Company Report | Nov 2, 2018
Tbk
(LPPF)
Slight Decline in 3Q18
’
s Performance
Hold
Dec 2019 TP (IDR)
5,480
Consensus Price (IDR) 9,033 TP to Consensus Price -39.3%
vs. Last Price +13.5%
Shares data
Last Price (IDR) 4,850
Price date as of Oct 31, 2018 52 wk range (Hi/Lo) 11,650 / 4,650
Free float (%) 84.1
Matahari Department Store Tbk | Summary (IDR bn)
2017 2018E 2019F 2020F
Source: Company Data, Bloomberg, NHKS Research
YTD 1M 3M 12M
Abs. Ret. -51.7% -29.5% -39.2% -52.4%
Rel. Ret. -43.5% -27.7% -36.0% -49.2%
Underpinned by Sales of Retail Segment
On annual basis, LPPF’s 3Q18 performance slightly lowered. Revenue grew by
2.9% y-y to IDR1.86 trillion backed by the growth of 4.6% in sales of the retail segment. Nevertheless, the slight decline in consignment sales and the hike of
5.1% y-y in COGS decelerated the overall margins and bottom line.
Furthermore, net profit depleted 9.5% y-y. On the other side, LPPF’s SSSG (same store sales growth) nearly diving 26.0% in 3Q17 only surged to 3.6% in 3Q18. Despite the slight growth in SSSG, 9M18’s sales edged up 3.1% y-y.
LPPF’s strategy for building collaborations with other brands, e.g. Disney, Marvel, and activewear brands such as Nike and Puma is a potent driver for retail growth. Yet, the strategy is less successful to boost its revenue. In contrast to the less fruitful strategy, 3Q18’s sales through matahari.com climbed 24.2% y -y, prompted by the change of shopping trend from offline to online.
To launch One New Store in 4Q18
Despite no new store launched in 3Q18, LPPF will launch a new store in Gresik, East Java. Sales contribution from Java Island (outside greater Jakarta areas) hit 53.6% in 3Q18. it projects the launch of 5 new stores in 2019 (vs. 3 new stores launched in FY18E) and the closure of 3 less profitable stores.
Target Price IDR5,480
We use an estimate of forward P/E of 7.5x (2SD lower than the last 2-year average). The target price implies a 2018E P/E of 8.1x. Now, LPPF is traded at a 2018E P/E of 7.1x.
Source: Company, NHKS Research
LPPF Quarterly Net Profit | 3Q16 - 3Q18
Source: Company, NHKS Research
LPPF Quarterly Revenue (IDR bn) | 3Q16 - 3Q18
Margin Ratios | 3Q17 - 3Q18
Source: Company, NHKS Research
Number of Stores | 2014 - 2019E
Source: Company, NHKS Research
Performance Highlights
SSSG by Region | 1Q16 - 3Q18
Source: Company, NHKS Research
Third Quarter Gross Revenue by Region
3Q18 review (IDR bn)
Source: Bloomberg, NHKS research
3Q17 4Q17 1Q18 2Q18 Actual Estimate 3Q18 y 4Q18E
ASEAN Retailers Company
LPPF is a retail company running its business through Matahari brand. It was founded in 1958 as the children apparel situated in Central Jakarta. Its businesses covering retail sales, consignment, and service revenues target the low to middle-income classes. Having 155 stores situated in 74 cities across Indonesia, it dominates the retail market share in Indonesia.
It performs expansion by launching new stores and developing the online platform with a view to strengthening its market share. Moreover, it also implements the strategy perfecting marketing and merchandising programs using big data analytics.
Indonesia’s Retail Industry in ASEAN
Indonesia is the home to the most populous nation in ASEAN. It develops Indonesia as an obviously lucrative market for the retail industry. LPPF, RALS, MAPI with their stores across Indonesia dominate the retail market in Indonesia. Besides, the stable commodity prices also advance LPPF’s outside Java’s revenue, particularly in 2Q18.
The retail industry in the ASEAN markets is sluggish; for instance, Singapore-based and Thailand-based retail industries mark the negative sales growth figures. This backdrop causes the retailers in ASEAN to strictly curb the operational cost with a view to balancing the market. In contrast to its peers in ASEAN, Indonesia-based retailers are capable of posting higher margin than are its peers in ASEAN.
SM Investments Corp 20,357 19,205 7,596 670 5.67% 8.8% 10.72% 31.5x 3.3x
Multiple Valuation
Forward P/E band | Last 2 yearsSource: NHKS research
Dynamic Forward P/E band | Last 2 years
Source: NHKS research
Rating and Target Price Update
Target Price RevisionDate Rating Target Price Last Price Consensus vs Last Price vs Consensus
03/02/2018 Buy 13,750 (Dec 2018) 10,800 12,751 +27.3% +7.8%
05/07/2018 Buy 11,250 (Dec 2018) 9,400 12,485 +19.7% -9.9%
09/28/2018 Buy 9,270 (Dec 2019) 6,925 9,611 +33.9% -3.5%
11/01/2018 Hold 5,480 (Dec 2019) 4,830 9,033 +13.5% -39.3%
Source: NHKS research, Bloomberg
Closing and Target Price
Source: NHKS research Analyst Coverage Rating
Source: Bloomberg
NH Korindo Sekuritas Indonesia (NHKS) stock ratings
1. Period: End of year target price2. Rating system based on a stock’s absolute return from the date of publication
Summary of Financials
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