Indonesia: Bumpy road ahead

Transcription

1. Ramayana Lestari HOLD Bumpy road ahead Target price (Rp) Rp1,185 Prior TP (Rp) Rp1,030 Shareprice (Rp) Rp1,280 Upside/downside (%) 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. (7.4) Sharesoutstanding (m) 7,096 Marketcap. (US$ m) We maintain HOLD recommendation with TP of Rp1,185. 660 Free float (%) 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. 5yr 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. 40.5 Avg. 6m dailyT/O (US$ m) n/a Price Performance 3M 6M 12M 6.7 42.2 11.3 10.0 38.2 2.7 Absolute (%) Relative to JCI (%) 52w high/low (Rp) 1,280 - 860 140 130 120 110 100 90 JCI Index-Rebase Major Shareholders Ramayana Makmursentosa PT 55.9% Tumewu Paulus 3.7% Norges Bank IM Government Pension 2.3% Estimate Change; Vs. Consensus 2018F Latest EPS (Rp) 60 50 (1.5) (0.2) (10.4) (31.6) Vs. Prior EPS (%) Vs. Consensus (%) Source: Bloomberg Willy Goutama PT Indo Premier Sekuritas willy.goutama@ipc.co.id +62 21 5793 1168 2019F Mar-18 Feb-18 Jan-18 Feb-18 Dec-17 Dec-17 Oct-17 RALS-Rebase Nov-17 Sep-17 Aug-17 Jul-17 Aug-17 Jun-17 May-17 Apr-17 May-17 70 Oct-17 80 Mar-17 Results Note (Unchanged) Stock Data Equity | Indonesia | Retail 29 March 2018 (RALS IJ) 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 26%). 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. Year To 31 Dec Revenue (RpBn) EBITDA (RpBn) EBITDA Growth (%) Net Profit (RpBn) EPS (Rp) EPS Growth (%) Net Gearing (%) PER (x) PBV (x) Dividend Yield (%) EV/EBITDA (x) Source : RALS, IndoPremier Refer to Important disclosures in the last page of this report 2016A 5,857 527 38.9 408 58 21.6 (52.8) 20.6 1.8 4.8 12.0 2017A 5,623 535 1.5 407 57 (0.5) (58.1) 20.9 1.7 4.8 11.5 2018F 5,810 532 (0.5) 424 60 4.2 (51.5) 20.8 1.7 4.8 12.4 2019F 5,988 469 (12.0) 353 50 (16.7) (53.1) 25.0 1.6 4.0 13.7 2020F 6,180 466 (0.5) 348 49 (1.5) (55.1) 25.4 1.6 3.9 13.5 Share Price Closing as of : 28-March-2018
2. RALS IJ Result Note Fig . 1: Improved DP margin promoted GPM better Direct Purchase Fig. 2: Direct Purchase growth trended lower Direct Purchase Consignment 30% 5-yr DP average growth 12% 29% 29% 28% 28% 6% 27% 5% 26% 1% 26% 26% 26% 25% 25% 25% 24% 2012 24% -2% 2014 2013 2015 2016 2017 23% -6% -7% 22% 2014 2015 2016 2017 Source: RALS, IndoPremier Source: RALS, IndoPremier Fig. 3: Implied annual salary growth persistently high Implied annual employee salaries Fig. 4: Expect modest bottom-line performance Salaries growth (%) 70,000,000 45% 60,000,000 40% GPM OPM OPEX as of net sales COGS as of net sales 64% 35% 62% NPM 61% 61% 62% 62% 50,000,000 30% 40,000,000 25% 30,000,000 20% 15% 20,000,000 10% 10,000,000 33% 32% 32% 5% 4% 6% 33% 39% 38% 36% 6% 7% 33% 39% 6% 7% 33% 38% 6% 7% 38% 5% 6% 5% 6% 0% - 2013 2014 2015 2016 2015 2017 Source: RALS, IndoPremier 2016 2017 2018F 2019F 2020F Source: RALS, IndoPremier Fig. 5: Number of Stores from 2010-2020F Fig. 6: Revenue composition by Region (in %) 41% 40% Net Number of Stores 130 123 125 118 120 113 115 110 39% 38% 36% 126 38% 37% 37% 35% 33% 34% 34% 120 116 114 116 26% 27% 27% 26% 113 26% 26% G. Jakarta Java ex G. Jakarta 106 107 Outer Java 105 100 95 2015 Source: RALS, IndoPremier Refer to Important disclosures in the last page of this report 2016 2017 2018F 2019F 2020F Source: RALS, IndoPremier 2
