july 03, 2014 catur sentosa adiprana...material shops. it also distributes consumer goods, such as...

COMPANY FOCUS PT Trimegah Securities Tbk - www.trimegah.com 1

To double its “Mitra10” retail stores within 10 years

CSAP is a distribution (around 76% of revenue) and modern retail

(around 24% of revenue) company. The distribution segment distributes

building material, consumer goods, and chemicals. CSAP’s modern retail

stores named Mitra10 (building materials and home improvement) with

20 stores and Atria (home furnishing) with 10 showrooms. The company

plans to double the number of their Mitra10 stores (adding 20 new

stores) with a pace of 1-2 store per year. Mitra10 contributes around

23% to total revenue.

Consolidated margin expansion

We expect CSAP to achieve EPS growth of 26.1% CAGR in 2014E-17E

(vs. 20.2% CAGR in 2010-13). The growth is driven by retail’s 24.7%

and distribution’s 15.0% revenue CAGR during that period. Mitra10

posted strong SSSG in 2012/13 of 20.6/29.4%. Moreover, as the retail

has higher gross margin (FY2013 20.9%) compared to distribution

(FY2013 10.7%), we expect the higher sales growth from higher gross

margin business (retail) would improve the consolidated core profit of

0.8% in 2013 to 1.4% in 2017E.

CSAP’s Retail comparison with ACES (Risk vs. Potential Growth)

We think ACES (105 outlets up to Jun 2014) has less competition risk

compared to CSAP, but the retail segment of CSAP (only 20 Mitra10

stores and 10 Atria showrooms), might be able to experience higher

growth compared to ACES. FY2013 revenue for: ACES Rp3.9tr (+20.9%

YoY) vs. CSAP’s retail segment Rp1.5tr (+33.8%YoY). Our 2014E/15E

core ROAE is 12.0/14.4%, compared to WACC of 9.4%.

Valuation: DCF-based target price of Rp530 (22.1% upside)

The DCF valuation of Rp530 implies 22.1% upside. Target price implies

19.0x 2014PE. EPS CAGR is 26.1% (2014E-17E).

CSAP’s has 2 segments: Distribution and mod-ern retail. The distribution segment distributes building material, consumer goods, and chemi-cals. The modern retail consists of Mitra10 (building materials & home improvement) and Atria (home furnishing).

Share Price Rp434

Sector Retail

Price Target Rp530(22%)

Year end Dec 2012 2013 2014F 2015F 2016F

Sales 4,932 6,321 7,293 8,623 10,144

Net Profit 57 71 81 109 131

EPS (Rp) 20 25 28 38 45

EPS Growth (%) (14.4) 24.0 13.6 34.9 19.8

Core Profit 40 52 81 109 131

Core EPS (Rp) 14 18 28 38 45

Core EPS Growth (%) (25.2) 29.2 56.0 34.9 19.8

DPS (Rp) 3 5 6 8 9

BVPS (Rp) 200 222 245 277 314

P/E (x) 21.9 17.7 15.5 11.5 9.6

Core P/E (x) 31.3 24.3 15.5 11.5 9.6

Div Yield (%) 0.8 1.2 1.3 1.8 2.1

Catur Sentosa Adiprana Company Focus

BUY Rp530

Reuters Code CSAP.JK

Bloomberg Code CSAP.IJ

Issued Shares (m) 2,895

Mkt Cap (Rpbn) 1,256

Average Daily T/O (m) 1.9

52-Wk range Rp425 /Rp150

PT Buanatata Adisentosa 31.3%

NTAsian Discovery Master Fund 21.0%

Public 47.7%

EPS 14F 15F

Consensus (Rp) na na

TRIM vs Cons. (%) na na

Growing Modern Retail for Building Materials

Company Update

Stock Data

Major Shareholders

Consensus

Stock Price

Companies Data

Paula Ruth

([email protected])

July 03, 2014

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60,000,000

70,000,000

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6/26/2013

8/26/2013

10/26/2013

12/26/2013

2/26/2014

4/26/2014

6/26/2014

Volume Price

PT Trimegah Securities Tbk - www.trimegah.com COMPANY FOCUS 2

Indonesia’s Homeowners Supported by MAC Growth and Urbanization

Population in Indonesia reached 248mn in 2012 with expected population in 2020 of 267.6mn. Looking deeper

into Indonesia’s demographic statistics, two major trends have emerged: 1) the middle-class and affluent con-

sumers (MAC) growth of 91% from 2012 to 2020E (source: BCG), 2) increasing urbanization rate from 56.1% in

2012E to 62.7% in 2017E (source: EIU).

