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Mitra Adiperkasa (MAPI IJ) (Buy) - Expecting short-term pressure

Mitra Adiperkasa (MAPI IJ) (Buy) - Expecting short-term pressure

Retail JW SH SC 477 21st Nov, 2024

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Expecting short-term pressure

Maintain Buy with higher TP of IDR1,960

Lower F&B revenue contribution and end-of-season (EOS) fashion sales drive 9M24 results miss

While Mitra Adiperkasa’s (MAPI) 3Q24 y-y sales growth remained strong at +17%, the earnings miss was primarily owing to lower-than-expected margins. F&B revenue contribution, particularly from Starbucks (SBUX US, Non-rated), declined significantly to 8.3% (from 13.1% in 3Q23), as SSSG did not recover (Fig. 1). Conversely, the lower-margin Digimap’s contribution increased to 15.4% (from 11.8% in 3Q23). Inventory days decreased slightly due to delayed end-of-season fashion sales in early 3Q24, and also a reduction in old inventory to 27% (Fig. 2). However, the company still targets a more optimal inventory level of around 126 days.

Valuation may be attractive, but still have some concerns over 4Q24F

MAPI's declining P/E multiple may appear attractive, especially compared to MAP Active (MAPA IJ, Buy). MAPI's ex-MAPA P/E currently trades at 7x 2025F P/E, slightly below its -1SD three-year average (Fig. 3). Additionally, MAPA's premium over MAPI has widened to 25% in the past three-four years (Fig. 4). However, we remain cautious about MAPI's 4Q24F earnings (Fig. 5). While we expect MAPA and the fashion segment to perform well, the F&B segment, particularly Starbucks, has not shown significant traffic recovery post-boycott. Further, the delayed iPhone 16 launch may pressure Digimap's business, which contributed 16% of 9M24 revenue. Despite strong revenue growth in other segments, these factors could weigh on 4Q24F earnings, in our view.

Maintain Buy with higher TP of IDR1,960, implying 22.5% upside

We cut our 2024F-2026F earnings estimates by ~13% due to the 3Q24 miss, weaker Starbucks outlook, and delayed iPhone 16 sales. We roll forward our valuation to 2025F, maintaining a P/E target multiple of 15x, resulting in a higher target price of IDR1,960 (vs. IDR1,870 earlier).

MAPI remains the top-performing discretionary retailer in our coverage universe. Near-term risks, particularly in 4Q24F, should not significantly impact future performance. Potential downside risks include slower inventory reduction and prolonged iPhone 16 sales delays. The stock currently trades at 12.2x 2025F P/E.

Year-end 31 DecFY23FY24FFY25FFY26F
Currency (IDR)ActualOldNewOldNewOldNew
Revenue (bn)33,31937,98938,00344,55843,00251,64448,648
Reported net profit (bn)1,8942,0701,7982,5082,1813,0582,662
Normalised net profit (bn)1,8942,0701,7982,5082,1813,0582,662
FD normalised EPS114.07124.72108.31151.08131.39184.23160.34
FD norm. EPS growth (%)-10.69.3-5.121.121.321.922.0
FD normalised P/E (x)14.0–14.8–12.2–10.0
EV/EBITDA (x)4.3–3.7–3.2–2.8
Price/book (x)2.7–2.3–2.0–1.7
Dividend yield (%)0.6–1.4–1.4–2.1
ROE (%)20.919.116.819.717.720.418.7
Net debt/equity (%)net cashnet cashnet cashnet cashnet cashnet cashnet cash
Source: Company data, Verdhana estimates


