1、12August2019 AsiaPacific/IndonesiaEquityResearchResearch Analysts Deidy Wijaya,CFA62 21 25537902 HYPERLINK mailto:deidy.wijaya MegaBong62 21 25537977 HYPERLINK mailto:mega.bong Indonesia Retail SectorSECTOR REVIEWSECTOR REVIEWMAPA and MAPI the top performers in 2Q19; remain as our top picks in retai

2、lFigure 1: Retailers financial performance in1H1939.634.329.422.417.7 15.219.421.714.3 11.314.91.6 1.01.9-0.639.634.329.422.417.7 15.219.421.714.3 11.314.91.6 1.01.9-0.6GrossrevenuegrowthGrossGrossrevenuegrowthGrossprofitgrowthOperatingprofitgrowthAdjusted net profitgrowthSource: Company data, Credi

3、t SuisseMAPA and MAPI the best performing retailers in 2Q19. MAPAs SSSG accelerated to 10.0% in 2Q19 (from 7.7% in 1Q19), while MAPIs accelerated to 4.0% from 2.0%. MAPAs adjusted net profit grew by 49.4%/39.6% YoY in 2Q19/1H19 in-line. MAPI saw big improvement in fashions EBIT margin due to stronge

4、r IDR and less promotions. Fashions EBIT contribution rose to 31.6% in 1H19 (from 23.8% in 1H18) Its F&B SSSG accelerated to 6% in 2Q19 from 2% in 1Q19. Hence, MAPIs 1H19 result was above our/consensus estimates we raise FY19/20 EPS by 7.0%/7.0% and raise our TP to Rp1,300 (from Rp1,200), putting us

5、 7.7%/7.3% aboveconsensus.ACES slightly below, RALS and LPPF inline. ACESs SSSG normalised to 6.9% (from 8.2% in 1Q19) due to a high base last year. Despite the deceleration, we believe it is still on track to meet our 6.4% SSSG forecast for this year and companys guidance (6-7%). The main disappoin

6、tment was in the sequential decline in gross margin, likely due to more aggressive promotions. We see 3% downside to consensus FY19 forecast. RALS and LPPFs 2Q19 results were slightly above our estimates, but in line with consensusforecasts.Current pecking order. Our new pecking order is MAPA MAPI R

7、ALS ACES LPPF. We changed our most preferred name from MAPI to MAPA, given MAPIs strong share price performance YTD (+24.2%). Based on last closing prices, MAPA is trading at a slight discount to MAPI, despite 70% profit contribution to MAPI and higher EPS growth potential over the next 2 years (bas

8、ed on our estimates). ACES has much stronger fundamentals relative to RALS, but we see more upside in RALS (despite our cut in TP to Rp1,620 from Rp1,875 as we lowered our target P/E to 16.2x from 20.0 x) over the shorter term due to RALSs significant share price decline (-30% in last 3 months). Fin

9、ally, LPPF remains our least preferred name in the space given challengingfundamentals.DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Creditto do in its As a be the a of

10、of as a in Focus chart and tableFigure 2: 1H19 results summaryRp bn (or as indicated)ACESMAPAMAPIRALSLPPFGross revenue4,1323,47211,4985,26610,596Net revenue3,9623,47210,0163,4895,950Gross profit1,8671,5944,9391,5693,730Operating exp.1,3251,0853,9699722,249Operating income5425089695981,481Profit befo

11、re tax5944887906971,477Net income4743664995901,162Adjusted net profit4743915255611,162SSSG (%)6.9%9.0%3.0%1.5%0.6%Margins (%)Gross margin47.145.949.345.062.7Operating margin13.714.69.717.124.9Adjusted net profit margin12.019.5As % of CSe FY19Net revenue46.546.047.960.057.3Gross profit46.645.948.561.

