30 March, 2015 Mitra Pinasthika Mustika Company Focus Willinoy Sitorus (willinoy.sitorus@trimegah.com) Adjust Earnings, Maintain BUY Earnings lower than expected Share price down 13% since 13 Mar 15 on lower than our expected FY14 earnings estimate (87% to our FY14 est.). We expect depressed quarterly earnings news flow to gradually abate and a modest recovery in the auto sector to be seen in 2H15 before full recovery in 2016. We expect 1Q15 earnings flat vs 4Q14 earnings before strongly picking up in 2H15. FY14 revenue grew but net profit declined on higher than expected allowance for financing impairment FY14 revenue grew 15.8% y-o-y to IDR16.1trn. However net profit declined 7.5% y-o-y amounting to IDR487bn mainly dragged by large impairment losses (IDR204bn in FY14 vs IDR83bn in FY13) coming from its financing/lease receivables as company turns more conservative by raising allowance for bad debt. 2014 opex to sales is 9.4% vs 8.4% in 2013. We slightly upgrade 2015-16 revenue by 7%/2% respectively as we upgrade our Nissan 4W sales volume. Yet, we cut 2015-16 earnings by both 13% respectively due to large portion of receivables loss allowance from its 2W financing business segment. Playing it safe - allowance for impairment is now at record high It is worth noting % allowance for collective impairment to gross consumer financing receivables is at 2.2% in FY14, higher compared to 1.4% in FY13. This is also highest in company s history. While we remain cautious of allowance remaining in elevated level of ~Rp200bn in 1Q and 2Q of this year, we think it should start declining in 2H15. 2015 single-digit earnings growth before double digit in 2016 We expect single-digit earnings growth in 2015 (+9.1% y-o-y) before booking a strong 2016 earnings growth (+23.5% y-o-y). The 2016 earnings growth is driven by next year s automotive recovery, better market share for Nissan 4W and better loan quality for its financing segment. Maintain BUY with lower TP Given USD/IDR weakening, unexciting 2M15 auto sales and MPMX s NPL hit, our 2015-16 earnings cut is reasonable in our view. Our long-term view is that auto competition to remain tight. Thus, MPMX with exposure to variety of auto brands is a winner in the long-run. We lower our DCFbased TP to IDR1,200 (from IDR1,350) implying 10x/8x 2015-16 P/E. Maintain our BUY call as share price provides 54% upside to our TP. Companies Data Year end Dec 2012 2013 2014 2015E 2016E Revenue (IDRbn) 10,777 13,879 16,076 18,151 20,806 Net Profit (IDRbn) 374 526 487 531 656 EPS (IDR) 84 118 109 119 147 EPS growth (%) 69.8 40.9-7.5 9.1 23.5 P/E (x) 9.3 6.6 7.1 6.6 5.3 P/B (x) 1.9 0.8 0.7 0.6 0.5 EV/EBITDA (x) 8.9 6.4 7.1 6.7 5.2 Div Yield (%) 4.3 0.3 0.0 3.1 5.1 Mitra Pinasthika Mustika is an automotive -related company catering to the 4W/2W distribution segment, auto components (lubricant oil), 4W rental