3. RALS IJ Result Note Fig . 7: Quarterly earnings result (IDR bn) 4Q17 3Q17 4Q16 (IDR b) (IDR b) (IDR b) ———Change——— (q-q%) (y-y%) FY17 FY16 Change (IDR b) (IDR b) (y-y %) Net sales 1,205 953 1,297 26.4 (7.1) 5,623 5,857 (4.0) COGS (725) (565) (852) 28.4 (14.9) (3,410) (3,655) (6.7) 0.4 Gross profit 480 388 445 23.5 7.9 2,212 2,202 (475) (439) (449) 8.2 5.8 (1,856) (1,845) 0.6 Operating profit 5 (50) (4) (110.1) (234.3) 356 357 (0.3) Interest income 33 28 25 19.4 33.7 110 120 (8.6) Tax 1 24 2 (93.9) nm (60) (57) 6.1 Other 5 3 28 81.1 nm 20 11 39 (1) 47 (4,057.3) (17.2) 407 408 Operating cost Net profit (0.5) % forecast % consensus 100.0 96.2 100.0 92.9 100.0 99.4 Others (%) Gross margin 39.8 40.7 34.3 39.3 37.6 Operating margin 0.4 (5.3) (0.3) 6.3 6.1 Net margin 3.2 (0.1) 3.6 7.2 7.0 Source: RALS, IndoPremier Fig. 8: Changes in earnings forecast FY18F (Rp Bn) FY19F old new change old new change Net Revenue 6,007 5,810 -3.3% 6,114 5,988 -2.1% Gross Profit 2,271 2,266 -0.2% 2,271 2,258 -0.6% Operating Profit 378 365 -3.5% 303 294 -2.9% Net Profit 430 424 -1.5% 355 353 -0.6% 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% Source: RALS, IndoPremier Refer to Important disclosures in the last page of this report 3
4. RALS IJ Result Note 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 357 356 365 294 288 97 90 94 94 97 Net Interest Forex Gain (Loss) Others-Net 0 0 0 0 0 11 20 21 22 22 Pre-Tax Income 465 467 480 411 407 Income Tax (57) (60) (56) (58) (60) 0 0 0 0 0 408 407 424 353 348 1,829 2,158 2,017 2,126 2,280 52 57 56 58 60 834 741 770 777 788 Minorities Net Income Balance Sheet Cash & Equivalent Receivable Inventory Other Current Assets Total Current Assets Fixed Assets - Net Goodwill Non Current Assets Total Assets 116 137 201 226 247 2,831 3,093 3,044 3,187 3,374 1,279 1,235 1,202 1,117 1,027 0 0 0 0 0 491 505 778 885 977 4,647 4,892 5,085 5,240 5,428 0 0 0 0 0 Payable 904 956 0 1,018 1,053 Other Payables 105 92 94 86 87 ST Loans Current Portion of LT Loans Total Current Liab. Long Term Loans Other LT Liab. Total Liabilities Equity Retained Earnings Minority Interest Total SHE + Minority Int. Total Liabilities & Equity 0 0 0 0 0 1,009 1,049 1,061 1,104 1,140 0 0 0 0 0 301 349 357 369 382 1,310 1,398 1,419 1,473 1,522 90 83 68 68 68 3,247 3,412 3,599 3,699 3,838 0 0 0 0 0 3,337 3,494 3,667 3,767 3,906 4,647 4,892 5,085 5,240 5,428 Source : RALS, IndoPremier Refer to Important disclosures in the last page of this report 4
5. RALS IJ Result Note Year to 31 Dec 2016A 2017A 2018F 2019F 2020F Net Income (Excl.Extraordinary&Min.Int) 408 407 424 353 348 Depr. & Amortization 170 179 168 174 178 (9) 128 (19) 42 23 (30) (39) (95) (145) (107) 539 675 477 424 442 (230) (148) (408) (196) (181) Cash Flow Changes in Working Capital Others Cash Flow From Operating Capital Expenditure 29 30 94 94 97 (201) (118) (314) (102) (84) Loans 0 0 0 0 0 Equity 15 0 (15) 0 0 0 0 0 0 0 (213) (8) 0 0 0 (198) (8) (15) 0 0 140 549 149 323 358 37.6 39.3 39.0 37.7 37.5 Operating Margin (%) 6.1 6.3 6.3 4.9 4.7 Pre-Tax Margin (%) 7.9 8.3 8.3 6.9 6.6 Net Margin (%) 7.0 7.2 7.3 5.9 5.6 6.5 Others Cash Flow From Investing Dividends Others Cash Flow From Financing Changes in Cash Financial Ratios Gross Margin (%) ROA (%) 8.9 8.5 8.5 6.8 ROE (%) 12.2 11.9 11.8 9.5 9.1 ROIC (%) 15.2 14.5 14.5 12.0 11.6 Acct. Receivables TO (days) 2.7 3.5 3.6 3.5 3.5 Acct. Receivables - Other TO (days) 0.0 0.0 0.0 0.0 0.0 Inventory TO (days) 4.4 4.3 4.7 4.8 4.9 90.1 99.6 99.0 97.1 97.9 Acct. Payables - Other TO (days) 0.0 0.0 0.0 0.0 0.0 Debt to Equity (%) 0.0 0.0 0.0 0.0 0.0 Interest Coverage Ratio (x) 0.0 0.0 0.0 0.0 0.0 (52.8) (58.1) (51.5) (53.1) (55.1) Payable TO (days) Net Gearing (%) Source : RALS, IndoPremier Refer to Important disclosures in the last page of this report 5
6. Head Office PT INDO PREMIER SEKURITAS Wisma GKBI 7 /F Suite 718 Jl. Jend. Sudirman No.28 Jakarta 10210 - Indonesia p +62.21.5793.1168 f +62.21.5793.1167 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.