12、857.1Operating income43.143.651.392.769.5Net income43.442.953.689.568.5Growth YoY (%)Gross revenue17.71.9Net revenue17.019.410.2-0.20.6Gross profit15.222.414.91.0-0.6Operating income14.329.434.36.7-11.4Adjusted net profit11.339.621.715.4-13.6Working capital daysReceivable days311935Inventories days2

13、2517612482125Payables days153953109132CCC days21314980-24-1Working capital days YoYReceivable days-1-1-101Inventories days22317524Payables days-4126-4-27CCC days25180952Source: Company data, Credit SuisseFigure 3: CSe vsconsensus99.4101.399.3101.097.098.496.696.796.894.496.393.2107.799.4101.399.3101

14、.097.098.496.696.796.894.496.393.2107.3109.42019E2020E2021EACESMAPAMAPIRALSLPPF2019E2020E2021ESource: Refinitiv Datastream, Credit Suisse estimatesMAPA andMAPI the best performers 2Q19. ACESs2Q19wasslightly whileRALSsandLPPFs werein withconsensusWe see 8% risks to MAPIs FY19 consensusforecasts and 3

15、% downsidetoMostretailersare trading at morethan1 SD belowmeanP/E. Keyrisksinclude highermin.wage increase,rentalhike and forex risksforimportersMAPIandMAPAthetopperformers2Q19; remain as our top picks inretail2Q19 results analysisMAPA and MAPI were the best performers in 2Q19. MAPAs SSSG accelerate

16、d to 10.0% in 2Q19 (from 7.7% in 1Q19), while MAPIs accelerated to 4.0% from 2.0%. MAPAs adjusted net profit grew by 49.4%/39.6% YoY in 2Q19/1H19 in-line. MAPI saw big improvement in fashions EBIT margin due to stronger IDR and less promotions. Its F&B SSSG accelerated to 4% in 1H19 from 2% in 1Q19.

17、 Hence, the 1H19 result was above our/consensus estimates we raise FY19/20 EPS by 7.0%/7.0%, putting us 7.7%/7.3% above consensus. ACESs SSSG normalised to 6.9% (from 8.2% in 1Q19) due to a high base last year. Despite the deceleration, we believe it is still on track to meet our 6.4% SSSG forecast

18、for this year, and the companys guidance (6-7%). The main disappointment was in the sequential decline in gross margin, likely due to more aggressive promotions. We see 3% downside to consensus FY19 forecast. RALS and LPPFs 2Q19 results were slightly above our estimates, but in line with consensus f

19、orecasts.EPS revisions and current pecking orderWe adjust earnings for MAPI, ACES and RALS. We raise our FY19/20/21 EPS estimates for MAPI by 7.0%/7.0%/4.5% on the back of higher EBIT margin assumptions for fashion and F&B segments (our TP is raised to Rp1,300 from Rp1,200). We lower our EPS forecas

20、ts for ACES by 0.8%/0.4%/1.1% as we slightly lower our gross margin assumptions (TP lowered to Rp1,890 from Rp1,900).Based on our revised estimates, we see 7.7% upside risks to consensus FY19 forecasts for MAPI. Meanwhile we see 3% downside risks to consensus forecasts for ACES. MAPA is not widely c

21、overed by the street; while our FY19 estimates for RALS and LPPF are in line with consensus, we have lower estimates for FY20 and FY21.At this juncture, our pecking order is MAPA MAPI RALS ACES LPPF. We switched the positioning of our most preferred name from MAPI to MAPA, given MAPIs strong share p

22、rice performance YTD (+24.1%). Based on last closing prices, MAPA is trading at a slight discount to MAPI, despite 70% profit contribution to MAPI and higher EPS growth potential over the next 2 years (based on our estimates). ACES has a stronger fundamentals relative to RALS, but we see more upside

23、 in RALS (despite our cut in TP to Rp1,620 from Rp1,875, as we lower our target P/E multiple to 16.2x from 20.0 x) over the shorter term due to RALS significant share price decline (-30% in the last 3 months). Finally, LPPF remains our least preferred name in the space, given challenging fundamental

24、s.Valuation and key risksValuation for Indonesia retail sector is currently very attractive in our view. MAPI, RALS and LPPF are all trading at more than 1 S. D. below their five-year mean P/E. While ACES is trading slightly above its five-year mean P/E. MAPA is recently listed, so there is no histo

25、rical P/E band for the stock, but given 70% profit contribution to MAPI and with higher expected EPS growth over the next 2 years, we believe MAPA is extremely attractivegiventhatiscurrentlytradingataslightdiscounttoMAPI(basedonFY20P/E).Key risks to the Indonesia retail sector include (1) Higher tha

26、n expected increase in minimum wage; (2) Higher than expected rental hike; (3) Forex risks for importers such as MAPI, MAPA and ACES; (4) Fuel price hike for low-end retailers (RALS); and (5) Weak overall consumption.UpsidePE (x)EPS growth (%)Figure 4: Indonesia retailers peerscomparisonUpsidePE (x)

