Company Note │ Alpha series Food Retail│Indonesia│July 4, 2018 Shariah Compliant
IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. IF THIS REPORT IS DISTRIBUTED IN THE UNITED STATES IT IS DISTRIBUTED BY CIMB SECURITIES (USA), INC. AND IS CONSIDERED THIRD-PARTY AFFILIATED RESEARCH.
Powered by the EFA Platform
INITIATION
Sarimelati Kencana PT Serving growth on silver platters ■ SMK, master franchisee of Pizza Hut in Indonesia, is the largest pizza chain operator
and one of the largest F&B franchises in Indonesia. ■ Low penetration, a fast-growing affluent middle class and an emerging eat-out lifestyle
provide vast growth opportunities. Pizza demand posted 9.5% CAGR in 2012-16. ■ An established track record, a well-known brand name, vertical integration, and an
experienced management team help entrench SMK's market leading position. ■ Sales delivered c.9% CAGR in 2014-17 and is projected to recorded c.15% CAGR in
2017-20F. We expect earnings to post c.22% CAGR over 2017-20F. ■ We initiate PZZA with an Add call and TP of Rp1,500 based on 22.0x 2019 P/E.
Vast growth opportunities in an increasingly affluent population Established in 1987, SMK is the master franchisee of Pizza Hut in Indonesia. It operates two outlet formats: Pizza Hut Restaurant (PHR) and Pizza Hut Delivery (PHD). As at end-1Q18, it had a total of 406 outlets across the country. Indonesia’s large and young population base with an emerging affluent middle class is driving strong demand for F&B establishments. Amid the greater acceptance of Western cuisine and higher appetite for wheat products, the demand for pizza saw 9.5% CAGR in 2012-16.
Plenty of untapped growth pockets Having established a strong presence in major cities, PHR now aims to expand to lower-tier cities while PHD enlarges its presence in first and second tier cities. Following an agreement for lower franchise fees from Yum!, SMK plans to accelerate its outlet expansion by opening at least 175 outlets in Indonesia in 2017-19. The company successfully opened a net addition of 51 outlets in 2017 and 13 outlets in 1Q18.
Adaptation leads to consistent growth Aside from its strong brand name and unchallenged operations, its highly adaptive nature by being continuously innovative in taste and technological aspects led SMK to achieve a consistent 9.3% sales CAGR in 2014-17, despite having operated for more than 20 years. Following PHD’s initiatives to work with online aggregators (e.g. Go-Jek) and more aggressive store expansion, we project stronger sales CAGR of 14.7% in 2017-20F.
Online delivery boost Engaging with online delivery leads to some aggregator cost, but this is more than compensated for by a large sales growth boost and employee efficiency. We estimate that reducing 1 delivery man in all PHD outlets saves at least Rp9.5bn annually or c.5% of earnings. With more food delivery services joining the fray, sales may see upside risk.
Robust c.22% earnings CAGR in 2017-20F As the strong sales growth leads to better operating leverage (salary and rental expenses fall as a % of sales), coupled with a lower franchise fee for the newly opened outlets as agreed with Yum!, we expect the company to book strong 26.3% yoy core earnings growth in 2018F, followed by more conservative 16.7% yoy growth in 2019F (given aggressive expansion) and 23.0% in 2020F.
Initiating coverage with an Add call and Rp1,500 TP We initiate PZZA with an Add and Rp1,500 TP pegged to 22.0x 2019 P/E. PZZA deserves a premium over its retailer peers (sector trading at 15.1x 2019 P/E) on the back of: 1) fast-growing F&B establishment in a country where mass market population and dining out trends are growing; and 2) strong track record, market leading position with over 3 decades of experience. Our TP implies 9.7x 2019 EV/EBITDA and 1.3x 2019 PEG. Risks: higher-than-expected opex and weak consumer purchasing power.
