CLSA Mitra Adiperkasa (MAPI IJ) – Shopper’s paradies, investors pain?

· Perennial underperformer. The 9M09 performance is masked by forex gain (from US$ and JPY debt), so the company looked cheap on PE basis. Stripping FX gain and tax effect out, MAPI booked only Rp63bn net profit (around 14.5.x earnings) as opposed to Rp166bn reported profits.

· Debt is a big issue here; with the company has US$134mn debt, which is larger than its own market cap.

· The company has generated only Rp1.5bn cash flow YTD and may need to refinance some of these debts.

· MAPI’s presence is visible in all premium shopping malls in Jakarta: 22 dept stores, 577 fashion and sport specialty stores, 109 F&B, and 4 other lifestyle outlets. The problem is that most of these stores are concentrated in Jakarta, resulting in some cannibalisation effect.

· MAPI's Harvey Nichols has also recently lowered prices with their “Reborn” ad. We understand that the lower prices are not just on existing inventory (which obviously mean lower margins in the immediate future) but also on future products. It also means that the super high-end Harvey Nichols brand will be diluted down here in Indonesia .