27、EPS growth (%)TP (IDR)EV/EBITDA (x)Dividend yield (%)Company nameTickerRatingCP (IDR)OldNew(%)(IDRtn)2019E2020E2019E2020E2019E2020E2019E2020ESumber Alfaria TrijayaAMRT.JKO9201,1351,13523.48.97.754.336.41.01.4ACE hardware IndonesiaACES.JKN1,7251,9001,8909.629.626.922.921.017.813.3MAP Active Indonesia

28、MAPA.JKO5,3758,0008,00048.815.317.914.611.08.9121.4Mitra AdiperkasaMAPI.JKO1,0001,2001,30030.016.617.826.5Ramayana Lestari SentosaRALS.JKO1,3101,8751,62023.79.313.45.1Matahari Department StoreLPPF.JKN3,2703,5303,5308.03.03.060.3(5.6)9.38.7Source: Refinitiv Datastream, Credit Suisse estimates, *As of

29、 9 August 2019Figure 5: 2Q19 results summaryCompanies2Q19 results summary vs consensusKey takeawaysNet profit revisions2019E 2020E 2021EMAPIAboveStrong results due to strong performance in Active and Fashion. SSSG rebounded to 4% in 2Q19 (3% in 1H19) from 2% in 1Q19 driven by Active and F&B division

30、s. Fashion division saw a big jump in EBIT due to stronger IDR and fewer promotions. F&B saw sequential improvement in SSSG and EBIT margin due to priceincreases.7.07.0MAPAIn-lineSSSG rebounded to 10.0% in 2Q19 from 7.7% in 1Q19. Big sequential improvements in Kids and Leisure, while Sports remain s

31、table. Adjusted net profit grew by 49.4%/39.6% in 2Q19/1H19 on track to achieve our adjusted net profit forecast of Rp872 bn (+35.1% YoY).0.00.0ACESSlightly belowGross margin continued to decline on a QoQ basis due to aggressive store openings and more promotions in some stores. Operating profit gro

32、wth was only 10.6% YoY despite delay in bonus payment. We lower our gross margin estimates slightly.-0.8-0.4-1.1RALSIn-lineNet income growth was supported by opex efficiency, while top line growth was lacklustre (+1.6% YoY). Opex declined by 4.3% YoY driven by declines in rental and “others” expense

33、s. We lower our opex estimates and raise our interest income forecasts, resulting in earnings upgrades.4.40.7-0.4LPPFIn-lineResult was above our estimates but in line with consensus. SSSG returned positive (1.7% in 2Q19) but net profit still declining on a YoY basis due to operating deleverage.0.00.

34、0Source: Credit Suisse estimatesFigure 6: Gross revenue, gross profit, operating profit, adjusted net profit growth in6M1939.634.329.422.417.719.421.715.2 14.315.411.31.61.01.9-0.639.634.329.422.417.719.421.715.2 14.315.411.31.61.01.9-0.6ACESMAPAMAPIRALSLPPFGross revenueGross revenue growthGross pro

35、fit growthOperating profit growthAdjusted net profit growthSource: Company data, Credit Suisse-13.62Q19 results analysisAcceleration in SSSG, except for ACESWe saw accelerations in 2Q19 SSSG for all the retailers that we cover, except for ACES. ACES deceleration was somewhat expected given the high

36、base in FY18 (13.5%), and is still on track to meet our forecast (6.4%) and managements guidance (6-7%) for FY19. MAPA saw a strong acceleration in SSSG, to 10.0% in 2Q19 from 7.7% in 1Q19, bringing 1H19 SSSG to 9.0%. MAPAs acceleration in 2Q19 SSSG was driven by recovery in Leisure and a strong per

37、formance in Kids. Leisures performance has returned to normal after being impacted by the bankruptcy of Payless in the US, in 1Q19. Kids strong performance was partially due to newer brands such as Lego and Smiggles. MAPIs SSSG accelerated to 4% in 2Q19 (from 2.0% in 1Q19) bringing 1H19 SSSG to 3.0%

