CIMB Quick Takes – Ramayana Lestari – Mixed signals

Maintain Outperform and target price of Rp1,070 for Ramayana, still pegged at our market P/E target. August sales shot up to Rp872bn, +50% mom with +20% SSG (unadjusted for seasonality), stimulated by festive-month purchases. But sales were 8% below the company’s target though margins rebounded by 140bp mom. Early September sales were reportedly quite robust with sales in the first nine days accounting for 70% of the month’s target, and margins were also strong. That said, whether revenue could meet the target of Rp6.2tr-6.3tr for this year would depend on sales after Hari Raya and whether discounts are necessary to achieve the target. We cut our FY10-12 earnings forecasts by 1-8% to factor in: 1) lower margins while keeping our sales outlook; and 2) higher utility expenses largely from recent electricity-tariff hikes. Our target price, however, stays at Rp1,070, still pegged at our market P/E target which is now 15x from 14x previously. We continue to expect catalysts from strong sales and margins.