Key data on Mitra Adiperkasa

Income statement (IDRbn)
Year-end 31 Dec
FY22
FY23
FY24F
FY25F
FY26F
Revenue
26,937
33,319
38,003
43,002
48,648
Cost of goods sold
-14,908
-18,225
-21,834
-24,337
-27,318
Gross profit
12,029
15,094
16,169
18,665
21,330
SG&A
-8,960
-11,498
-12,839
-14,675
-16,544
Employee share expense
0
0
0
0
0
Operating profit
3,070
3,596
3,330
3,990
4,786
EBITDA
5,838
6,452
7,446
8,247
8,984
Depreciation
-811
-901
-1,298
-1,343
-1,324
Amortisation
-1,957
-1,955
-2,817
-2,914
-2,874
EBIT
3,070
3,596
3,330
3,990
4,786
Net interest expense
-421
-386
-471
-535
-583
Associates & JCEs
70
93
96
108
123
Other income
454
-100
-100
-100
-100
Earnings before tax
3,173
3,203
2,855
3,463
4,227
Income tax
-662
-858
-628
-762
-930
Net profit after tax
2,511
2,345
2,227
2,701
3,297
Minority interests
-393
-452
-429
-520
-635
Other items
Preferred dividends
Normalised NPAT
2,118
1,894
1,798
2,181
2,662
Extraordinary items
0
0
0
0
0
Reported NPAT
2,118
1,894
1,798
2,181
2,662
Dividends
0
-168
-379
-360
-545
Transfer to reserves
2,118
1,726
1,419
1,822
2,116
Valuations and ratios
Reported P/E (x)
12.5
14.0
14.8
12.2
10.0
Normalised P/E (x)
12.5
14.0
14.8
12.2
10.0
FD normalised P/E (x)
12.5
14.0
14.8
12.2
10.0
Dividend yield (%)
–
0.6
1.4
1.4
2.1
Price/cashflow (x)
6.5
13.6
11.9
9.2
8.2
Price/book (x)
3.3
2.7
2.3
2.0
1.7
EV/EBITDA (x)
4.2
4.3
3.7
3.2
2.8
EV/EBIT (x)
7.9
7.6
8.2
6.6
5.2
Gross margin (%)
44.7
45.3
42.5
43.4
43.8
EBITDA margin (%)
21.7
19.4
19.6
19.2
18.5
EBIT margin (%)
11.4
10.8
8.8
9.3
9.8
Net margin (%)
7.9
5.7
4.7
5.1
5.5
Effective tax rate (%)
20.9
26.8
22.0
22.0
22.0
Dividend payout (%)
0.0
8.9
21.1
16.5
20.5
ROE (%)
30.2
20.9
16.8
17.7
18.7
ROA (pretax %)
20.2
18.0
13.7
15.2
17.1
Growth (%)
Revenue
46.2
23.7
14.1
13.2
13.1
EBITDA
44.6
10.5
15.4
10.8
8.9
Normalised EPS
402.1
-10.6
-5.1
21.3
22.0
Normalised FDEPS
402.1
-10.6
-5.1
21.3
22.0
Source: Company data, Verdhana estimates
Cashflow statement (IDRbn)
Year-end 31 Dec
FY22
FY23
FY24F
FY25F
FY26F
EBITDA
5,838
6,452
7,446
8,247
8,984
Change in working capital
-57
-3,071
-1,277
-597
-716
Other operating cashflow
-1,686
-1,435
-3,941
-4,755
-5,029
Cashflow from operations
4,095
1,946
2,229
2,895
3,239
Capital expenditure
-871
-1,723
-1,461
-1,275
-1,294
Free cashflow
3,224
223
767
1,620
1,945
Reduction in investments
0
0
0
0
0
Net acquisitions
0
0
0
0
0
Dec in other LT assets
0
0
0
0
0
Inc in other LT liabilities
0
0
0
0
0
Adjustments
229
-526
-137
-146
-165
CF after investing acts
3,453
-302
631
1,474
1,780
Cash dividends
0
-168
-379
-360
-545
Equity issue
0
0
0
0
0
Debt issue
-545
2,248
-1,286
-500
-1,000
Convertible debt issue
0
0
0
0
0
Others
-1,835
-1,954
136
194
201
CF from financial acts
-2,380
126
-1,528
-666
-1,344
Net cashflow
1,072
-176
-897
808
436
Beginning cash
2,778
3,851
3,675
2,777
3,586
Ending cash
3,851
3,675
2,777
3,586
4,022
Ending net debt
-3,250
-819
-777
-2,086
-3,522
Balance sheet (IDRbn)
As at 31 Dec
FY22
FY23
FY24F
FY25F
FY26F
Cash & equivalents
3,851
3,675
2,777
3,586
4,022
