Ramayana Lestari (RALS IJ)

Transcription

1 Ramayana Lestari (RALS IJ) HOLD (Unchanged) 29 March 2018 Results Note Equity Indonesia Retail Stock Data Target price (Rp) Prior TP (Rp) Shareprice (Rp) Rp1,185 Rp1,030 Rp1,280 Upside/downside (%) (7.4) Sharesoutstanding (m) 7,096 Marketcap. (US$ m) 660 Free float (%) 40.5 Avg. 6m dailyt/o (US$ m) Price Performance n/a 3M 6M 12M Absolute (%) Relative to JCI (%) w high/low (Rp) 1, Mar-17 Apr-17 May-17 May-17 Jun-17 Jul-17 Aug-17 RALS-Rebase Major Shareholders Ramayana Makmursentosa PT 55.9% Tumewu Paulus 3.7% Norges Bank IM Government Pension Estimate Change; Vs. Consensus 2.3% 2018F 2019F Latest EPS (Rp) Vs. Prior EPS (%) (1.5) (0.2) Vs. Consensus (%) (10.4) (31.6) Source: Bloomberg Aug-17 Sep-17 Oct-17 Oct-17 Nov-17 Dec-17 Dec-17 Jan-18 Feb-18 JCI Index-Rebase Feb-18 Mar-18 Bumpy road ahead Weak revenue growth but in-line earnings result. Margins improved as direct purchase margin increased. Cut revenue forecasts on the back of shifting customer preference. We maintain HOLD recommendation with TP of Rp1,185. In-line earnings result. Ramayana Lestari Sentosa (RALS) had a subdued 2017 net profit of Rp407bn (-0.5% yoy) which was relatively in-line with consensus (99%) and lower than our forecast (92%). On the top-line, revenue registered lower at Rp5.6tn (- 4% yoy) which was driven by declining direct purchase growth at 6% in 2017 (avg. 5- yr at 3%) though COGS also shrank to Rp3.4tn (-6% yoy) and operating costs flattened to Rp1.8tn (+0.6% yoy), expanding all the profitability margins. Gross, operating, and net profit margin gauged higher at 39.3%, 6.3%, and 7.2%, respectively (FY16: 37.6%, 6.1%, and 7.0%). On quarterly-basis, 4Q17 net profit was at Rp39bn (3Q17: - Rp1bn) cumulating 10% of FY17 earnings. Margins slightly improved. The improvement on COGS was attributable to better 2017 direct purchase margin at 29% (2016: 28%) that has trended upward over the last five years (avg. 5-yr at ). On operational level, the closure of its two rentbased stores at Bulukumba (4,300sqm) and Jakarta (3,379sqm) with the total area of 7,679sqm reduced rent expense to Rp182bn (-7% yoy) and number of employees of 10,171 (-7% yoy) that lowered overall selling expenses to Rp379bn (-7% yoy). However, total operating expenses grew flat (+0.6% yoy) to Rp1,8tn as a result of higher implied salaries paid at Rp66mn/year (+18% yoy). Slash revenue forecasts. We trimmed our revenue forecast by -3%/-2% in FY18F/FY19F. We expect better customers purchasing power in the absence of electricity tariff hike though we are cautious on whether the company will be directly benefited as there is spending preference shift toward experiential-based. The newlybuilt Ramayana Prime store serves as good example of company effort to adapt with the changing preference and possible early indication of segmentation shifting from low to middle-income class. RALS engaged other tenants (e.g. Ace Hardware and XXI cinema) as a means to increase RALS stores traffic though its implementation success remains uncertain. We thus accommodate this by lowering same store sales/sqm by - 6% and -5% in FY18F/FY19F. Maintain HOLD recommendation. Despite having geographically diverse presence, RALS derives a third of its revenue from Greater Jakarta (34%) in 2017 on which we believe many residing customers choose apparel specialist retailer over mixed retailing. Euromonitor captured apparel and footwear specialist grew faster (5-yr CAGR at 6.9%) than mixed retailer (5-yr CAGR at 6.3%) by value. But we believe RALS is still able to rely on ex-java market in the lights of better low-income spending. Therefore, We maintain our HOLD call with TP of Rp1,185 reflecting a P/E FY18F of 19.84x. Willy Goutama PT Indo Premier Sekuritas willy.goutama@ipc.co.id Year To 31 Dec 2016A 2017A 2018F 2019F 2020F Revenue (RpBn) 5,857 5,623 5,810 5,988 6,180 EBITDA (RpBn) EBITDA Growth (%) (0.5) (12.0) (0.5) Net Profit (RpBn) EPS (Rp) EPS Growth (%) 21.6 (0.5) 4.2 (16.7) (1.5) Net Gearing (%) (52.8) (58.1) (51.5) (53.1) (55.1) PER (x) PBV (x) Dividend Yield (%) EV/EBITDA (x) Source : RALS, IndoPremier Share Price Closing as of : 28-March-2018