BCG categorized the MAC in Indonesia as the consumers with household expenditure at least Rp2mn per month.

It forecasts that the number of people categorized as MAC’s is expected to grow by 8% CAGR in 2012-20E and

MACs would be 53% of the country’s population in 2020E (vs. 30% in 2012). With higher urbanization rate and

expected disposable income growth of 11.8% CAGR for 2012E-17E (source: EIU), the current and future Indone-

sian MACs are predicted to seek products and shopping experience that gives higher level of convenience and

comfort, than just fulfilling their basic needs. Hence, modern retail, which provide selling area and facilities that is

modern, clean, air-conditioned, and other aspects that provides convenience to their customers, have the oppor-

tunity to grow along with the rising population of MACs.

Figure 1. Indonesia’s Consumer Categories

Source: BCG

Monthly household Population Growth

CAGR

Expenditure (Rpmn)

2012 2012 2020E 2020E 2012-2020E (in mn) % of total (in mn) % of total

Elite Rp7.5m and more 2.5 1% 6.9 3% 176% 14%

Affluent Rp5 - less than 7.5m 6.6 3% 16.5 6% 150% 12%

Upper middle Rp3 - less than 5m 23.2 9% 49.3 18% 113% 10%

Middle Rp2 - less than 3m 41.6 17% 68.2 25% 64% 6%

Middle class and affluent Rp2 and more 73.9 30% 140.9 53% 91% 8%

Emerging middle Rp1.5 - less than 2m 44.4 18% 50.5 19% 14% 2%

Aspirant Rp1.0 - less than 1.5m 65.4 26% 47.9 18% -27% -4%

Poor less than Rp1.0m 64.5 26% 28.3 11% -56% -10%

Total population All 248.2 100% 267.6 100% 8% 1%

Consumer Categoris

Source: EIU

Figure 2. Urbanization Rate and Disposable Income

56.1%

57.4%

58.6%

60.0%

61.3%

62.7%

50%

52%

54%

56%

58%

60%

62%

64%

2012E 2013E 2014E 2015E 2016E 2017E

Urbanization Rate

275.2 285.7

322.8

372.4

423.9

481.3

0

100

200

300

400

500

600

2012E 2013E 2014E 2015E 2016E 2017E

USD bn

Disposable Income

(U

SD

bn

)


From total of 62.6mn of Indonesian households in 2012, 76.4% households are home owners (source: Euromoni-

tor). Based on statistics provided by Bank Indonesia (BI), house and apartment ownership (outstanding) credits

grew 22.4% CAGR in 2007-13 and 20.8%YoY in April 2014. The growing number of homeowners in Indonesia is

expected to support the increase consumption for building materials, home improvement, and furnishings. Exist-

ing homeowner could also purchase those products to improve and renovate their homes. Considering the grow-

ing population of MACs and their purchasing behavior, MACs who are homeowners might purchase products that

could make their homes more comfortable.

Source: Euromonitor

Figure 3. Number of Households by Tenure 2012 in Indonesia

Source: Bank Indonesia

Figure 4. Indonesia: House and Apartment Ownership Credits

Distribution vs. Modern Retail

CSAP’s revenue comes from 2 business segments, which are distribution (around 76%) and modern retail

(around 24%). The modern retail segment grew 29.3% of CAGR for 2010-13, higher than distribution segment of

22.6% CAGR for 2010-13. CSAP was able to charge higher gross margin to its modern retail, compared to the

distribution segment. For 2011/12/13, the gross margin was 19.8/20.4/20.9% for retail, which is above the

84

108 124

141

183

222

281

-

50

100

150

200

250

300

2007 2008 2009 2010 2011 2012 2013

(Rp tr)

House and Apartment Ownership Credits

Outstanding

237

286

-

50

100

150

200

250

300

Apr 2013 Apr 2014

(Rp tr)

House and Apartment Ownership Credits

Outstanding

6.6

41.3

8.0 6 .8

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

Home owners, with mortgage Home owners, without mortgage Rented Others

(iIn Millions)

(in

mn

)

(R

ptr

)

(R

ptr

)


distribution segment’s margin of 10.8/10.4/10.7%. Margin in distribution segment also depends on the negotia-

tion or agreement between CSAP and its principals, which might cause lag in the ability to maintain margin when

there’s cost increase (e.g. increase in minimum wage). Retail and distribution contributed ~38% and ~62% to

FY2013 gross margin respectively.

