NH Korindo Sekuritas Indonesia
compared to 2016’s margin. The authority’s policy left electricity tariff and
subsidized petroleum price unchanged until 2019 is a takeaway factor
underpinned
RALS’s success in maintain 4Q17’s gross profit at the average
of 40%
.
Another to the success in maintaining 4Q17’s margin,
the closing of tens of
its supermarkets in 2017 was capable of stopping the last 3
-
year loss
RALS
suffered from the operation of loss
-
making supermarkets. In ahead years,
it
likely paves a way for beefing up the portion of consignment products
consistently posting the last
-
3
-
year growth in sales.
Headwind amid Recovery in Purchasing Power
Overseeing 2018’ agricultural harvest success, supportive authority's
regulations, and hike in March 2018’s core inflation, we project
the
consumers purchasing power, in particular the low
-
middle class incomes
to likely recover
.
However, the improving consumers' purchasing power proved futile to spur
3Q17 and 4Q17’s growths in sales. In fact, to face headwind of a given
paradigm shift in consumers’ shopping trend amid the
intense competition
with conventional wholesale centers
, RALS has to change the concept of
its existing stores into Ramayana Prime .
Target Price of IDR1,450
We use an estimate of forward P/E of 19.6x (1 SD higher than the last
-
3
-year average) as the basis of valuation method. The target price implies a
2018 P/E of 22.6x (vs the current P/E of 21.6x)
A Glance at RALS
RALS is retail
-
based company selling apparels and accessories through Ramayana
Department Store, and selling groceries through Spar Supermarket. Targeting the low
-middle class consumers, it operates 116 stores: 76 stores situated in Java Island and 40
stores situated outside Java Island
To cushion the sluggish market circumstances, RALS cooperating with F&B tenants,
cinemas, and specialties shops offers a lifestyle
-
based concept through Ramayana Prime
Store; indeed, it cooperates with Lazada to target the e
-
commerce segment.
Indonesia’s Retail Industry in ASEAN
Indonesia is the home to biggest population in ASEAN. It develops Indonesia into the
lucrative market for the retail business
. LPPF, RALS, MAPI with their stores across
Indonesia dominate the retail market in Indonesia.
The Indonesian Retailers Association (Aprindo) targets the growth of 9% in 2018’s retail
business. The authoritiy’s policy left an electricity tariff and a subsidized petroleum price
unchanged until 2019 is a takeaway catalyst for the recovery in consumers’ purchasing
power until 2019.
The retail industry in ASEAN market is sluggish, marking the negative sales growth figures
in Singapore and Thailand— for instance. This backdrop causes the retailers in ASEAN to
strictly curb the operational cost
with a view to balancing market. Nonetheless, in 2017,
most of retailers consistently posted high price
-
earnings ratio and two
-
digit ROE. In the
margin outlook, Indonesia retailers succeeded in
posting higher margin than its ASEAN
Source: Company, NHKS research
Source: Company, NHKS research
Source: Company, NHKS research
Store Sales Growth (YTD) | 2016 & 2017
Operational Performance
Sales (IDR bn)| 2014
-
2017
Sales by Geography (IDR bn)| 2014
-
2017
Source: Company, NHKS research
Gross Sales (IDR bn)| 2017
Source: Company, NHKS research
Source: Company, NHKS research
Multiple Valuation
Forward P/E band | Last 3 years
Dynamic Forward P/E band | Last 3 years
Rating and target price
Date
Rating
Target Price
Last Price
Consensus
vs Last Price
vs Consensus
04/04/2018
Hold
1,450
1,310
1,338
+10.7%
+8.4%
Closing and Target Price
Source: NHKS research
Analyst Coverage Rating
Source: Bloomberg
Source: NHKS research
Source: NHKS research
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
Buy : Greater than +15%
Hold : -15% to +15%
Sell : Less than -15%Summary of Financials
DISCLAIMER
This report and any electronic access hereto are restricted and intended only for the clients and related entity of PT NH Korindo Sekuritas Indonesia. This report is only for information and recipient use. It is not reproduced, copied, or made available for others. Under no circumstances is it considered as a selling offer or solicitation of securities buying. Any recommendation contained herein may not suitable for all investors. Although the information here is obtained from reliable sources, it accuracy and completeness cannot be guaranteed. PT NH Korindo Sekuritas Indonesia, its affiliated companies, respective employees, and agents disclaim any responsibility and liability for claims, proceedings, action, losses, expenses, damages, or costs filed against or suffered by any person as a result of acting pursuant to the contents hereof. Neither is PT NH Korindo Sekuritas Indonesia, its affiliated companies, employees, nor agents liable for errors, omissions, misstatements, negligence, inaccuracy arising herefrom.
In IDR bn 2016/12A 2017/12A 2018/12E 2019/12E EBITDA/Assets 12.0% 11.8% 11.5% 12.2%
Net Sales 5,857 5,623 5,736 6,077 Cash Dividend (IDR bn) 242 244 253 300