38、. MAPIs SSSG acceleration was driven by Specialty Store and F&B, while Department Stores SSSG stayed flattish and Others SSSG decelerated. RALS SSSG accelerated to 1.5% in 1H19 from 0.5% in 1Q19, while LPPFs SSSG recovered to +1.7% in 2Q19 (0.6% in 1H19), from -1.7% in 1Q19, helped by positive SSSG

39、over the Lebaranperiod.Figure 7: SSSGcomparisons13.511.711.1 11.88.26.98.37.79.08.06.36.85.50.51.40.04.03.04.02.03.02.90.51.53.50.6-2.7-1.2-1.720152016201720183M196M19ACESMAPAMAPIRALSLPPF20152016201720183M196M19Source: Company data, Credit SuisseFigure 8: MAPAs SSSG breakdown by segment 1Q19 vs2Q191

40、0.0%10.0%10.0%8.4%7.7%4.3%0.0%16.0%10.0%10.0%10.0%8.4%7.7%4.3%0.0%SportsLeisurefootwearKidsTotal1Q192Q191Q192Q19Source: Company data, Credit SuisseFigure 9: MAPIs SSSG breakdown by segment2015-6M1917.04.06.07.010.02.04.02.0-3.05.01.01.07.00.07.02.04.00.02.04.04.03.04.08.02.03.0SpecialtystoresDepartm

41、entstoresCafandrestaurantOthersConsolidated20152016201720183M196M1920152016201720183M196M19Source: Company data, Credit SuisseFigure 10: ACESsSSSGbreakdownFigure 11: LPPFs SSSGbreakdown14.413.33.43.4 3.3 2.84.00.5 1.4-2.3-1.96.1 5.53.81.7 1.60.6-0.3-1.2-1.714.413.33.43.4 3.3 2.84.00.5 1.4-2.3-1.96.1

42、 5.53.81.7 1.60.6-0.3-1.2-1.7-2.8-5.4-5.7-7.42015 2016 2017 2018 3M19 6M192015 2016 2017 2018 3M19 6M19Average ticket sizeVolumeSSSGAURVolume increaseSSSG2015 2016 2017 2018 3M19 6M192015 2016 2017 2018 3M19 6M19Source: Company data,CreditSuisseSource: Company data, CreditSuisseMAPA and MAPI were th

43、e most aggressive in adding spacesIn terms of space additions, MAPA was the most aggressive, followed by MAPI. MAPAs space additions in 2Q19 were largely driven by the Kids segment (MAPA took over13,000 sq. m. of space from MAPIs Sogo Department Store). MAPIs space additions were driven by Specialty

44、 Stores, F&B and Others (18 Apple stores named as Digimap, with 2,684 sq. m. of total selling space or 17.7% of existing space). On the other hand, MAPIs Fashion divisions space was reduced by 5,246sqm in 2Q19 due to some store closures.RALS slightly reduced its selling space in 2Q19 by closing down

45、 its loss-making stores in Sabang (Jakarta) and BSD (Greater Jakarta) after Ramadan. LPPF only managed to add one large-format store in Bandung (in April). It also added two stand-alone mono brand stores (361 degrees) in Surabaya (April) and Cibubur (May). LPPF revised down its new store openings to

46、 2-3 large-format stores, from 4-6 previously, due to delays in construction.ACES added 7 new stores in 2Q19, 2 of which are ACE Xpress stores. In 1H19, ACES added 8 regular-format stores and 2 ACE Xpress stores and is on track to achieve its FY19 new-store guidance of 15-20 regular stores plus a mi

47、nimum of 5 ACE Xpress stores (10% new sellingspace).Figure 12: Net space addition as % of existing space15.516.45.65.0 1.10.015.516.45.65.0 1.10.0-1.7-1.3 -1.0-0.7-0.920152016201720183M196M19ACESMAPAMAPIRALSLPPF20152016201720183M196M19Source: Company data, Credit SuisseFigure 13: ACESs store additio

48、nsbyregionFigure 14: MAPAs net space additions bysegment 822.019.112.414.6 -1.3-16.6822.019.112.414.6 -1.3-16.681.-17.02016 2017 2018 1Q19 1H1926719514132151149887117515220143145201620183121Q1952013320172Q194JakartaJava ex JakartaOutside JavaSportsLeisurefootwearKidsTotal space2016 2017 2018 1Q19 1H

49、1926719514132151149887117515220143145201620183121Q1952013320172Q194JakartaJava ex JakartaOutside JavaSource: Company data,CreditSuisseSource: Company data, CreditSuisseFigure 15: MAPIs space additions by segments26.3 27.0-1.920.96.81.63.5 5.115.61.919.8-1.33.50.1-0.720.17.912.2-5.10.721.21.52.18.41.