Source: Company

Figure 5. CSAP’s Revenue and Gross Profit Breakdown

Distribution – Major Revenue Contributor with Low Gross Margin

CSAP distributes building material, consumer goods, and chemical with contribution of around 60%, 10%, and

4% respectively to the company’s total revenue. Building material distribution is supported by 48 branches in 39

cities across Indonesia. This sub-segment supplied more than 15,000 SKUs with main principals mostly supply

ceramic tiles and paints, such as “Arwana” ceramic tiles (manufactured by ARNA), ICI Paints, Propan, Mowilex,

Mulia Ceramic. Customers of CSAP’s building material distribution are retail customers or traditional building

material shops. It also distributes consumer goods, such as “P&G”, “Frisian Flag”, and “Dua Kelinci”.

This year, the company plans to add branch offices at Aceh and Madiun (+4.2% to 48 branches) to support

building material distribution. It will also build 1 new warehouse at Tegal. CSAP has closed 1 chemical distribution

branch (Medan) on Dec 2013. The closure would not significantly affect the overall chemical distribution segment

contribution because sales volume in Medan area is not significant. We expect the distribution revenue to grow

14.0% in 2014E and 15.0% revenue CAGR for 2014-17E. 1Q14 distribution revenue grew 7.7% (1Q13 20.3%

YoY; 1Q12 18.2%YoY), while FY2013 sales reached Rp4.9tr which grew 25.7% (22.6% CAGR 2010-13). Lower

1Q14 revenue growth was mostly caused by lower sales of ceramic tiles to building material stores compared to

previous period. This might be happened due to the national election in July 2014 that caused the end users of

building materials received less construction and/or renovation projects. Sales of ceramic tiles were 38.8% of

total revenue in FY2013 and 1Q14.

Distribution segment has 10.7% of gross margin in FY2013. Gross margin was 12.1% in 1Q14, higher than

10.6% in 1Q13, which is driven by improvement of margin from principal of product (“Arwana” ceramic tiles).

“Arwana” is one of the major contributors to distribution segment’s revenue. In 2013, inventories purchased

(net) from ARNA’s subsidiary was 23.6% of CSAP’s cost of sales. We estimate gross margin to increase to 11.5%

in 2014E.

Distribution

revenue

76%

Retail revenue

24%

Distribution

62%

Retail

38%

Revenue Gross Profit


Source: Company, TRIM Research

Figure 6. CSAP’s Distribution Sales and Gross Margin

Modern Retail Expansion – Doubling Mitra10 Stores

CSAP’s retail business has two sub-segments: Mitra10 and Atria. Mitra10 sells building material and home im-

provement products. It has more than 65,000 SKUs with main principals for granite tiles, ceramic tiles and paint

products, such as Roman ceramic tiles and ICI Paints. Its target market is middle class customers and 90-95% of

the customers are homeowners. Atria sells furniture and furnishing products with more than 6,000 SKUs.

Mitra10 has 14 stores in Jabodetabek, 2 stores in East Java, 2 stores in Bali, and 2 stores in Sumatra. Those 20

existing stores consist of 15 Superstores and 5 Express Stores. The existing Superstore has selling area per store

between 1,300-3,600sqm, whereas Express Store is smaller, around 300-1,000sqm. Mitra10 has no new store in

2013 and, according to the management, there’s no plan for new store in 2014E. For 2013-14E, the company

said that it has focused on improving its existing stores by adding more fast-moving and new products, remodel-

ing, improving inventory management, and developing people. Starting 2015E, Mitra10 plans to add another 20

Superstore-type outlets with target of 2 new stores in 2015E continued with a pace of 1-2 stores each year. We

assume Mitra10 to add 1 store per year during 2015-16E continued by 2 stores per year in 2017-25E assuming

size 3,000sqm per store. Currently, Mitra10 total selling area was 40,525sqm. Assuming no change on total

existing stores area, we estimate that the new stores would add 148.1% (60,000sqm) of Mitra10 selling area to

total selling area of 100,525sqm by the end of 2025E.

Atria has 10 showrooms (13,385sqm) with 60% of the showrooms are located inside Mitra10 store, which could

facilitate one-stop-shopping experience for Mitra10 and Atria customers. Atria plans to add 1 showroom (around

2,800sqm) in Bali in 4Q2014E (vs. 2 and 3 new showrooms in 2012 and 2013). We estimate 1 showroom to be

opened every two years during 2015-25E.