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
Indonesia
ADD Consensus ratings*: Buy 0 Hold 0 Sell 0
Current price: Rp1,090
Target price: Rp1,500
Previous target: N/A
Up/downside: 37.6%
CIMB / Consensus: na
Reuters: PZZA.JK
Bloomberg: PZZA IJ
Market cap: US$228.8m
Rp3,293,844m
Average daily turnover: US$0.75m
Rp10,560m
Current shares o/s: 3,022m
Free float: 30.5% *Source: Bloomberg
Key changes in this note
N/A.
Source: Bloomberg
Price performance 1M 3M 12M
Absolute (%) -11.4
Relative (%) -5.5
Major shareholders % held PT Sriboga Raturaya 64.8
Mountain High Investments Ltd. 4.8
Insert
Analyst(s)
Kevie ADITYA
T (62) 21 3006 1738 E [email protected]
Financial Summary Dec-16A Dec-17A Dec-18F Dec-19F Dec-20F
Revenue (Rpb) 2,695 3,027 3,474 4,006 4,563
Operating EBITDA (Rpb) 317.0 333.1 381.7 441.3 510.7
Net Profit (Rpb) 130.4 139.4 175.8 205.2 252.2
Core EPS (Rp) 45.25 46.07 58.18 67.89 83.47
Core EPS Growth 117% 2% 26% 17% 23%
FD Core P/E (x) 24.09 23.66 18.74 16.06 13.06
DPS (Rp) 22.5 106.6 23.1 29.1 33.9
Dividend Yield 2.06% 9.78% 2.12% 2.67% 3.11%
EV/EBITDA (x) 10.92 10.97 7.81 6.98 5.64
P/FCFE (x) 25.60 46.26 NA NA 13.01
Net Gearing 49.5% 97.0% (27.4%) (17.3%) (29.7%)
P/BV (x) 9.73 8.91 2.90 2.65 2.38
ROE 43.7% 39.3% 23.4% 17.2% 19.2%
% Change In Core EPS Estimates
CIMB/consensus EPS (x)
98.0
103.7
109.4
115.1
1,000
1,100
1,200
1,300
Price Close Relative to JCI (RHS)
20
40
60
May-18 Jun-18 Jun-18 Jun-18
Vo
l m
2
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Serving growth on silver platters
COMPANY BACKGROUND
Business overview
PT Sarimelati Kencana (SMK) was established as a franchisee of Pizza Hut Indonesia under Yum! Brands. According to Yum! Brands' website, Yum! Brands currently has c.45,000 restaurants across 135 countries globally, with three established brands: KFC, Pizza Hut and Taco Bell. Through the franchise, SMK has access to innovative products, global procurement, international marketing strategies, best practice sharing as well as good quality control and regular technical support.
Pizza Hut Indonesia has two different types of outlet formats:
Pizza Hut Restaurant (PHR), which is a full-service pizza restaurant chain, first opened in 1987. As at end-3M18, PHR had a total of 239 outlets throughout Indonesia, located mostly in malls and free-standing buildings.
Pizza Hut Delivery (PHD), which is a pizza delivery chain, first opened in 2007. As at end-3M18, PHD had a total of 167 outlets spread across Indonesia, located mostly in shop houses near residential areas.
Figure 1: SMK’s number of outlets by format (2015-1Q18) Figure 2: Total number of outlets (2015-1Q18)
SOURCES: CGS-CIMB RESEARCH, COMPANY SOURCES: CGS-CIMB RESEARCH, COMPANY
The main difference between PHR’s and PHD’s business flow is its dough balls. PT Sriboga Flour Mill (SFM) directly supplies wheat flour to each PHR outlet to make fresh dough balls in the respective kitchens. Only lasagna and sausages are supplied from the company’s factories to PHR outlets.
For PHD, SFM supplies wheat flour to PHD’s dough ball factories and commissaries, where it is turned into ready-made chilled dough and then transported to PHD outlets in the relevant area.