Marketable securities
315
443
443
443
443
Accounts receivable
842
1,085
1,255
1,418
1,602
Inventories
4,699
8,088
9,690
10,800
12,123
Other current assets
1,031
1,700
1,939
2,194
2,482
Total current assets
10,737
14,992
16,104
18,441
20,672
LT investments
297
356
356
356
356
Fixed assets
3,841
5,291
5,454
5,386
5,356
Goodwill
79
111
111
111
111
Other intangible assets
159
163
186
210
238
Other LT assets
5,899
6,605
6,719
6,841
6,978
Total assets
21,013
27,517
28,929
31,343
33,709
Short-term debt
601
2,856
2,000
1,500
500
Accounts payable
3,309
4,095
4,924
5,486
6,156
Other current liabilities
3,654
4,100
4,005
4,374
4,783
Total current liabilities
7,564
11,051
10,929
11,360
11,439
Long-term debt
0
0
0
0
0
Convertible debt
Other LT liabilities
3,693
4,054
4,207
4,368
4,538
Total liabilities
11,257
15,105
15,135
15,728
15,977
Minority interest
1,619
2,414
2,414
2,414
2,414
Preferred stock
Common stock
1,333
1,333
1,333
1,333
1,333
Retained earnings
5,546
7,307
8,726
10,548
12,664
Proposed dividends
Other equity and reserves
1,257
1,357
1,320
1,320
1,320
Total shareholders' equity
8,136
9,998
11,380
13,201
15,318
Total equity & liabilities
21,013
27,517
28,929
31,343
33,709
Liquidity (x)
Current ratio
1.42
1.36
1.47
1.62
1.81
Interest cover
7.3
9.3
7.1
7.5
8.2
Leverage
Net debt/EBITDA (x)
net cash
net cash
net cash
net cash
net cash
Net debt/equity (%)
net cash
net cash
net cash
net cash
net cash
Per share
Reported EPS (IDR)
127.58
114.07
108.31
131.39
160.34
Norm EPS (IDR)
127.58
114.07
108.31
131.39
160.34
FD norm EPS (IDR)
127.58
114.07
108.31
131.39
160.34
BVPS (IDR)
490.15
602.26
685.52
795.25
922.75
DPS (IDR)
0.00
10.11
22.81
21.66
32.85
Activity (days)
Days receivable
9.8
10.6
11.3
11.3
11.3
Days inventory
103.2
128.0
149.0
153.7
153.1
Days payable
71.4
74.1
75.6
78.1
77.8
Cash cycle
41.6
64.5
84.7
86.9
86.7
Source: Company data, Verdhana estimates
Company profileIncorporated in 1995, MAP is the leading lifestyle retailers in Indonesia with over 2,600 retail stores and a diversified portfolio of over 150 brands that includes sports, fashion, department stores, kids, food & beverage, and lifestyle products. Some of MAP's iconic brands include Starbucks, Zara, Marks & Spencer, SOGO, SEIBU, Oshkosh B'Gosh, Reebok, among many others. As of 3M22, specialty stores contributes 74% towards MAP's revenue, followed by department stores (12%), Food & Beverage (13%), and others (1%).
Valuation MethodologyOur target price of IDR1,960 is based on 2025F target P/E of 15x, +1SD of its three-year mean. The benchmark index of the stock is JCI Index.
Risks that may impede the achievement of the target priceDownside risks include slower inventory reduction and prolonged iPhone 16 sales delays.
ESGMAP is committed to be a responsible and relevant driver of positive change in society. Driven by their "Better Business for a Better World" philosophy, MAP continue to uphold sustainability at the forefront of our business strategies and operations. As of 3rd Nov 2021, MAPI received a BBB MSCI ESG rating.