The retail segment’s revenue mostly comes from Mitra10. Historically, Mitra10 was able to achieve SSSG of

20.6/29.4% in 2012/13, followed by 22% in 1Q14 (31% in 1Q13). Assuming that new store’s sales in 1st year of

opening would be similar to the minimum target (Rp2mn/sqm/month) adjusted with inflation assumption of 6%,

we estimate Mitra10 to grow 25.3% revenue CAGR in 2014-17E. Our expectation on 2014E Mitra10 sales growth

is 23.0%, based on Mitra10’s plan to increase ASP by 7% and sales growth in existing stores as no new store

planned for this year. We expect Mitra10 SSSG to be 22.5/22.0% in 2015/16E and then decreasing each year to

6.0% in 2025E considering higher base (1-2 new stores per year in 2015-25E) and possibility of sales cannibali-

zation from new stores opened near to other stores. Assuming 6% growth of average revenue per Atria show-

room, we estimate Atria to grow 11.8% revenue CAGR. We expect CSAP retail segment revenue to grow 24.7%

CAGR in 2014-17E (29.3% CAGR in 2010-13).

10.8%10.4% 10.7%

11.5% 11.5% 11.5% 11.5%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

-

2,000

4,000

6,000

8,000

10,000

12,000

2011 2012 2013 2014E 2015E 2016E 2017E

(Rp bn)

Net Revenue Gross Margin

(R

pb

m)


Source: Company

Figure 7. CSAP Modern Retail Locations

2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E

Revenue drivers

Number of stores 20 20 20 21 22 24 26 28 30

New stores built in the year 0 0 1 1 2 2 2 2 2

Average Revenue per store 72 89 105 126 146 169 193 218 241

Revenue per existing store 72 89 109 130 155 179 204 229 253

Revenue per new store 0 0 38 40 86 91 96 102 108

Revenue 1443 1775 2213 2775 3494 4396 5412 6526 7712

23.0% 24.6% 25.4% 25.9% 25.8% 23.1% 20.6% 18.2% Revenue growth (%)

Figure 8. Mitra10 Revenue Drivers and Estimates




Figure 9. CSAP’s Modern Retail Sales and Gross Margin

Gross margin of retail segment in 2011/12/13 was 19.8/20.4/20.9%. We assume gross margin in 2014/15 to be

21.4/21.8% from selling items with higher margin. This is slightly lower than 1Q14 gross margin of 22.4%.

Expected Higher Modern Retail Contribution – Higher Consolidated Margin

We expect higher contribution from retail segment and lower contribution from distribution segment to total

revenue in 2014E-25E. This is supported by our expectation for higher revenue growth on retail (23.6% CAGR),

compared to distribution (15.0% CAGR) in 2014-17E. We estimate retail to contribute 25.7% in 2014E to 30.5%

in 2017E (FY2013 24.2%) to total revenue. 1Q14 company’s revenue grew 11.6%YoY, driven by revenue growth

of 23.4%YoY for retail and 7.7%YoY for distribution. We estimate 2014E total revenue to grow by 15.0% (retail

22.2%; distribution 14%), which is lower than management target of 23%. We expect CSAP to achieve 17.6%

revenue CAGR in 2014-17E.


Figure 10. CSAP’s Segment Revenue and Consolidated Gross Margin

We estimate consolidated gross margin to improve from 13.2% in 2013 to 14.8% in 2017E, supported by expan-

sion of gross margin for retail (FY2013 20.9%; 2017E 21.8%) and distribution (FY2013 10.7%; 2017E 11.5%)

along with higher retail revenue contribution. We expect core EPS to grow 26.1% CAGR for 2014-17E. Our esti-

mated core ROAE is 12.0% in 2014E to 16.6% in 2017E, higher than 8.5% in FY2013.

19.8%

20.4%

20.9%

21.4%21.8% 21.8% 21.8%

15.0%

16.0%

17.0%

18.0%

19.0%

20.0%

21.0%

22.0%

23.0%

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2011 2012 2013 2014E 2015E 2016E 2017E

(Rp bn)

Net Revenue Gross Ma rgin

12.9%

12.8%13.2%

14.2%14.4%

14.6%14.8%

11.5%

12.0%

12.5%

13.0%

13.5%

14.0%

14.5%

15.0%

-

2

4

6

8

10

12

14

16

2011 2012 2013 2014E 2015E 2016E 2017E

(R

p t

r)

Distribution revenue Retail revenue Gross Margin

(R

pb

m)



Figure 11. CSAP Core ROAE

Regarding cash flow from operation, the company posted negative Rp25bn in 2013, compared to Rp125bn of

positive cash flow in 2012. CSAP experienced cash cycle of 45 days (+6.3%YoY) in 2013. This was mostly result-

ed from increase in A/R days (6%YoY). Majority of the A/R belongs to the distribution segment as modern retail

mostly accepts payment in cash. We assume cash cycle to be 45 days in 2014E and 43 days in 2017E.