229 227 237 239
92115
156 167
0
50
100
150
200
250
300
350
400
450
2015 2016 2017 1Q18
PHR PHD
321342
393 406
0
50
100
150
200
250
300
350
400
450
2015 2016 2017 1Q18
3
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Figure 3: PHR’s business process flow diagram
SOURCES: CGS-CIMB RESEARCH, COMPANY
Figure 4: PHD’s business process flow diagram
SOURCES: CGS-CIMB RESEARCH, COMPANY
As at end-1Q18, the company’s 406 total outlets were spread across the five big islands in Indonesia. Among these, 297 outlets were in first-tier cities, 66 in second-tier cities, and the remaining 43 in third-tier cities. About 81% of the company’s total outlets (PHR and PHD combined) were located in Java.
4
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Figure 5: SMK outlets based on city tiers as at end-1Q18
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
Figure 6: PHR outlets based on geographical area as at end-1Q18
Figure 7: PHD outlets based on geographical area as at end-1Q18
SOURCES: CGS-CIMB RESEARCH, COMPANY SOURCES: CGS-CIMB RESEARCH, COMPANY
To support its operations, SMK has developed manufacturing and distribution facilities to ensure vertical integration between its businesses. According to SMK, its parent company PT Sriboga Raturaya (SRR) has a subsidiary, PT Sriboga Flour Mill (SFM), which is one of Indonesia’s top five wheat flour producers and SMK’s sole wheat flour supplier currently. As at 2017, SMK’s manufacturing facilities included:
One dough ball and pasta factory located in Pulo Gadung, East Jakarta. This factory produces c.2,000 tonnes of chilled dough balls (for PHD) and pasta (e.g. lasagna) annually. The utilisation rate of the factory is 50% for dough balls but has reached 100% for pasta.
One dough ball and sausage factory located in Bandung, West Java. This factory produces c.400 tonnes of chilled dough balls (for PHD) and sausages annually. The utilisation rate of the factory is 100% for sausage despite only being able to supply sausages to 50% of SMK’s outlets, hence SMK also hires third-party sausage suppliers.
Five dough ball commissaries located in Semarang, Surabaya, Denpasar, Makassar and Medan. Each commissary can produce c.200 tonnes of chilled dough balls (for PHD) annually. According to the company, when it establishes PHD chains in a new city, it usually opens one dough ball commissary for every 3-4 PHD outlets. In addition, as at 2017, SMK’s distribution facilities included:
Title:
Source:
Please fill in the values above to have them entered in your report
297
66
43
0
50
100
150
200
250
300
350
First-tiered Second-tiered Third-tiered
Title:
Source:
Please fill in the values above to have them entered in your report
Greater Jakarta, 101
Java, 73
Sumatera, 34
Kalimantan, 14
Sulaw esi, 13 Eastern Indonesia, 4
Title:
Source:
Please fill in the values above to have them entered in your report
Greater Jakarta, 96
Java, 58
Sumatera, 7Sulaw esi, 6
5
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Five dry warehouses (or distribution centres or DC), two of which are located in Jakarta and one each in Medan, Surabaya and Makassar. The Jakarta DC is the main warehouse, with a rented space of 3,500 m
2, and it
receives all imported and local goods, which are then distributed to the other dry warehouses across the country.
Fifteen frozen warehouses in Jakarta (the main warehouse), Bandung, Semarang, Surabaya, Batam, Medan, Pekanbaru, Padang, Palembang, Banjarmasin, Balikpapan, Denpasar, Makassar, Manado and Pontianak. The company rents these frozen warehouses from third parties.
Figure 8: SMK’s dough ball and pasta factory in Pulo Gadung, East Jakarta
SOURCES: CGS-CIMB RESEARCH, COMPANY
Figure 9: SMK’s main distribution centre in Ancol, North Jakarta
SOURCES: CGS-CIMB RESEARCH, COMPANY
The company has more than one supplier for each raw material, except for wheat flour, which is fully supplied by its sister company, SFM. It plans to procure wheat flour from two additional flour mills in Medan and Makassar. Although the price of wheat flour may increase slightly, transport costs may decline due to the closer proximity of flour mills to SMK’s commissaries in Medan and Makassar.
Stronger growth beyond Java
In 2017, Jakarta’s outlets still made up the biggest chunk of SMK’s sales, although this declined from 46.9% in 2015 to 43.9% in 2017. Outlets located in Java contributed a total of 72.9% to Pizza Hut’s total sales in 2017 vs. 77% of the company’s total outlets as at end-2017, which indicates lower sales per outlet in the Java area.