and financing related business. BUY Company Update Stock Data Rp1,200 Share Price 780 Reuters Code MPMX.JK MPPA.JK Bloomberg Code MPMX.IJ MPPA.IJ Issued Shares (m) 4,463 5,378 Mkt Cap (Rpbn) 15,973 3,481 Average Avg. Value Daily Daily Trading USD 9.3mn 2.7 6 month (Rpbn) 52-Wk range (Rp) Rp3,500 1350 / Rp1,720 / Major Shareholders PT Saratoga Investama Sedaya 47.6% Morninglight Investment 15.3% Claris Investments 6.8% Public 30.3% Stock Price PT Trimegah Securities Tbk - www.trimegah.com COMPANY FOCUS 1 Sector Automotive Price Target Rp1,200 (+54%) Consensus Core EPS 15E 16E Consensus (Rp) na na TRIM vs Cons. (%) - - (Rp) 1,600 1,400 1,200 1,000 800 600 400 200 - Volume (RHS) Price (LHS) Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 (mn) 30 25 20 15 10 5 -
Figure 1. Earnings revision Source: TRIM Research NEW OLD CHANGE 2015F 2016F 2015F 2016F 2015F 2016F Revenue 18,151 20,806 16,969 20,341 7.0% 2.3% Gross profit 2,583 3,010 2,314 2,708 11.6% 11.2% Gross margin 14.2% 14.5% 13.6% 13.3% Operating profit 958 1,179 1,109 1,341-13.6% -12.1% Op. profit margin 5.3% 5.7% 6.5% 6.6% Pre-tax profit 772 944 911 1,121-15.3% -15.8% Pre-tax margin 4.3% 4.5% 5.4% 5.5% Net profit 531 656 613 757-13.3% -13.3% Net margin 2.9% 3.2% 3.6% 3.7% Figure 2. Financial highlights Before revised Trimegah (IDR bn) 4Q13 3Q14 4Q14 q-o-q y-o-y 2014A y-o-y 2014A/2014F Total revenue 3,568 4,163 4,065-2.4% 14.0% 16,076 15.8% 104.1% Total cost of revenue 3,057 3,577 3,482-2.7% 13.9% 13,763 16.1% Total gross profit 511 586 584-0.5% 14.3% 2,314 14.3% 106.0% Grossmargin (%) 14.3% 14.1% 14.4% 14.4% Total opex 341 378 456 20.7% 33.8% 1,507 28.6% Other income -16-18 -27 48.3% 68.5% -73 Other expenses 1 0 3 na 154.8% 11 Operating profit 185 227 151-33.2% -18.1% 868-3.7% 82.6% Operating margin (%) 5.2% 5.4% 3.7% 5.4% Interest income 23 21 35 64.2% 51.2% 107 55.2% Interest expense -60 (74) (80) 7.9% 34.0% -281 35.0% Share in net income of associates 3 1 2 12.1% -39.0% 5 21.5% Total other income/exp -34-51 -43-15.7% 27.9% -169 25.2% Pre-tax profit 151 175 108-38.4% -28.4% 699-8.8% 83.6% Pre-tax margin (%) 4.2% 4.2% 2.7% 4.3% Income tax 27 52 22-58.8% -20.9% 186-7.8% Minority interest 8 8 (2) na na 26-31.8% Net income 116 115 88-23.3% -23.7% 487-7.5% 87.0% Net margin (%) 3.2% 2.8% 2.2% 3.0% Cash 1,103 1,932 1,422 1,422 Debt 5,539 7,094 6,992 6,992 Equity 4,395 5,340 5,260 5,260 Gearing (%) 126.0% 132.8% 334.0% 132.9% Net gearing (%) 100.9% 96.7% 269.2% 105.9% Revenue segments Distribution 2,947 3,474 3,419-1.6% 14.9% 13,392 15.4% Consumer parts 330 393 385-2.2% 9.7% 1,592 10.2% Automotive services 225 358 214-40.3% 46.9% 1,174 24.7% Financial services 301 305 319 4.8% 20.2% 1,213 17.8% Elimination -235 (367) (272) -25.8% 4.7% (1,294) 13.0% Total revenue 3,568 4,164 4,065-2.4% 18.0% 16,076 15.8% Operating profit Distribution 56 91 54-40.5% 13.2% 310 4.6% Consumer