Takeaways from on the ground visits

Following are our findings during the on the ground visit to Mitra10 & Atria (Serpong; May 11 and Jun 13), Depo

Bangunan (Serpong; Jun 13), and traditional building material store (Southern Jakarta; Jun 12):

Depo Bangunan that we visited has larger store area (6,500sqm) compared to Mitra10 (3,600sqm), while the

traditional store has around 300sqm of selling area. The size of aisle is varies within Mitra10 and Depo

Bangunan. We estimate that aisle in Depo Bangunan and Mitra10 could reach around 1.5.m. Traditional store has

less than 1m of “aisle”, which is the area where the store’s visitors standing when making purchases (asking) the

sales staffs. We feel that Depo Bangunan is almost like a warehouse-type of store with its less polished high

ceiling. Compared to traditional store, Mitra10 and Depo Bangunan are more neat and clean. Mitra10 has 4 cash-

ier counters vs. Depo Bangunan’s 9 cashier counters. For traditional store, during our visit, the store has 2 sales

staffs and 1-2 supervisors.

During our visit, Depo Bangunan has more foot traffic compared to Mitra10. This also might be due to the store

location factor Depo Bangunan located near the main city road vs. Mitra10 at developer’s (SMRA) area which is

further from the main city road) and earlier opening of Depo Bangunan (open in 2000) than Mitra10 (open in

2009) in that city. The traditional store has around 2-4 visitors when we visited. As it has smaller “aisle”, it is

already felt crowded in the traditional store with only 2-4 visitors.

Depo Bangunan put its promotional program information “bordering” the store entrance door making it easily

noticed by the time the visitors going into the store building. Mitra10 and Depo Bangunan both has in-store pro-

motion, such as promo products near the cashiers and area where visitors walked from one aisle to other aisle.

We noticed that Depo Bangunan put clearance sales items on outside the selling area (outside cashier) at the

back part of the building with less foot traffic compared to inside the selling area. Traditional store does not have

promo signs. The visitors have to ask the store supervisor or staff to know specific product’s price.

We saw sales and design consultation service area at the center of Mitra10’s store, which provide services, such

as interior design consultation. We have not noticed if Depo Bangunan also provides similar service.

10.7%

7.2%

8.5%

12.0%

14.4%15.3%

16.6%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

2011 2012 2013 2014E 2015E 2016E 2017E


Source: TRIM Research

Figure 12. Store Front


Figure 13. Mitra10’s Aisle



Figure 14. Depo Bangunan’s Aisle


Figure 15. Inside Traditional Store



Figure 16. Mitra10’s Store Promotion


Figure 17. Depo Bangunan’s Store Promotion


Figure 18. Mitra10’s Product Arrangement



Figure 19. Mitra10 2nd Floor with Atria (same building)


Figure 20. Depo Bangunan’s Product Arrangement


Figure 21.Traditional Store’s Product Arrangement


Quick price survey on 6 popular items

For the survey, we picked 6 items which we considered to be popular in traditional and modern retail store

(Mitra10 & Depo Bangunan) of building materials. We rank the items in range of 1 (cheapest) to 3 (most expen-

sive). Store with the lower of sum indicates that it has most items with cheaper price. For the the items sur-

veyed, the rank analysis shows that Depo Bangunan (10 points) sold more items with cheaper price, compared

to Mitra10 (13 points) and traditional store (13 points).

From our visit and interview at the traditional store, the store’s supervisor mentioned that the ceramic tiles sold

there are mostly plain white colors with the exception for bathroom ceramic tiles. Note that we have not con-

firmed whether the store would not mind to order the non-plain white ceramic tiles if there’s order from custom-

ers, whether it depends on the order quantity, and how frequent the customers purchase from the store (regular

customer or not).

In Rp In USD Rank

Item Product Category Mitra

10

Depo Bangu

nan

Tradi-tional Store

Mitra 10

Depo Bangun

an

Tradi-tional Store

Mitra 10

Depo Bangu

nan

Tradi-tional Store

Vinilex Super Pearly White 5kg

Paint for Wall 128,700 110,500 100,000 10.7 9.2 8.3 3 2 1

Ftalit Gloss Pearl White 1 kg

Paint for Metal and Wood

48,200 47,900 49,500 4.0 4.0 4.1 2 1 3

Semen MU-380 40kg Instant Cement 130,700 130,800 125,000 10.9 10.9 10.4 2 3 1

No Drop 1kg Waterproofing Paint 42,700 41,700 45,000 3.6 3.5 3.8 2 1 3

No Drop 20kg Waterproofing Paint 742,700 723,600 735,000 61.9 60.3 61.3 3 1 2

Mulia Signature Glossy White KW1

Ceramic Tiles 20cm x 20 cm

50,800 51,700 53,000 4.2 4.3 4.4 1 2 3

13 10 13


Figure 22. Price survey in Mitra10, Depo Bangunan, and Traditional Store (assume:

Focusing rank analysis to the modern retail stores and added another 3 items consists of 2 non-plain-white ce-

ramic tiles and 1 different paint brand for specific color, we found a consistent result that Depo Bangunan (12

points) sold more cheaper items compared to Mitra10 (15 points).