6
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Although contributing a much smaller proportion of SMK’s total sales, total sales in Kalimantan, Sulawesi and Eastern Indonesia rose to 14.0% in 2017 from 12.0% in 2015. This was on the back of a notably strong economic performance in Kalimantan and Eastern Indonesia, with SSSG surging in the double-digits in 2015-2017 and outperforming other areas. In our view, this should lead to more opportunities for Pizza Hut to expand to lower-tier cities, especially given the continuous economic growth and infrastructure development as well as a recovery in commodity prices.
According to the company, a key challenge is that every time PHD enters a new city, it aims to open at least four outlets and one commissary within the first 12 months. This requires a sizeable investment, which we estimate to be c.Rp12bn per city. However, PHD can always leverage PHR’s presence since it has higher penetration than PHD. For instance, the existing dough ball commissary in Semarang is located on the upper level of PHR’s free-standing outlet. We note that one dough ball commissary can serve up to 10 PHD outlets.
Figure 10: Revenue contribution to SMK’s total revenue, based on location (2015-17)
Figure 11: SSSG based on location (2015-17)
NOTE: JAVA-BALI REGION EXCLUDES GREATER JAKARTA
SOURCES: CGS-CIMB RESEARCH, COMPANY
NOTE: JAVA-BALI REGION EXCLUDES GREATER JAKARTA
SOURCES: CGS-CIMB RESEARCH, COMPANY
Figure 12: Gross margin by location (2015-17) Figure 13: Operating margin by location (2015-17)
NOTE: JAVA-BALI REGION EXCLUDES GREATER JAKARTA
SOURCES: CGS-CIMB RESEARCH, COMPANY
NOTE: JAVA-BALI REGION EXCLUDES GREATER JAKARTA
SOURCES: CGS-CIMB RESEARCH, COMPANY
Product overview
Through the two outlet formats, the company targets young adults and families and we believe it is set to benefit from the rising middle-class segment in Indonesia. As at 2017, PHR’s average spending per customer per visit was Rp57k while PHD’s was Rp45k.
PHR positions itself as a casual dining restaurant that offers a wide range of products, with a total of 128 items vs. PHD’s 57 items as at end-2017. Since it
Title:
Source:
Please fill in the values above to have them entered in your report
46.9% 45.2% 43.9%
27.9% 28.7% 29.0%
13.2% 12.9% 13.2%
5.6% 5.9% 6.5%
5.4% 5.8% 5.7%
1.0% 1.5% 1.8%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2015 2016 2017
Greater Jakarta Java - Bali Sumatera Sulawesi Kalimantan Eastern
Title:
Source:
Please fill in the values above to have them entered in your report
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
GreaterJakarta
Java - Bali Sumatera Sulawesi Kalimantan Eastern
2015 2016 2017
Title:
Source:
Please fill in the values above to have them entered in your report
64.0%
65.0%
66.0%
67.0%
68.0%
69.0%
70.0%
GreaterJakarta
Java - Bali Sumatera Sulawesi Kalimantan Eastern
2015 2016 2017
Title:
Source:
Please fill in the values above to have them entered in your report
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
GreaterJakarta
Java - Bali Sumatera Sulawesi Kalimantan Eastern
2015 2016 2017
7
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
has larger kitchens, PHR’s products in general take a longer time to prepare. As mentioned earlier, PHR’s pizza dough is prepared fresh from scratch every day in the respective kitchens while PHD has chilled dough delivered from the company’s factories/commissaries two or three times a week.
Figure 14: List of products sold at PHR and PHD as at end-2017
SOURCES: CGS-CIMB RESEARCH, COMPANY
One of the company’s main competitive advantages is its ability to continuously use innovation to attract young customers. One of its strategies is to introduce new items every two months, either developed locally or introduced globally by Pizza Hut.
In 2003, the company introduced its ‘stuffed crust’, a cheese-filled pizza crust that is still popular today. SMK’s latest creation is the ‘black pizza’, which is currently only available in Indonesia. On the back of strong promotional activities, the new item has been a huge hit in Indonesia.
