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

Solid 1Q15 results amid the weak purchasing power condition

Despite of weak purchasing power condition, combining with salary and

utility increases, LPPF was still able to deliver Rp185bn net profit in

1Q15, grew significantly by 50.3% YoY. It was in-line with our and con-

sensus’ estimates at 9%, given its historical seasonality. The revenue

stood at Rp1.6tr (+9.4%), with higher DP portion in merchandise mix.

The top-line made 17% of TRIM and the consensus’ forecast, where the

historical seasonality was at ~19%. We also highlight a significant de-

cline in finance expenses by 67% YoY, to come to Rp19bn (vs Rp58bn).

Delivered positive SSSG level of 5.4%

LPPF still managed to deliver positive SSSG at 5.4%, amid the slow

down economic condition. We note that LPPF is the only one retailer that

able to post positive SSSG in 1Q15, while the others showed negative

growths (e.g. ACES, RALS). We see that LPPF has strong consumer

profile, which are on the middle-income segment.

To open 9 new stores prior to Lebaran

In FY15E, the management kept its target to open 12-14 new stores, of

which 9 new stores will be opened prior to Lebaran. In 1Q15, LPPF add-

ed 1 new store in Singkawang, Kalimantan. In April’ 15, LPPF also has

opened 2 new stores in Buton Island, Sulawesi, and Kupang, Nusa

Tenggara.

Maintain BUY, higher TP Rp20,200

We use DCF methodology, and roll over our DCF-based year to FY16E, to

derive our Rp20,200 target price. We now apply 7.3% risk-free rate and

13.1% WACC. LPPF currently trades at 28-21x PE FY15-16E. Although our

target price implies a 1.3x PEG, we believe this is warranted due to LPPF’s

more stable business versus most other retailers and closer to the likes of

ACES (also 1.1x PEG). BUY

Year end Dec 2013 2014 2015E 2016E 2017E

Sales 12,739 14,451 16,603 20,076 23,770

Net Profit 1,125 1,440 1,855 2,439 2,920

EPS (Rp) 386 494 636 836 1,001

EPS Growth 47.2% 28.0% 28.8% 31.5% 20%

DPS (Rp) n/a 158 219 287 376

BVPS (Rp) (272) 55 473 1,023 1,647

P/E (x) 44.4 36.0 27.4 20.9 17.5

Div Yield n/m 0.9% 1.3% 1.6% 2.2%

Matahari Department Store Company Focus

Solid performance in 1Q15

Companies Data

Dian Octiana

(dian.octiana@trimegah.com)

May 4, 2015

PT Matahari Department Store Tbk en-

gages in the retail business for several

types of products such as clothes, acces-

sories, bags, shoes, cosmetics, house-

hold appliances, and management con-

Share Price Rp17,500

Sector Retail

Price Target Rp20,200 (+15%)

BUY Rp20,200

Reuters Code LPPF.JK

Bloomberg Code LPPF.IJ

Issued Shares (m) 2,918

Mkt Cap (Rpbn) 51,064

Avg. Value Daily 6 month (Rpbn)

63.6

52-Wk range (Rp) 20225 / 13475

Asia Color Company Ltd. 2.00%

PT Multipolar Tbk 20.48%

Public 77.52%

EPS 15F 16F

Consensus (Rp) 651 790

TRIM vs Cons. (%) -2.3% 5.9%

Company Update

Stock Data

Major Shareholders

Consensus

Stock Price & Value

-

20

40

60

80

100

120

140

160

180

-

5,000

10,000

15,000

20,000

25,000

May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15

(Rpbn)

Avg. 5 Day MA Trading Value (RHS) Price (LHS)

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

Source: Company, TRIM Research

Figure 2. Quarterly SSSG - maintain positive SSSG amid the weak purchasing power

Source: Company, TRIM Research

Figure 3. LPPF’s merchandise mix

9.3%

15.4%

9.7%8.7%

5.4%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

1Q14 2Q14 3Q14 4Q14 1Q15

DP sales

; 34%CV sales

; 66%

1Q14

DP sales

; 35%CV sales

; 65%

1Q15

Figure 1. 1Q15 Results - delivered +50.3% YoY net profit

1Q14 4Q14 1Q15 QoQ Chg.

(%)

YoY Chg.

(%)

FY15E 1Q15/

FY15E

1Q15/

Cons.