To be noted that this survey is performed at one location for each store, which caused the result might not re-

flect the overall trend. The traditional store we visited is located at southern Jakarta, while the Mitra10 and Depo

Bangunan at outer Jakarta, which could have different product pricing between Jakarta and outer Jakarta. We

also noticed in the modern retail store we visited that several items have promo / discounted price. Normal price

(purchase during other period) might be the same with price at competitor store. The survey was also done only

on several items or categories. Broadening the number of items or categories might give different findings con-

sidering a store could implement different pricing strategy for different product categories or items.


Figure 23. Price survey in Mitra10 and Depo Bangunan (assume: Rp12,000/USD)

In Rp In USD

Item Product Category Mitra

10 Depo

Bangunan Mitra

10 Depo

Bangunan Mitra

10 Depo

Bangunan

Vinilex Super Pearly White 5kg Paint for Wall 128,700 110,500 10.7 9.2 2 1

Ftalit Gloss Pearl White 1 kg Paint for Metal and Wood 48,200 47,900 4.0 4.0 2 1

Semen MU-380 40kg Instant Cement 130,700 130,800 10.9 10.9 1 2

No Drop 1kg Waterproofing Paint 42,700 41,700 3.6 3.5 2 1

No Drop 20kg Waterproofing Paint 742,700 723,600 61.9 60.3 2 1

Mulia Signature Glossy White KW1 Ceramic Tiles 20cm x 20 cm 50,800 51,700 4.2 4.3 1 2

Dulux Pentalite Bluebell White 2.5 ltr Paint for Wall 136,000 128,400 11.3 10.7 2 1

Centro Hybrid WT Cenit FS 2501 Beige KWA Ceramic Tiles 25cm x 25 cm 113,000 107,350 9.4 8.9 2 1

Asia Canary Basic KWA Ceramic Tiles 20cm x 25cm 50,200 50,750 4.2 4.2 1 2

15 12

Rank


Risks

Delay on Completion or Construction of New Store, Warehouse, and/or Branch

CSAP’s revenue growth achievement could depend on whether the planned new store, branch, or warehouse is

completed on time. To fulfill specific building requirement, most of these buildings were custom built by CSAP.

Rental risk

Most of CSAP’s store is located in rented locations. The increase in rental rate would decrease margin. By the

time the rental contract is expired, there is also risk if the owner of land plans to use the area for other purpose

(refuse to extend the rental to CSAP).

Minimum wage increase

Significant rise in minimum wage would cause decrease in margin. CSAP employs 7,150 employees with 56% are

permanent employees.

Decreasing Purchasing Power and National Election Effect

If economic condition changes or other circumstances caused decrease in purchasing power, it might negatively

affect the revenue and margin of CSAP. For example, customers of retail segment could lower their purchase for

building material if their purchasing power is reduced due to, for example, significant fuel increase. National

election might affect CSAP’s business as well, particularly to the building material distribution segment, because

traditional building material stores (CSAP’s distribution segment’s customers), might order lower volume of build-

ing material to CSAP. This is possibly impacted from contractors receiving lower construction projects due to

political uncertainty.

Competition Risk

Some of other competitors in modern retail of building material are Depo Bangunan, Dunia Bangunan, and Pasar

Keramik (specific for ceramic tiles). Competitor for home furnishing store, includes Informa and Ikea. CSAP’s

distribution business is also competing with other distributors. If competitors significantly become more aggres-

sive, it might cause lower revenue growth and margin projection.

Brand Principal or Supplier Risk

Most of CSAP business is in forms of distribution business. The revenue for distribution business would depend on

whether the brand principals or supplier still agree to use CSAP as their product distributor when the (principal –

distributor) agreement period is completed. For distribution segment, CSAP has managed to maintain long term

relationship with most of its principals. Margin for distribution segment depends on the negotiation or agreement

between principal and CSAP.

Valuation

By using DCF calculation method (assuming 9.5% WACC, 5% long-term growth), we arrive at target price of

Rp530 and 22.1% upside. Using adjusted beta of ACES (0.940) as retail (25% contribution) and EPMT (0.403) as

distribution (75% contribution) segment benchmark, we calculate comparison-Beta of 0.54. Based on CSAP’s

adjusted Beta of 0.79, we assume beta of 0.80 for our DCF calculation.