Figure 15: Pizza Hut Indonesia’s latest innovation, “Black Pizza”
SOURCES: CGS-CIMB RESEARCH, COMPANY
Besides new product innovation, the company also continues to add sales channels. In 2017, it introduced its mobile app ‘PHD Indonesia’ and works closely with online food aggregators, Go-Jek.
8
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Figure 16: PHD Indonesia’s mobile app
SOURCES: COMPANY
INDUSTRY OUTLOOK
Growing middle-class population
Indonesia is home to more than 260m people (source: BPS, 2017) and its F&B business delivered a robust c.8% CAGR in 2010-17 (source: Euromonitor). BPS projected Indonesia’s population to reach 305.6m by 2035F (+18% from 260m in 2017), which would make Indonesia the fourth most populous country after China, India and the US. We believe that a higher number of consumers will be a boon for the F&B business.
In a survey by Boston Consulting Group (BCG) in 2014, 88m Indonesians were designated as affluent middle-class consumers who regularly spent more than Rp2m per month on household expenditures. Affluent middle-class consumers constituted c.35% of Indonesia’s population in 2014. By 2020, BCG project that this will almost double to 141m or 53% of Indonesia’s population. We believe this should translate to stronger consumer demand for lifestyle products, entertainment and F&B.
Based on our research, we believe strong consumption appetite will not only come in the form of consumers spending their own income, but also in the form of consumer credit. Nowadays, it is relatively easy for Indonesians to gain access to consumer credit by providing proof of stable income. Indeed, credit card ownership in Indonesia rose by 34% in 2010-17 (source: CEIC).
Figure 17: Indonesia’s population (in m people) Figure 18: Indonesia’s GDP per capita
SOURCES: CGS-CIMB RESEARCH, BPS SOURCES: CGS-CIMB RESEARCH, BPS
Title:
Source:
Please fill in the values above to have them entered in your report
230
235
240
245
250
255
260
265
2010 2011 2012 2013 2014 2015 2016 2017
Title:
Source:
Please fill in the values above to have them entered in your report
0%
2%
4%
6%
8%
10%
12%
14%
-
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
2011 2012 2013 2014 2015 2016 2017
GDP per capita (in Rp) GDP per capita growth (RHS)
9
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Figure 19: Indonesia’s growing number of middle class and affluent consumers (in m people)
Figure 20: Credit and debit card ownership (in people)
SOURCES: CGS-CIMB RESEARCH, BCG SOURCES: CGS-CIMB RESEARCH, CEIC
Growing dining out trends
Increasingly busy and hectic lifestyles in urban areas mean Indonesians have less time for cooking, which has led to growth in the F&B business as more consumers opt for convenience. Euromonitor recorded an additional 700 restaurants in 2011-16, which brought the total number of restaurants in Indonesia to c.100k as at 2016. The number, we believe, should continue to grow as dining out frequency increases and demand surges. According to CEIC, restaurants and hotels grew by 9.7% yoy in 1Q18 (vs. 8.4% in 1Q17 and 9.2% in 4Q17), higher than total household expenditures that grew by 8.3% yoy.
Restaurant chains (such as Pizza Hut, Solaria) drove the F&B industry in terms of outlet growth, at a 4% CAGR in 2011-16 (or +250 restaurant outlets over the past five years). The number of sales transactions in Indonesia’s full-service restaurants reached c.4bn in 2016 from c.3.7bn in 2011. Although restaurant chains constituted only c.3% of the industry’s total transactions, their transactions posted a robust 6% CAGR in 2011-16 vs. 1% for independent restaurants, underpinned by aggressive expansion. We estimate 9% sales CAGR for restaurant chains in 2011-16 (vs. 8% for independent restaurants), indicating higher sales per transaction for restaurant chains.