Revenue 1,480 1,886 1,619 -14.2% 9.4% 9,788 16.5% 17.4%

Gross profit 924 1,221 1,018 -16.6% 10.2% 6,167 16.5% 17.5%

Operating profit 263 484 256 -47.0% -2.6% 2,543 10.1% 10.3%

Net profit 123 359 185 -48.4% 50.3% 1,973 9.4% 9.5%

Gross margin (%) 62.5% 64.7% 62.9% 63.0%

Operating margin (%) 17.8% 25.6% 15.8% 26.0%

Net margin (%) 8.3% 19.0% 11.4% 20.2%

Source: Company, TRIM Research

PT Trimegah Securities Tbk - www.trimegah.com COMPANY FOCUS 3

Valuation and Price Target

We lower our forecast in 2015/16F by -6/-1%, to adjust the realization of store area in FY14. We also lower our

overall productivity per sqm by -6% in FY15E to anticipate continuation of lower purchasing power condition.

We use DCF methodology, and roll over our DCF-based year to FY16E, to derive our Rp20,400 target price. We now

apply 7.3% risk-free rate and 13.1% WACC. LPPF currently trades at 28-21x PE FY15-16E. Although our target price

implies a 1.3x PEG, we believe this is warranted due to LPPF’s more stable business versus most other retailers and

closer to the likes of ACES (also 1.1x PEG). BUY

Risk free rate 7.3%

Market premium 5.0%

Beta 1.17

Debt proportion 0.0%

Tax rate 20.0%

Equity cost of capital 13.1%

Debt cost of capital 16.0%

WACC 13.1%

LT growth rate 3.0%

Description 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E

EBIT x (1 - tax) 2,409 2,852 3,363 3,921 4,545 5,252 6,313 7,254 8,315 9,512 10,859

Less: Capital Expenditure (322) (381) (449) (523) (606) (700) (807) (927) (1,063) (1,216) (1,388)

Changes in Working Capital 120 131 152 163 185 209 237 267 302 340 383

Add: Depreciation & Amortiza- 304 360 424 484 562 649 420 482 553 632 722

FCFF 2,511 2,962 3,490 4,046 4,686 5,410 6,162 7,076 8,107 9,268 10,575

LT Growth 83,149

Discounted FCFF 1 1 1 1 2 2 2 2 3 3 3

Total discounted FCFF 2,511 2,619 2,728 2,797 2,864 2,923 2,944 2,989 3,028 3,061 27,367

Net debt / (Net cash) 55,831

Minority Interest (3,024)

NAV 0

# of shares (bn) 58,855

NAV / share 20,200

Figure 5. WACC and DCF Calculations

Source: TRIM Research

Figure 4. forecast changes

Previous Current Changes

FY15E FY16E FY15E FY16E FY15E FY16E

Additional stores 12 11 12 11 0% 0%

Store area (SQM) 937,663 1,009,163 932,000 1,003,500 -1% -1%

SSSG (%) 10.2% 9.7% 10.2% 9.7% 0% 0%

Gross sales 17,604 20,962 16,603 20,076 -6% -4%

Net sales 9,788 11,655 9,231 11,158 -6% -4%

Gross profit 6,167 7,370 5,836 7,077 -5% -4%

Operating profit 2,543 3,078 2,407 3,011 -5% -2%

Net profit 1,973 2,483 1,860 2,453 -6% -1%

Gross margin 63% 63% 63% 63%

Operating margin 26% 26% 26% 27%

Net margin 20% 21% 20% 22%

Source: TRIM Research

PT Trimegah Securities Tbk - www.trimegah.com COMPANY FOCUS 4

Income Statement (Rpbn) Balance Sheet (Rpbn)

Cash Flow Key Ratio Analysis

Interim Results Capital History

Date

10-Oct-89 IPO @ Rp7,900

Year end Dec 2013 2014 2015E 2016E 2017E

Revenue 12,739 14,451 16,603 20,076 23,770

Revenue Growth (%) 17.0% 13.4% 14.9% 20.9% 18.4%

Gross Profit 4,363 5,048 5,836 7,077 8,378

Opr. Profit 1,781 2,111 2,407 3,011 3,565

EBITDA 1,988 2,339 2,659 3,315 3,925

EBITDA Growth (%) 13.6% 17.7% 13.7% 24.7% 18.4%

Net Int Inc/(Exp) (291) (233) (88) 37 86

Gain/(loss) Forex 0 0 0 0 0

Other Inc/(Exp) 34 (27) 6 0 0

Pre-tax Profit 1,524 1,851 2,325 3,049 3,650

Tax (373) (431) (465) (610) (730)