Market Cap P/E Dividend Yield

Ticker Price (Rpbn) 2014 2015F 2014 2015F Value (Rp) Volume

ACES 875 15,006 26.7 22.5 0.8 0.9 15,063.3 19.1

MPPA 3,125 16,806 41.0 30.1 0.7 1.0 108,923.1 43.8

RALS 1,130 8,018 17.5 15.3 2.8 3.2 3,239.6 2.5

AMRT 525 19,819 33.2 27.0 1.2 1.4 754.5 1.6

RANC 585 915 30.3 26.1 0.7 0.8 518.6 0.8

HERO 2,700 11,296 NA NA NA NA 331.8 0.1

11,977 30.0 24.4 1.2 1.4 21,471.8 11.3

AVERAGE 6 Month

Risk free rate 7.5%

Market premium 5.0%

Beta 0.8

Debt rate 10.7%

Debt proportion 57.3%

Tax rate 25.0%

Equity cost of capital 11.5%

Debt cost of capital 8.0%

WACC 9.5%

LT growth rate 5.0%

Description 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E

EBIT (1- tax) 200 239 286 341 402 468 537 607 676 757 829

Depreciation and Amortisation 70 84 100 121 143 169 198 232 269 313 362

Changes in non-cash Working

Capital (201) (163) (195) (190) (197) (206) (202) (200) (194) (182) (170)

Capex (160) (196) (254) (303) (332) (394) (433) (510) (563) (658) (726)

FCFF (91) (37) (63) (31) 16 37 99 129 189 230 295

Discounted FCFF (83) (30) (48) (22) 10 21 53 62 83 93 2,413

Total discounted FCFF 2,553

Net cash (debt) (1,016)

NAV 1,537

# of shares (bn) 2.9

NAV / share 531

Target price after rounding 530


Figure 24. WACC and DCF Calculations

CSAP’s Retail Comparison to ACES

ACES already opened 105 outlets until Jun 2014. Thus, we think ACES has less competition risk compared to

CSAP. In the other hand, the retail segment of CSAP, with only 20 Mitra10 stores and 10 Atria showrooms, might

be able to experience higher growth compared to ACES. ACES’ revenue was Rp3.9tr (+20.9%YoY) in FY2013. In

2013, ACES opened 19 new Ace stores (25% of total up to 2012) and 4 Toys Kingdom stores (25.0% of total up

to 2012). In the same year, CSAP’s retail segment posted Rp1.5tr (+33.8%YoY) of revenue. Atria (around 1.4%

of FY2013 consolidated sales) opened 3 new showrooms that year. No new Mitra10 store in 2013, but that year

the company focused on improving existing stores by adding fast-moving & new products, remodeling, and other

ways of improvement. FY2013 gross margin of ACES, which mostly sells lifestyle and home improvement prod-

ucts, was 49.6% (vs. CSAP’s retail 20.9%) of net sales. CSAP plans to increase its gross margin by adding owned

brand products, such as granite tiles (imported from China) using owned brand “Sincere”.

Figure 25. Retail Comparison

Source: TRIM Research, Bloomberg


Source: Company

Figure 26. CSAP Ownership

Source: Company

Figure 27. CSAP’s Company Structure

PT Buanatata

Adisentosa31%

NT Asian Discovery

Fund21%

Management

8%

Public

40%

PT Buanatata Adisentosa

NT Asian Discovery Fund

Management

Public

Company background and ownership

PT Catur Sentosa Adiprana was initially started in 1966 as a small shop in selling paint and other building mate-

rials in Jakarta which expanded into distribution business. The family business then established as PT Catur

Sentosa Adiprana in 1983. Its retail segment was started in 1997 by opening modern retail store for building

materials in Indonesia using “Mitra10” brand. The company added home furnishing into its retail segment by

opening “Atria” showroom in 2006. In 2007, the company went public with ticker CSAP. The company already

has 48 building materials distribution branches in 39 cities, 4 chemicals distribution branches, 14 consumer

goods distribution areas, 20 stores of Mitra10, and 10 showrooms of Atria in Indonesia. In 2013, the distribution

business contributes 76.8% of revenue and the rest from its retail business. NT Asian Discovery Fund (Thailand)

bought 21% of CSAP shares on May 2014.