Figure 21: Indonesian restaurants and hotels grew above household expenditures in the past few years (3M12-3M18)
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
Title:
Source:
Please fill in the values above to have them entered in your report
-
20
40
60
80
100
120
140
160
2014 2020F
Middle Upper middle Affluent Elite
Title:
Source:
Please fill in the values above to have them entered in your report
-
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
400,000,000
450,000,000
500,000,000
-
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
No. of credit card No. of ATM card (RHS)
Title:
Source:
Please fill in the values above to have them entered in your report
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
Household expenditure, growth yoy Restaurant & hotel, growth yoy
10
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Figure 22: Number of full-service restaurants in Indonesia (in outlets)
Figure 23: Number of restaurant transactions (in m)
SOURCES: CGS-CIMB RESEARCH, EUROMONITOR SOURCES: CGS-CIMB RESEARCH, EUROMONITOR
Figure 24: Total sales in restaurants (in Rp bn)
SOURCES: CGS-CIMB RESEARCH, EUROMONITOR
As macro catalysts seem to be in favour of consumption this year, following the benign inflation rate from unchanged administered prices (electricity, fuel, and gas) and less volatile food prices, coupled with distribution of social assistance to 10m families this year (vs. 6m in 2017), we believe it should continue to support the F&B industry.
Consumption trend of wheat-based products
As an alternative carbohydrate source, wheat-based products have gained lots of interest, with sales CAGR of 5% in 2011-17 in Indonesia (Source: Euromonitor). Such strong growth was due to the country’s stable economic conditions and changing consumer lifestyles, with western-style foods, such as bread, pasta and pizza, becoming more popular. As more middle-income families adopt urban habits and as households benefit from double incomes, convenience becomes key.
However, 60% of total wheat flour consumption in Indonesia in 2016 was in the form of noodles, followed by bakery goods at 20%, biscuits at 10% and household use at 10% (Source: USDA). Hence, given this condition, coupled with low pizza consumption per capita, we believe pizza sales have room to grow. In 2012-16, pizza sales in Indonesia reached Rp5.8tr, with a rapid 9.5% CAGR (Source: Euromonitor). This was well above the 4.4% growth in Asia Pacific and 0.7% sales decline of pizza sales globally in 2012-16 (Source: Euromonitor).
-
20,000
40,000
60,000
80,000
100,000
120,000
2011 2012 2013 2014 2015 2016
Chained restaurant Independent restaurant
1.4%
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2011 2012 2013 2014 2015 2016
Chained restaurant Independent restaurant
2.8%
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
2011 2012 2013 2014 2015 2016
Chained restaurant Independent restaurant
3.4%
11
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Figure 25: Wheat vs. rice consumption per capita per kg Figure 26: Wheat flour sales
SOURCES: CGS-CIMB RESEARCH, USDA, BPS SOURCES: CGS-CIMB RESEARCH, APTINDO
Figure 27: Pizza sales in Indonesia (in Rp bn)
SOURCES: CGS-CIMB RESEARCH, EUROMONITOR
Figure 28: Pizza sales in Asia Pacific
SOURCES: CGS-CIMB RESEARCH, EUROMONITOR
Opportunities in ‘halal’ certification
Indonesia currently has the largest Muslim population in the world, at c.85% of the total (or c.200m people) (Source: MUI, 2017). Hence, it is not a surprise that the increasing demand for ‘halal’ products has boosted investment in the F&B industry. Sales of ‘halal’ food products in Indonesia came to US$158bn in 2014, making Indonesia the largest ‘halal’ market in the world (Source: Thomson Reuters). The Ministry of Industry of Indonesia forecasts that sales of ‘halal’ consumer food products will grow by 7% p.a. in the next 6 years.
Such increasing interest in consuming ‘halal’ food products is not only driven by religion but also by the quality of ‘halal’ products in terms of health, safety and eco-consciousness. Up to 1H17, there were only 48 restaurants (<1%) that were registered as ‘halal’ (Source: MUI). Hence, Pizza Hut, as one of the few restaurant chains in Indonesia with ‘halal’ certification, stands to be a major beneficiary.
