What’s New
• Retailers are beneficiaries of strong consumer spending. A growing
disposable income will directly benefit retailers given the strong positive
correlation between disposable income and listed retailers’ revenue
(R2=0.99). The 16.5% CAGR in annual disposable income in 2005-09
led to a 15.4% CAGR in listed retailers’ aggregate revenue.
• Changing consumption patterns. As per capita disposable income had
more than doubled over five years to Rp15.9m (US$1,776) in 2009,
lifestyles and consumption patterns have also evolved. Spending on
non-food items has risen, from 45.4% of monthly expenses in 2004 to
49.4% in 2009, and will benefit retailers like Ramayana Lestari Sentosa
(RALS) and Mitra Adiperkasa (MAPI).
• Low penetration rate provides opportunities. The proportion of
modern retailers is projected to increase from 38% of the industry’s retail
channels in 2009 to 41% in 2012, driven by store openings amid rising
income and changing lifestyle. Indonesia’s store penetration rate is also
a low 52 stores/1m population, compared with that of countries with
similar market characteristics, like Malaysia (156 stores/1m) and Thailand
(124 stores/1m).
• Swelling disposable income. Registering a 17.2% CAGR in 2004-09,
disposable income growth is expected to remain strong on the back of
the following: a) growing segment of middle-income earners, b) growing
urban population, c) continued increase in foreign and domestic
investments, and d) relocation of foreign factories to Indonesia to improve
income sustainability. High remittance inflow (4.0% CAGR in 2005-09)
should also support purchasing power in the middle- to low-income
segments.
• Burgeoning middle class. The proportion of middle- and upper-income
groups form 51% of the total surveyed population (in 2009) vs 42% a
year ago. It is estimated that the number of middle-income earners with
an annual per capita income of US$15,000 will grow to 36m in the next
five years, which is larger than the population of Malaysia (28m).
• Indonesians spending more. Annual per capita private consumption
over 2004-09 expanded at 15.0% CAGR to Rp14.2m (US$1,586).
Strong car and motorcycle sales which hit monthly record highs of 72,130
and 699,411 units respectively in Jul 10 are indicative of Indonesians’
propensity to spend.
Action
• OVERWEIGHT retail sector. We have an OVERWEIGHT rating on the
Indonesian retail sector, with RALS as our top pick due to its convincing
recovery story, strong competitive advantage and stronger balance sheet.
Our valuations are derived from a PE ratio methodology, with target prices
being pegged to the PE multiplier set within the historical trading mean
and 2011F as the valuation base year.
• Re-initiate RALS with a BUY. We re-initiate coverage on RALS with a
target price of Rp1,100 based on 16.5x 2011F PE, which is still within its
five-year mean of 15.5x. We recommend a BUY on this stock, which is
also our top pick, for its convincing recovery story, strong competitive
advantage and stronger net cash position without underlying debts.
• Initiate MAPI with a BUY. We initiate coverage on MAPI with a Rp1,920
target price based on 13.0x 2011F PE, higher than its historical trading
mean of 10.0x since the initial public offering (excluding 2007-8), as we
have seen a re-rating on the stock on the back of an operational
turnaround, supported by the growing number of middle-income earners.
Sector Catalysts
• Strong 2H10 results to reflect Idul Fitri and year-end festivities, strongerthan-
expected economic growth.
Assumption Changes
• None.
Essentials
• We are positive on the Indonesian retail sector outlook due to its very
attractive long-term growth potential, supported by the country’s stronger
economic and stable political conditions as well as abundant opportunities.
Risks
• Surge in inflation, growing competitive pressures, unfavourable regulatory
changes, operational risks, and social and political risks.
Tidak ada komentar:
Posting Komentar