CSAP acts as a holding company for the group’s subsidiaries as well as an operational company with activities in

the distribution of building materials and consumer goods (P&G and Frisian Flag Products)

Source: Company

Figure 28. CSAP Distribution Business

Cities with building material distribution branch

Chemical distribution braches

Consumer good distribu�on areas


Income Statement (Rpbn) Balance Sheet (Rpbn)

Cash Flow Key Ratio Analysis

Interim Results Capital History

Date

12-Des-07 IPO @ Rp200

Year end Dec 2012 2013 2014F 2015F 2016F

Revenue 4,932 6,321 7,293 8,623 10,144

Growth (%) 20.1 28.2 15.4 18.2 17.6

Gross Profit 632 835 1,034 1,242 1,477

Opr. Profit 127 153 215 266 319

EBITDA 193 226 274 337 402

Growth (%) 6.3 16.8 21.7 22.7 19.4

Net Int Inc/(Exp) (64) (81) (100) (112) (134)

Other Inc/(Exp) 24 25 0 0 0

Pre-tax Profit 86 97 115 154 184

Tax 23 21 29 39 46

Minority Int. (6) (5) (5) (6) (8)

Extra. Items 0 0 0 0 0

Reported Net Profit 57 71 81 109 131

Core Net Profit 40 52 81 109 131

growth (%) (25.2) 29.2 56.0 34.9 19.8

DPS 3 5 6 8 9

growth (%) (22.2) 42.9 13.6 34.9 19.8

Dividend payout

ratio (%) 17.7 20.4 20.4 20.4 20.4

Year end Dec 2012 2013 2014F 2015F 2016F

Cash and equivalents 66 57 36 43 51

Other curr asset 1,691 2,209 2,498 2,990 3,476

Net fixed asset 663 734 794 884 996

Other asset 92 108 144 184 225

Total asset 2,512 3,108 3,472 4,101 4,748

ST debt 579 772 865 1,030 1,174

Other curr liab 1,016 1,339 1,501 1,792 2,115

LT debt 186 167 187 229 262

Other LT Liab 84 114 128 151 175

Minority interest 70 74 83 97 113

Total Liabilities 1,864 2,391 2,680 3,202 3,726

Shareholders Equity 578 643 709 802 910

Net debt / (cash) 687 870 1,016 1,216 1,386

Total cap employed 918 997 1,107 1,279 1,459

Net Working capital 163 155 169 211 238

Debt 764 938 1,052 1,259 1,436

Year end Dec 2012 2013 2014F 2015F 2016F

Core Net Profit 40 52 81 109 131

Depr / Amort 43 47 60 70 84

Chg in Working Cap (15) (195) (139) (201) (163)

Others 57 71 0 0 0

CF's from oprs 125 (25) 2 (21) 51

Capex (284) (111) (120) (160) (196)

Others (25) (28) 0 0 0

CF's from investing (310) (139) (120) (160) (196)

Net change in debt 235 173 114 207 177

Others (15) (18) (17) (19) (25)

CF's from financing 220 155 98 188 152

Net cash flow 35 (9) (21) 7 8

Cash at BoY 31 66 57 36 43

Cash at EoY 66 57 36 43 51

Free Cashflow (152) (128) (38) (91) (37)

Year end Dec 2012 2013 2014F 2015F 2016F

Profitability

Gross Margin (%) 12.8 13.2 14.2 14.4 14.6

Opr Margin (%) 2.6 2.4 2.9 3.1 3.1

EBITDA Margin (%) 3.9 3.6 3.8 3.9 4.0

Core Net Margin (%) 0.8 0.8 1.1 1.3 1.3

ROAE (%) 10.3 11.7 12.0 14.4 15.3

ROAA (%) 2.5 2.5 2.5 2.9 3.0

Stability

Current ratio (x) 1.1 1.1 1.1 1.1 1.1

Net Debt to Equity (x) 1.2 1.4 1.4 1.5 1.5

Net Debt to EBITDA (x) 3.6 3.9 3.7 3.6 3.4

Interest Coverage (x) 2.3 2.2 2.2 2.4 2.4

Efficiency

A/P (days) 81 82 81 82 83

A/R (days) 51 54 54 53 51

Inventory (days) 72 73 73 75 75

Year end Dec 1Q13 2Q13 3Q13 4Q13 1Q14

Sales 1,437 1,590 1,518 1,775 1,604

Gross Profit 186 207 207 235 239

Operating Profit 24 39 31 59 42

Net Profit 11 21 8 31 19

Gross Margins (%) 12.9 13.0 13.7 13.2 14.9

Opr Margins (%) 1.7 2.5 2.1 3.3 2.6

Net Margins (%) 0.8 1.3 0.5 1.8 1.2

PT Trimegah Securities Tbk

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purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of any offer to buy. This report has

been produced independently and the forecasts, opinions and expectations contained herein are entirely those of Trimegah Securities.

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july 03, 2014 catur sentosa adiprana...material shops. it also distributes consumer goods, such as...

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