Title:
Source:
Please fill in the values above to have them entered in your report
152
153
154
155
156
157
158
159
-
5
10
15
20
25
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Wheat consumption per capita Rice consumption per capita (RHS)
-4%
-2%
0%
2%
4%
6%
8%
10%
-
1
2
3
4
5
6
7
1 2 3 4 5 6 7
Wheat flour sales (in m ton) Growth YoY (RHS)
2011 2012 2013 2014 2015 2016 2017
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2012 2013 2014 2015 2016
CAGR
2012-2016
Asia Pacific USD million 8,722 9,184 9,833 10,010 10,380 4.4%
China CNY million 13,343 15,910 18,976 21,017 22,457 13.9%
India INR million 33,768 40,498 47,900 60,434 71,016 20.4%
Malaysia MYR million 714 750 769 838 848 4.4%
Philippines PHP million 414,930 437,841 469,362 502,186 535,982 6.6%
Indonesia IDR billion 4,000 4,516 4,930 5,297 5,758 9.5%
2016Unit 2012 2013 2014 2015
12
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Growing F&B franchisers
F&B franchisers in Indonesia posted a robust 8% sales CAGR in 2012-17 (Source: Euromonitor). Fast food and full-service restaurants (33% and 48% contribution to total sales in 2017, respectively) recorded 8% sales CAGR in 2012-17, according to Euromonitor. The new rising star, take-away restaurants, delivered more rapid growth of 20% CAGR in 2012-17 but this only contributed c.3% to total F&B franchisers’ sales in 2017. Going forward, Euromonitor forecasted take-away restaurants to still book double-digit sales CAGR of 17% in 2018-21, underpinned by a low base, rapid outlet expansion and the growing popularity of online delivery. The presence of third-party food delivery applications, i.e. Go-Food and GrabFood, may also support the industry’s growth.
Meanwhile, kiosks (or traditional stalls) have lost sales over time. The segment is being battered in its competition with fast food and full-service restaurants as the latter is perceived to have better hygiene standards and a more comfortable dining environment.
Figure 29: F&B franchiser sales (in Rp bn)
SOURCES: CGS-CIMB RESEARCH, EUROMONITOR
Interestingly, pizza franchises grew a more promising 11% CAGR in 2012-17 and are projected to reach 13% sales CAGR in 2018-21, based on Euromonitor.
Figure 30: Pizza franchiser sales (in Rp bn)
SOURCES: CGS-CIMB RESEARCH, EUROMONITOR
Players in the industry
In 2016, Euromonitor ranked SMK as no.3 in the chained consumer food service segment in Indonesia in terms of retail value. KFC, as the no.1 player in the segment in terms of retail value, owned more than 650 outlets combined as of 2017, including KFC Coffee and KFC Box stores. The no.2 player was
Title:
Source:
Please fill in the values above to have them entered in your report
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
2012 2013 2014 2015 2016 2017 2018F 2019F 2020F 2021F
Take-away restaurant Full-service restaurant Fast food Kiosk Others
Title:
Source:
Please fill in the values above to have them entered in your report
-
1,000
2,000
3,000
4,000
5,000
6,000
2012 2013 2014 2015 2016 2017 2018F 2019F 2020F 2021F
13
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
McDonald’s, with more than 200 outlets as of 2017, while PHR and PHD owned 393 outlets in 76 cities as of 2017.
Specifically in the pizza category, SMK dominated sales in 2016 with a 97% market share in chained pizza full-service restaurants, followed by Domino’s Pizza, Papa Ron’s and Pizza Express.
Figure 31: Market share in chained pizza full-service restaurant Figure 32: Market share in chained pizza takeaway restaurant
SOURCES: CGS-CIMB RESEARCH, EUROMONITOR SOURCES: CGS-CIMB RESEARCH, EUROMONITOR
Figure 33: Ranking of leading chained pizza consumer food service providers in Indonesia by retail value, 2012-2016
SOURCES: CGS-CIMB RESEARCH, EUROMONITOR
Opportunities beyond Java
The Java Island indeed stands in the spotlight when it comes to developing businesses in Indonesia, having contributed 58% to Indonesia’s GDP in 2016 and accounted for c.70% of the country’s population in 2016 (Source: BPS, 2017). However, we believe regions outside Java may also be able to provide attractive economic growth prospects, supported by improving infrastructure, rising spending power and government incentives.