parts 50 93 58-37.2% 11.1% 323 10.3% Automotive services 44 62 57-8.9% -13.5% 259 9.9% Financial services 41 24 (11) -146.6% -39.6% 101-35.9% Elimination 89 (5) (7) 25.8% -93.8% (22) -319.8% Total operating profit 280 265 152-42.8% 38.5% 970-2.2% Net profit* Distribution 54 81 51-37.1% 7.0% 278 4.1% Consumer parts 38 74 46-37.4% 15.5% 251 13.6% Automotive services 92 9 9-4.7% -53.9% 62-59.7% Financial services 41 22 (4) -116.9% -40.7% 96-34.0% Elimination/others -80 (8) 44-621.1% -488.4% 25-134.6% Total net profit 145 177 146-17.8% -10.6% 713-0.6% Source: Company, TRIM Research * Excluding the company s unallocated expenses PT Trimegah Securities Tbk - www.trimegah.com COMPANY FOCUS 2
Figure 3. DCF valuation (IDR bn) 2015F 2016F 2017F 2018F 2019F EBIT (1-tax) 718 884 1,020 1,145 1,245 Depreciation 444 505 559 622 684 Capex + Inv. in assoc (1,123) (675) (610) (700) (680) Increase (Dec.) in WC 14 (96) 280 (62) (51) Free cash flow 53 617 1,249 1,005 1,197 PV 50 520 939 674 716 Discounted FCF (2015-19) 2,899 Discounted terminal value 8,749 - Minority interest 722 - Debt 6,992 + Cash 1,422 Equity 5,357 Shares outstanding (m) 4,463 Target price 1,200 Source: TRIM Research Figure 4. WACC calculation Risk Free Rate 7.25% Equity beta 1.3 Equity RP 5% Cost of Equity 13.8% Debt Premium 3.0% Cost of Debt 11.0% Statutory Tax Rate 25.0% Target DE Debt 60.0% Equity 40.0% Target DE 150.0% Target D/DE 60.0% WACC 12.1% Nominal Long run growth 5% Source: TRIM Research PT Trimegah Securities Tbk - www.trimegah.com COMPANY FOCUS 3
Figure 5. Asia automotive distribution peers comparison AUTOMOTIVE DISTRIBUTION Source: TRIM Research, Bloomberg Market cap PER (x) PBV (x) EV/EBITDA (x) ROE (%) (USDm) 2015 2016 2015 2016 2015 2016 2015 2016 Indonesia Astra International 25,417 15.6 14.1 3.1 2.8 13.6 12.6 20.1 19.6 Indomobil Sukses Internasional 847 26.6 16.8 1.8 1.6 22.0 16.4 7.1 9.9 India Bajaj Auto Limited 9,340 16.5 14.2 5.1 4.3 12.6 10.9 32.1 31.9 Hero Motocorp Ltd 8,282 19.9 16.3 7.9 6.3 13.2 11.0 42.9 43.9 Mahindra & Mahindra 11,972 16.5 13.1 2.8 2.5 10.8 9.1 17.0 17.7 Maruti Suzuki Limited 17,393 31.1 22.6 4.5 3.9 16.7 13.0 15.7 19.2 TVS Motor 2,016 42.0 28.1 9.0 7.0 21.6 15.5 24.7 30.7 Hongkong Brilliance China 9,190 9.8 8.3 2.5 2.0 na na 28.8 26.6 Dongfeng Motor 13,534 6.3 5.7 1.0 0.9 40.5 35.2 16.8 16.4 Geely Auto 4,517 10.8 9.1 1.4 1.2 5.7 4.8 13.5 13.8 Guangzhou Auto 8,719 8.5 6.9 0.9 0.8 57.5 45.6 11.1 12.2 Korea Hyundai Motor 16,559 5.6 5.1 0.7 0.6 3.8 3.4 13.7 13.3 Kia Motors 33,607 5.6 5.3 0.7 0.6 6.6 6.3 12.5 12.2 Japan Toyota Motor 247,470 12.5 11.1 1.7 1.5 12.1 10.5 14.1 14.6 Honda Motor 61,735 12.7 10.8 1.1 1.0 9.9 8.7 9.0 9.8 Daihatsu Motor 6,573 13.0 12.7 1.3 1.2 5.6 5.4 10.2 9.7 Mazda Motor 12,452 8.6 8.6 1.8 1.5 6.1 5.5 22.9 19.0 Nissan Motor 47,718 11.4 10.0 1.1 1.0 11.0 9.8 9.9 10.5 Suzuki Motor 17,306 18.1 15.4 1.4 1.3 5.5 