Fig. 1: MAPI’s quarterly SSSG y-y by segment – Weak MAPI SSSG mainly driven by negative F&B SSSG

Source: Company data, Verdhana research
Fig. 2: MAPI, MAPA, and MAPI ex-MAPA inventory days trend

Source: Company data, Verdhana research

 

Fig. 3: MAPI ex-MAPA P/E band

Source: Bloomberg Finance L.P., Verdhana estimates
Fig. 4: MAPA P/E premium (discount) to MAPI

Source: Bloomberg Finance L.P., Verdhana estimates

 

Fig. 5: Our view on each of MAPI’s business segments

Business segments9M24 Revenue contribution9M24 EBIT contributionOutlookRemarks
MAPA45.0%65.7%++- SSSG recovery should remain on track in 4Q24F.
- 2Q24 should be the bottom margin for the year, expect improvement to continue in the 4Q24F and 2025F.
- Remains MAPI's main revenue/net profit growth driver.
Specialty stores ex-MAPA37.9%26.3%  
Others21.9%n.a.+- Big clearance in fashion segment should be done by July.
- Although should expect some end-of-season sale, but we think the potential of higher sales (~29% of revenue typically were from 4Q) should able to compensate lower GPM.
Digimap16.0%n.a.-- Delayed iPhone 16 sales should impact MAPI's 4Q earnings negatively. Historically, 4Q revenue contributed to ~28% of Digimaps' FY revenue
Department stores7.6%11.0%Neutral- Cant expect much growth, but the large space that they covered help company to negotiate cheaper rents for the whole segments
F&B8.8%-3.5%-- Starbucks remains facing double whammy from boycott and heightened competition
Others0.7%0.4%Neutral-
Source: Verdhana research

 

Fig. 6: MAPI— 4Q24F forecasts

 9M239M24y-y4Q234Q24Fy-y2024Fy-y
Revenue23,79227,61616.1%9,52610,3879.0%38,00314.1%
Gross Profit10,85911,8248.9%4,2354,3452.6%16,1697.1%
EBIT2,5662,388-6.9%1,030942-8.5%3,330-7.4%
NPAT1,4161,300-8.2%4784984.3%1,798-5.1%
         
GPM45.6%42.8% 44.5%41.8% 42.5% 
EBIT Margin10.8%8.6% 10.8%9.1% 8.8% 
NPM6.0%4.7% 5.0%4.8% 4.7% 
Source: Company data, Verdhana estimates

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. 

GENERAL DISCLOSURE/DISCLAIMER 
This report is prepared by PT Verdhana Sekuritas Indonesia (“PTVSI”) a securities company registered in Indonesia, supervised by Indonesia Financial Services Authority (OJK) and a member of the Indonesia Stock Exchange (IDX).

This report is intended for client of PTVSI only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of PTVSI.

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ANALYST CERTIFICATION
The research analyst primarily responsible for the content of this report and certifies that the views about the companies including their securities expressed in this report accurately reflect his/her personal views.  The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.


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Rating Table

Rating
Remains
Buy
Target price
Increased from IDR 1,870
IDR 1,960
Closing price
20 November 2024
IDR 1,600
Implied upside+22.5%
Market Cap (USD mn)1,674.7
ADT (USD mn)2.7

Relative performance chart

Source: LSEG, Verdhana

M cap (USDmn)
1,674.7
Free float (%)
49.0
3-mth ADT (USDmn)
2.7
(%)
1M
3M
12M
Absolute (IDR)
-8.6
5.3
-3.0
Absolute (USD)
-10.9
2.4
-5.6
Rel to Jakarta Stock Exchange Composite Index
-1.3
9.8
-5.9

Research Analysts

Jody Wijaya (jody.wijaya@verdhana.id)

Sandy Ham (sandy.ham@verdhana.id)

Samuel Christian (samuel.christian@verdhana.id)

Tags: Retail, MAPI, MAPI JK, MAPI IJ, Jody Wijaya, Sandy Ham, Samuel Christian
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