50、86.12016201720183M196M19FashionActiveDepartmentstoreCaf&RestaurantsOthersTotal2016201720183M196M19Source: Company data, Credit SuisseRevenue growthIn terms of revenue growth, MAPA experienced the strongest acceleration (due to acceleration in SSSG and highest space additions). MAPIs revenue accelera

51、tion was driven by Active, F&B and Others, while Fashions growth decelerated (partially due to space reduction). ACESs revenue growth decelerated from a high base, while LPPFs revenue growth returned positive due to improvement in 2Q19. RALSs revenue growth stayed flattish (relative to 1Q19).23.323.

52、020.120.619.417.714.714.0 15.012.011.39.67.84.4 1.6 1.61.0 23.323.020.120.619.417.714.714.0 15.012.011.39.67.84.4 1.6 1.61.0 2.11.9-2.0-1.1-1.1ACESMAPAMAPIRALS20152016201720183M196M19Source: Company data, Credit SuisseFigure 17: MAPIs net revenue growth bysegment23.023.020.7 22.217.919.414.716.8 19.

53、020.014.816.512.023.023.020.7 22.217.919.414.716.8 19.020.014.816.512.0-2.1-1.2201720183M196M19FashionActiveDepartmentstoreCaf&RestaurantsOthersTotal201720183M196M19Source: Company data, Credit SuisseGross margin trendMAPAs gross margin expanded in 1H19 owing to better product mix. MAPI enjoyed the

54、largest gross margin expansion YoY, driven by Active, Fashion as well as F&B. ACESs gross margin declined the most due to aggressive store openings. RALSs reported gross margin improved due to higher consignment contribution, while LPPFs decreased.Figure 18: Gross margincomparisons47.5 47.6 47.7 47.

55、6 47.9 47.144.9 45.3 44.8 45.946.8 48.6 48.2 47.8 47.3 49.344.4 45.039.642.943.736.1 47.5 47.6 47.7 47.6 47.9 47.144.9 45.3 44.8 45.946.8 48.6 48.2 47.8 47.3 49.344.4 45.039.642.943.736.1 37.639.3ACESMAPAMAPIRALSLPPF20152016201720186M186M1920152016201720186M186M19Source: Company data, Credit Suisse

56、estimatesFigure 19: RALS gross margin (DPvs.consignment)Figure 20: LPPF gross margin (DP vs.consignment)32.733.332.930.028.228.729.429.826.126.727.224.825.624.324.925.025.835.731.235.631.235.535.230.942.343.332.733.332.930.028.228.729.429.826.126.727.224.825.624.324.925.025.835.731.235.631.235.535.2

57、30.9DP - GPMConsignment- GPMTotal gross profit/ gross revenueDP - DP - GPMConsignment- GPMTotal gross profit/ gross revenueDP - GPMConsignment- GPMTotal gross profit/ gross revenueSource: Company data,CreditSuisseSource: Company data, CreditSuisseMAPA and MAPI recorded EBIT/sq. m. improvementsIn ter

58、ms of productivity, which we measure based on sales/sq. m., MAPA saw the biggest improvement, followed by ACES. The productivities for the rest of the companies were relatively flattish on a YoY basis (1H19 vs 1H18). In terms of EBIT/sq. m., MAPA and MAPI experienced the biggest improvements. For MA

59、PA it was driven by the strong SSSG, while for MAPI, it was boosted by the margin improvements (primarily in Fashion and Department Stores). MAPIs Fashion segment enjoyed big EBIT margin improvement in 2Q19 due to stronger IDR and less promotions. ACESs EBIT/sq. m. stayed flat YoY, RALSs EBIT/sq. m.

60、 improved due to opex efficiency, while LPPFs EBIT/sq. m. declined due to operatingdeleverage.Figure 21: Sales/sq. m. comparisons34.228.631.022.825.115.2 14.8 16.317.816.3 16.618.8 20.118.1 18.1 17.8 31.022.825.115.2 14.8 16.317.816.3 16.618.8 20.118.1 18.1 17.8 18.212.4 12.48.7 8.97.9 8.5 8.4 8.610