4.8 8.2 9.1 Yamaha Motor 8,125 11.5 10.1 1.8 1.6 7.3 6.5 17.0 16.9 Weighted Average 12.7 11.0 1.8 1.6 12.1 10.5 14.5 14.9 Mitra Pinasthika 260 6.6 5.3 0.6 0.5 6.7 5.2 11.1 12.3 MPMX's % premium/disc. to industry -48.5% -51.8% -67.1% -67.0% -44.4% -50.7% -23.4% -17.5% Figure 6. Asia automotive consumer parts peers comparison AUTOMOTIVE CONSUMER PARTS Market cap PER (x) PBV (x) EV/EBITDA (x) ROE (x) (USDm) 2015 2016 2015 2016 2015 2016 2015 2016 Indonesia Gajah Tunggal 336 6.3 4.9 0.7 0.6 5.1 4.4 10.6 12.6 Selamat Sempurna 500 15.7 14.4 5.3 4.7 9.7 9.1 31.9 33.1 Astra Otoparts 1,234 14.5 11.3 1.6 1.5 14.7 12.4 11.6 13.7 India Bharat Forge Limited 4,583 38.2 29.1 8.8 7.1 20.1 16.3 25.1 26.9 Exide Industries Ltd 2,490 23.1 19.3 4.1 3.7 14.0 12.1 18.7 20.1 Korea Hankook Tire 4,920 7.3 6.7 1.0 0.9 4.4 4.1 15.3 14.5 Hyundai Mobis 21,662 6.4 6.0 0.9 0.8 4.6 4.3 14.8 13.8 Hyundai Wia 3,462 8.0 7.3 1.2 1.0 5.3 4.7 16.1 15.3 Mando 1,357 7.9 6.7 1.1 1.0 5.4 4.8 15.5 16.0 Nexen Tire 1,149 8.6 7.7 1.2 1.1 6.6 6.2 15.0 14.5 Japan Denso 41,656 16.7 14.6 1.5 1.4 7.8 7.0 9.6 10.1 Aisin Seiki 10,823 14.3 12.1 1.1 1.0 5.0 4.5 8.1 8.8 Thailand Somboon Advance Technology 250 10.6 9.6 1.4 1.3 6.0 5.8 13.8 14.5 Thai Stanley Electric PCL 473 12.7 10.8 1.3 1.2 5.9 4.8 10.8 11.6 Weighted Average 14.1 12.2 1.7 1.5 7.3 6.5 12.4 12.6 Mitra Pinasthika 260 6.6 5.3 0.6 0.5 6.7 5.2 11.1 12.3 MPMX's % premium/disc. to industry -53.7% -56.5% -65.5% -65.3% -7.3% -20.1% -10.7% -3.0% Source: TRIM Research, Bloomberg PT Trimegah Securities Tbk - www.trimegah.com COMPANY FOCUS 4
Income Statement (IDRbn) Balance Sheet (IDRbn) Year end Dec 2012 2013 2014 2015F 2016F Year end Dec 2012 2013 2014 2015F 2016F Revenue 10,777 13,879 16,076 18,151 20,806 Gross profit 1,618 2,024 2,314 2,583 3,010 Opr. profit 746 901 868 958 1,179 EBITDA 944 1,235 1,275 1,402 1,683 Growth (%) 155.8% 30.9% 3.3% 9.9% 20.1% Net int. inc/(exp) -172-139 -174-192 -241 Share in NI of 4 4 5 6 6 Pre-tax profit 579 766 699 772 944 Tax 174 202 186 212 253 Minority int. 32 38 26 28 35 Extra. Items 1 0 0 0 0 Reported net profit 374 526 487 531 656 Growth (%) 69.8% 40.9% -7.5% 9.1% 23.5% Cash and equivalents 1,192 1,103 1,422 454 1,009 Other current asset 3,070 3,771 4,779 5,314 6,233 Net fixed asset 1,772 2,644 3,214 3,894 4,064 Other non-curr. asset 3,036 3,703 4,535 4,569 3,707 Total asset 9,070 11,220 13,950 14,231 15,013 ST debt 2,887 3,303 2,769 2,068 1,988 Other curr liab 997 1,175 1,438 1,696 1,936 LT debt 3,250 2,236 4,271 4,400 4,300 Other LT liab 99 112 212 219 226 Total liabilities 7,233 6,826 8,690 8,383 8,450 Minority interest 257 250 722 802 900 Shareholders equity 1,580 4,144 4,539 5,046 5,662 Total liab. & equity 9,070 11,220 13,950 14,231 15,013 Cash Flow (IDRbn) Year end Dec 2012 2013 2014 2015F 2016F Net profit 374 526 487 531 656 Depr / amort 82 187 156 444 505 Chg in work. cap 269-290 -474 14-96 Others -504-209 -559-290 -582 CF from op. 220 215-390 699 482 Capex -1,446-1,059-727 -1,123-675 Others -606-613 -276-35 863 CF from investing -2,052-1,672-1,003-1,158 188 Net change in debt 5,082-599 1,454-572 -180 Changes in capital 637 944 0 0 0 Others -2,862 1,022 258 63 65 CF from financing 2,857 1,368 1,712-509 -115 Others 0 0 0 0 0 Net cash flow 1,026-89 319-968 555 Cash at BoY 166 1,192 1,103 1,422 454 Cash at EoY 1,192 1,103 1,422 454 1,009 Key Ratio Analysis Year end Dec 2012 2013 2014 2015F 2016F Profitability Gross margin 15.0% 14.6% 14.4% 14.2% 14.5% Op. margin 6.9% 6.5% 5.4% 5.3% 5.7% EBITDA margin 8.8% 8.9% 7.9% 7.7% 8.1% Net margin 3.5% 3.8% 3.0% 2.9% 3.2% ROAE 30.9% 18.4% 11.2% 11.1% 12.3% ROAA 6.4% 5.2% 3.9% 3.8% 4.5% Stability Current ratio (x) 1.1 1.1 1.5 1.5 1.8 Net debt/equity (x) 2.7 1.0 1.1 1.0 0.8 Net debt/ebitda (x) 5.2 3.6 4.4 4.3 3.1 Interest coverage (x) 3.7 4.3 3.1 4.3 4.0 Efficiency A/R turnover (days) 11 12 16 16 14 Inv. turnover (days) 9 8 14 19 21 A/P turnover (days) 20 21 21 23 24 Interim results Year end Dec 4Q13 1Q14 2Q14 3Q14 4Q14 Revenue 3,568 3,642 4,206 4,163 4,065 Capital History Date 29-May-13 IPO @ 1,500 Gross Profit 511 551 592 586 584 Opr. Profit 185 244 246 227 151 Net profit 116 152 132 115 88 Gross Margins (%) 14.3% 15.1% 14.1% 14.1% 14.4% Opr. Margins (%) 5.2% 6.7% 5.8% 5.4% 3.7% Net Margins (%) 3.2% 4.2% 3.1% 2.8% 2.2% PT Trimegah Securities Tbk - www.trimegah.com COMPANY FOCUS 5
PT Trimegah Securities Tbk Gedung Artha Graha 18 th Floor Jl. Jend. Sudirman Kav. 52-53 Jakarta 12190, Indonesia t. +62-21 2924 9088 f. +62-21 2924 9150 www.trimegah.com DISCLAIMER This report has been prepared by PT Trimegah Securities Tbk on behalf of itself and its affiliated companies and is provided for information purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of any offer to buy. This report has been produced independently and the forecasts, opinions and expectations contained herein are entirely those of Trimegah Securities. While all reasonable care has been taken to ensure that information contained herein is not untrue or misleading at the time of publication, Trimegah Securities makes no representation as to its accuracy or completeness and it should not be relied upon as such. This report is provided solely for the information of clients of Trimegah Securities who are expected to make their own investment decisions without reliance on this report. Neither Trimegah Securities nor any officer or employee of Trimegah Securities accept any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. Trimegah Securities and/or persons connected with it may have acted upon or used the information herein contained, or the research or analysis on which it is based, before publication. Trimegah Securities may in future participate in an offering of the company s equity securities.