2 Fig. 1: Improved DP margin promoted GPM better Fig. 2: Direct Purchase growth trended lower Direct Purchase Consignment Direct Purchase 5-yr DP average growth 30% 29% 28% 27% 24% 23% 22% 29% 28% 24% % 6% 5% 1% % % -6% Fig. 3: Implied annual salary growth persistently high Fig. 4: Expect modest bottom-line performance Implied annual employee salaries Salaries growth (%) GPM OPM NPM 70,000,000 45% OPEX as of net sales COGS as of net sales 60,000,000 50,000,000 40% 35% 30% 64% 62% 61% 61% 62% 62% 40,000,000 30,000,000 20,000,000 10,000, % 15% 10% 5% 0% 32% 32% 33% 33% 33% 33% 36% 38% 39% 39% 38% 38% 4% 6% 6% 7% 6% 7% 6% 7% 5% 6% 5% 6% F 2019F 2020F Fig. 5: Number of Stores from F Fig. 6: Revenue composition by Region (in %) Net Number of Stores % 41% 40% 39% 38% 38% 37% 36% 37% 35% 34% 34% 27% 27% G. Jakarta Java ex G. Jakarta Outer Java F 2019F 2020F 2

3 Fig. 7: Quarterly earnings result 4Q17 3Q17 4Q16 Change FY17 FY16 Change % forecast % consensus (IDR bn) (IDR b) (IDR b) (IDR b) (q-q%) (y-y%) (IDR b) (IDR b) (y-y%) Net sales 1, , (7.1) 5,623 5,857 (4.0) COGS (725) (565) (852) 28.4 (14.9) (3,410) (3,655) (6.7) Gross profit ,212 2, Operating cost (475) (439) (449) (1,856) (1,845) 0.6 Operating profit 5 (50) (4) (110.1) (234.3) (0.3) Interest income (8.6) Tax (93.9) nm (60) (57) 6.1 Other nm Net profit 39 (1) 47 (4,057.3) (17.2) (0.5) Others (%) Gross margin Operating margin 0.4 (5.3) (0.3) Net margin 3.2 (0.1) Fig. 8: Changes in earnings forecast FY18F FY19F (Rp Bn) old new change old new change Net Revenue 6,007 5, % 6,114 5, % Gross Profit 2,271 2, % 2,271 2, % Operating Profit % % Net Profit % % GPM 62.3% 63.5% 62.0% 63.4% OPM 26.6% 27.1% 26.2% 26.5% NPM 20.7% 21.6% 20.6% 21.3% 3

4 Year To 31 Dec (RpBn) 2016A 2017A 2018F 2019F 2020F Income Statement Net Revenue 5,857 5,623 5,810 5,988 6,180 Cost of Sales (3,655) (3,410) (3,544) (3,730) (3,860) Gross Profit 2,202 2,212 2,266 2,258 2,320 SG&A Expenses (1,845) (1,856) (1,901) (1,964) (2,032) Operating Profit Net Interest Forex Gain (Loss) Others-Net Pre-Tax Income Income Tax (57) (60) (56) (58) (60) Minorities Net Income Balance Sheet Cash & Equivalent 1,829 2,158 2,017 2,126 2,280 Receivable Inventory Other Current Assets Total Current Assets 2,831 3,093 3,044 3,187 3,374 Fixed Assets - Net 1,279 1,235 1,202 1,117 1,027 Goodwill Non Current Assets Total Assets 4,647 4,892 5,085 5,240 5,428 ST Loans Payable ,018 1,053 Other Payables Current Portion of LT Loans Total Current Liab. 1,009 1,049 1,061 1,104 1,140 Long Term Loans Other LT Liab Total Liabilities 1,310 1,398 1,419 1,473 1,522 Equity Retained Earnings 3,247 3,412 3,599 3,699 3,838 Minority Interest Total SHE + Minority Int. 3,337 3,494 3,667 3,767 3,906 Total Liabilities & Equity 4,647 4,892 5,085 5,240 5,428 Source : RALS, IndoPremier 4

5 Year to 31 Dec 2016A 2017A 2018F 2019F 2020F Cash Flow Net Income (Excl.Extraordinary&Min.Int) Depr. & Amortization Changes in Working Capital (9) 128 (19) Others (30) (39) (95) (145) (107) Cash Flow From Operating Capital Expenditure (230) (148) (408) (196) (181) Others Cash Flow From Investing (201) (118) (314) (102) (84) Loans Equity 15 0 (15) 0 0 Dividends Others (213) (8) Cash Flow From Financing (198) (8) (15) 0 0 Changes in Cash Financial Ratios Gross Margin (%) Operating Margin (%) Pre-Tax Margin (%) Net Margin (%) ROA (%) ROE (%) ROIC (%) Acct. Receivables TO (days) Acct. Receivables - Other TO (days) Inventory TO (days) Payable TO (days) Acct. Payables - Other TO (days) Debt to Equity (%) Interest Coverage Ratio (x) Net Gearing (%) (52.8) (58.1) (51.5) (53.1) (55.1) Source : RALS, IndoPremier 5

6 Head Office PT INDO PREMIER SEKURITAS Wisma GKBI 7/F Suite 718 Jl. Jend. Sudirman No.28 Jakarta Indonesia p f INVESTMENT RATINGS BUY : Expected total return of 10% or more within a 12-month period HOLD : Expected total return between -10% and 10% within a 12-month period SELL : Expected total return of -10% or worse within a 12-month period ANALYSTS CERTIFICATION. The views expressed in this research report accurately reflect the analysts personal views about any and all of the subject securities or issuers; and no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report. DISCLAIMERS This research is based on information obtained from sources believed to be reliable, but we do not make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendations contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is not and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or sell any securities. PT. Indo Premier Sekuritas or its affiliates may seek or will seek investment banking or other business relationships with the companies in this report.