenue, IDR bn 13,802 13,527 13,552 13,989 14,535 EBITDA, IDR bn EBITDA growth, (%) (30.9) (17.9) (55.2) Net profit, IDR bn (41) EPS, IDR 41 7 (8) 8 10 EPS growth (%) (60.0) (82.6) n/a n/a 34.8 BVPS, (IDR) DPS, (IDR) n/a 3.9 PER (x) n/a PBV (x) Dividend yield (%) n/a 0.7 EV/EBITDA (x) Source : MPPA, Danareksa Estimate

2 Nielsen survey: Super/hypermarkets showed below industry growth in 1H17 According to a recent Nielsen survey, the growth of modern retailers trade in Indonesia reached 4.8% yoy in 1H17. Among them, minimarkets outshone with brisk 7.0% yoy growth in 1H17. The growth of super/hypermarkets, by comparison, was below industry growth at only 0.4% yoy in 1H17. In MPPA s case, the company s revenues contracted by 3% yoy in 1H17. Going forward, the outlook for the company is likely to remain challenging, we believe. Exhibit 1. 1H17 Super/Hypermarket vs. Minimarket yoy growth, % Source: Nielsen Exhibit 2. Forecast changes Before After Changes 2017F 2018F 2019F 2017F 2018F 2019F 2017F 2018F 2019F Revenue, IDRbn 13,903 14,535 15,168 13,552 13,989 14, % -3.8% -4.2% Gross profit, IDRbn 2,346 2,453 2,560 2,196 2,364 2, % -3.6% -4.0% Operating profit, IDRbn n/a -23.1% -14.7% Pretax profit, IDRbn (55) n/a -60.1% -48.7% Net profit, IDRbn (41) n/a -62.6% -51.9% Gross margin, % 16.9% 16.9% 16.9% 16.2% 16.9% 16.9% Operating margin, % 1.2% 1.2% 1.2% 0.2% 1.0% 1.1% Pretax margin, % 1.0% 1.0% 1.0% -0.4% 0.4% 0.5% Net margin, % 0.8% 0.8% 0.8% -0.3% 0.3% 0.4% Source: Company, Danareksa Sekuritas 2

3 Exhibit 3. DCF Valuation Net present value (IDRbn) 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F 2026F 2027F Net present value estimate Cash flow multiple Discount 12.4% Free cash flow Operating profit ,041 1,180 (-) Tax 14 (14) (19) (45) (76) (108) (141) (175) (209) (245) (282) Operating profit after tax (+) Amortization and depreciation Gross cash flow ,105 1,222 (-) Capital expenditures (407) (420) (436) (460) (487) (514) (541) (569) (597) (625) (654) (+) Incremental working capital Free cash flow PV of free cash WACC 12.4% Total PV of free cash WACC 12.4% 1,226 PV residual WACC 12.4% 2,151 Corporate WACC 12.4% (IDRbn) 3,376 Shareholder value WACC 12.4% 2,506 Net debt, 2017F 540 Non controlling interest - Equity value 1,966 Net equity value per share 365 Cash & cash equivalents 330 Equity value Shareholder WACC 12.4% 2,506 TP 450 Source: Company, Danareksa Sekuritas 3

4 Exhibit 4. Income Statement Revenue 13,802 13,527 13,552 13,989 14,535 COGS (11,534) (11,233) (11,357) (11,625) (12,078) Gross profit 2,269 2,294 2,196 2,364 2,456 EBITDA Oper. profit Interest income Interest expense (46) (83) (96) (99) (100) Forex Gain/(Loss) Income from assoc. co s Other Income (Expenses) (14) Pre-tax profit (55) Income tax (50) (63) 14 (14) (19) Minority interest Net profit (41) Core Net Profit (41) Exhibit 5. Balance Sheet Cash & cash equivalent Receivables Inventory 2,498 2,747 2,542 2,554 2,675 Other Curr. Asset Fixed assets - Net 1,462 1,576 1,779 1,989 2,207 Other non-curr.asset 861 1,024 1,153 1,162 1,170 Total asset 6,033 6,702 6,914 7,323 7,629 ST Debt Payables 1,763 2,318 2,349 2,555 2,673 Other Curr. Liabilities Long Term Debt Other LT. Liabilities Total Liabilities 3,519 4,272 4,559 4,840 5,058 Shareholder's Funds 2,514 2,430 2,370 2,411 2,447 Minority interests Total Equity & Liabilities 6,033 6,702 6,928 7,252 7,504 4

5 Exhibit 6. Cash Flow Net income (41) Depreciation and Amort Change in Working Capital (563) Other Oper. Cash Flow (181) (50) (30) (10) (10) Operating Cash Flow (216) Capex (422) (399) (407) (420) (436) Others Inv. Cash Flow (34) (159) (121) (0) (0) Investing Cash Flow (456) (558) (219) (422) (439) Net change in debt New Capital Dividend payment (236) (123) (19) 0 (21) Other Fin. Cash Flow (7) Financing Cash Flow Net Change in Cash (339) (160) Cash - begin of the year Cash - end of the year Exhibit 7. Key Ratios Year to 31 Dec F 2018F 2019F Growth (%) Sales 1.6 (2.0) EBITDA (30.9) (17.9) (55.8) Operating profit (50.4) (46.9) (88.3) n/a 13.8 Net profit (60.0) (82.6) n/a n/a 34.8 Profitability (%) Gross margin EBITDA margin Operating margin Net margin (0.3) ROAA (0.6) ROAE (1.7) Leverage Net Gearing (x) Interest Coverage (x) Source : MPPA, Danareksa Estimate 5