Minority Int. 0 0 0 0 0

Extra. Items 0 0 0 0 0

Reported Net Profit 1,150 1,419 1,860 2,439 2,920

Core Net Profit 1,125 1,440 1,855 2,439 2,920

Growth (%) 47.2% 28.0% 28.8% 31.5% 19.7%

Dividend per share n/a 158 219 287 376

growth (%) n/m n/m 38.8% 31.1% 31.1%

Dividend payout ratio n/m 40.0% 45.0% 45.0% 45.0%

Year end Dec 2013 2014 2015E 2016E 2017E

Cash and equivalents 798 786 1,320 3,024 4957

Other curr asset 905 1,332 1,358 1,579 1820

Net fixed asset 727 726 825 843 832

Other asset 510 569 569 569 569

Total asset 2,940 3,413 4,072 6,015 8178

ST debt 29 279 0 0 0

Other curr liab 1,861 2,240 2,367 2,708 3080

LT debt 1,567 410 0 0 0

Other LT Liab 276 325 325 325 325

Minority interest 0 0 0 0 0

Total Liabilities 3,733 3,254 2,692 3,033 3405

Shareholders Equity (793) 159 1,381 2,983 4805

Net debt / (cash) 798 (97) (1320) (3024) (4957)

Total cap employed 1,050 894 1,706 3,308 5098

Net Working capital (956) (908) (1,009) (1,129) (1260)

Debt 1,596 689 0 0 0

Year end Dec 2013 2014 2015E 2016E 2017E

Core Net Profit 1,150 1,419 1,860 2,439 2,920

Depr / Amort 207 228 251 304 360

Chg in non-cash Working

Cap 326 234 101 120 131

Others 313 186 0 0 0

CF's from oprs 1,683 1,881 2,212 2,863 3,411

Capex (162) (171) (351) (322) (381)

Others (76) (98) 0 0 0

CF's from investing (238) (269) (351) (322) (381)

Net change in debt (1,400) (988) (689) 0 0

Others (274) (629) (639) (837) (1,098)

CF's from financing (1,674) (1,617) (1,328) (837) (1,098)

Net cash flow (230) (5) 534 1,704 1,933

Cash at BoY 1,039 798 786 1,320 3,024

Cash at EoY 784 793 1,320 3,024 4,957

Free Cashflow 1,715 1,910 1,927 2,511 2,962

Year end Dec 2013 2014 2015E 2016E 2017E

Profitability

Gross Margin 34.3% 34.9% 35.2% 35.3% 35.2%

Opr Margin 14.0% 14.6% 14.5% 15.0% 15.0%

EBITDA Margin 15.6% 16.2% 16.0% 16.5% 16.5%

Core Net Margin 8.8% 10.0% 11.2% 12.1% 12.3%

ROAE n/m n/m n/m n/m n/m

ROAA 39.2% 44.7% 49.7% 48.4% 41.2%

Stability

Current ratio (x) 0.9 0.8 1.1 1.7 2.2

Net Debt to Equity (x) (1.0) (0.6) (1.0) (1.0) (1.0)

Net Debt to EBITDA (x) 0.4 (0.0) (0.5) (0.9) (1.3)

Interest Coverage (x) 6.1 9.0 27.3 n/m n/m

Efficiency

A/P (days) 173 159 151 139 140

A/R (days) 4 4 4 4 4

Inventory (days) 94 105 105 96 97

Year end Dec 1Q14 2Q14 3Q14 4Q14 1Q15

Sales 2,687 3,304 5,008 3,453 2,902

Gross Profit 924 1,184 1,718 1,221 1,018

Operating Profit 263 444 920 484 256

Net Profit 123 239 699 359 185

Gross Margins 34.4% 35.8% 34.3% 35.4% 35.1%

Opr Margins 9.8% 13.4% 18.4% 14.0% 8.8%

Net Margins 4.6% 7.2% 14.0% 10.4% 6.4%

PT Trimegah Securities Tbk

Gedung Artha Graha 18th Floor

Jl. Jend. Sudirman Kav. 52-53

Jakarta 12190, Indonesia

t. +62-21 2924 9088

f. +62-21 2924 9150

www.trimegah.com

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

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