On the ground checks suggest that mini-market retailers’ SSSG remains strong

Based on our conversations with investors, many are concerned about the overall Indonesia consumer demand outlook, especially with the narratives of government IDR307tn (~USD19bn) budget reallocation which could potentially dampen short-term purchasing power. However, our on-the-ground checks indicate a more resilient picture. For instance, Mayora Indah (MYOR IJ, Buy) achieved solid double-digit y-y sales growth in 2M25. Furthermore, our survey suggests that mini-market industry same-store-sales growth (SSSG) may have expanded by a mid-to-high single-digit percentage(6-8% y-y) in Jan and Feb 2025, contradicting concerns about slower inflation (Fig. 1) and weakened purchasing power. This robust trend has been particularly evident in ex-Java regions, likely driven by favorable soft commodity prices over the past two years (Fig. 2), benefiting informal workers (Fig. 3 and 4), as mentioned in our Anchor Report. This trend could give Alfamidi (MIDI IJ, Buy) a slight advantage over Alfamart (AMRT IJ, Buy) due to its greater store presence in those regions (Fig. 6).

Expecting a strong 1Q25F SSSG for both AMRT and MIDI

With the Eid holiday arriving ten days earlier than last year and the associated seasonal surge in demand, we anticipate AMRT and MIDI will maintain strong SSSG in March, resulting in robust 1Q25F performance. Both companies are expected to thrive despite the government budget reallocation, as they primarily sell essential daily necessities, remaining crucial even during economic downturns. Additionally, the stagnant or declining middle class and aspiring middle class may contribute to increased mini-market traffic, as tighter budgets encourage smaller basket purchases. While potential delays in the rollout of the reallocated government budget may impact performance beyond 1Q25F, AMRT's consistent positive SSSG over the past 15 years (excluding 2020 due to the COVID-19 outbreak) demonstrates its resilience (Fig. 7).

Stocks for action

We reiterate our Buy ratings on both AMRT (TP IDR3,600) and MIDI (TP IDR500). Despite investor concerns about YTD foreign outflows of IDR21.4tn (USD1.3bn), which have negatively impacted the JCI index (-10%) and the stock prices of both AMRT (-16%) and MIDI (-19%), we remain confident in their likely strong 1Q25F performance. AMRT's consistent average SSSG of approximately 6% over the past decade (excluding 2020) highlights its ability to deliver steady performance amid challenging macroeconomic conditions, in our view. Currently, AMRT and MIDI trade at 22x/16x 2025F EPS, -0.6/-1SD of their five-year average P/Es on a 24%/16% ROE, respectively.

Fig. 1: Indonesia monthly CPI and Core CPI y-y trend – Declining CPI trend was mainly due to electricity subsidy in Jan-Feb’25. Whereas Core CPI still remain elevated

Fig. 2: 2023-2024 soft commodity price changes – The relatively strong soft commodity prices we believe is one of the reason why buying power in ex-Java has remain strong

Fig. 3: Indonesia formal/informal worker split, as of Feb-24. Majority of the informal worker comes from agriculture

Fig. 4: Indonesia workforce by sector – Agriculture represents close to 30% of total workforce

Fig. 5: Average FMCG sales value growth by area for 1Q20-3Q24 – Ex-Java has been the consistent outperformers given the more favourable soft commodity prices.

Fig. 6: Alfamart/Alfamidi Java/Ex-Java store split

Fig. 7: AMRT annual y-y SSSG trend – Saw negative SSSG trend only in 2020 due to COVID lockdown

Fig. 8: AMRT foreign/local institutional OW/UW – more prone from foreign selling

Fig. 9: MIDI foreign/local institutional OW/UW – less prone from foreign selling

Fig. 10: AMRT P/E Band

Fig. 11: MIDI P/E Band

INVESTMENT RATINGS
A rating of ‘Buy’, indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of ‘Neutral’, indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of ‘Reduce’, indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of ‘Suspended’, indicates that the rating, target price, and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies that are labelled as ‘Not Rated’ or ‘No Rating’ are not in regular research coverage. Benchmark is Indonesia Composite Index (‘IDX Composite’). A ‘Target Price’, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part of the analyst’s estimates for the company’s earnings, and may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market in general. 

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Jody Wijaya (jody.wijaya@verdhana.id)

Sandy Ham (sandy.ham@verdhana.id)

Samuel Christian (samuel.christian@verdhana.id)