The recovery in commodity prices and the lifting of the government embargo on the export of certain mineral ores have helped to accelerate economic recovery in Kalimantan and Sumatra, which produce a significant amount of commodities. Note that Kalimantan and Sumatra contributed c.8% and 22% to Indonesian’s GDP in 2016, respectively. We expect stable commodity prices to continue to aid purchasing power recovery as mining investment has already started to pick up.
In recent years, Sulawesi (6% contribution to the Indonesian economy in 2016) has significantly outpaced the national average in terms of economic growth. In 2017, the region recorded economic growth of more than 6% on the back of higher household consumption, investment and infrastructure projects.
97.0%
3.0%
Pizza Hut Others
64.6%
35.4%
PHD Others
Unit: Ranking 2012 2013 2014 2015 2016
PT Sarimelati Kencana 1 1 1 1 1
PT Dom Pizza Indonesia 2 2 2 2 2
PT Entertainment Indonesia 3 3 3 3 3
PT Mitra Adi Perkasa Tbk 4 4 4 4 4
14
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Figure 34: GDP contribution per area
SOURCES: CGS-CIMB RESEARCH, CEIC
Figure 35: Kalimantan’s and Sumatra’s GDP growth have recovered along with commodity prices
Figure 36: Sulawesi’s GDP growth vs. national
SOURCES: CGS-CIMB RESEARCH, CEIC, BLOOMBERG SOURCES: CGS-CIMB RESEARCH, BPS
Adapting to the Millennials
Millennials (sometimes referred to as Gen-Y) are those born between the early 1980s and early 2000s, i.e. those in their late teens to late thirties right now. According to Indonesia’s 2015 Intercensal Population Survey, Millennials (15-34 years old at the time) accounted for around 35% of the total population. The ratio is even higher in urban areas like Jakarta.
According to AsiaToday, Millennials eat out more often than Baby Boomers (born between early-to-mid 1960s to early 1980s), and spend roughly 10% more than the latter. Millennials’ probability of eating out at least once a week is also double that of Baby Boomers.
The company is one of the fast-movers in terms of adapting to the habits of the Millennials. As Indonesian Millennials have a high presence in various social media, i.e. Facebook and Instagram, the company has long intensified its presence in those platforms. In Instagram, for example, Pizza Hut Indonesia has a total followers of 328k, side by side with its main competitors KFC Indonesia with 422k followers, and McDonald’s Indonesia with 332k followers as at the end of March 2018.
It also continuously enhances its store layouts and food offerings to attract more Millennials into the store, as well as get ‘free’ advertising when they post their visits on their social media accounts. Note that according to a survey by JakPat done in Jan 16, 33.8% of Millennial Instagram users in Indonesia used the app to post food photos and another 16.6% used the app to post photos of locations they deemed had a ‘cool’ ambience.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2011 2012 2013 2014 2015 2016
Sumatra Java Bali & East Nusa Kalimantan Sulawesi Maluku & Papua
22%
58%
3%
8%
6%2%
-40%
-20%
0%
20%
40%
60%
80%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
2010
2011
2012
2013
2014
1Q
15
2Q
15
3Q
15
4Q
15
1Q
16
2Q
16
3Q
16
4Q
16
1Q
17
2Q
17
3Q
17
4Q
17
Real GDP growth - Kalimantan - (LHS)
Real GDP growth - Sumatra - (LHS)
Coal price - 12MA (RHS)
CPO price - 12MA (RHS)
Title:
Source:
Please fill in the values above to have them entered in your report
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
2010 2011 2012 2013 2014 2015 2016 2017
Sulawesi National
15
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Figure 37: Leading activities of Instagram users ages 16-35 in Indonesia (Jan 2016)
Figure 38: Instagram page of Pizza Hut Indonesia (end Mar 2018)
SOURCES: CGS-CIMB RESEARCH, JAKPAT SOURCES: CGS-CIMB RESEARCH, INSTAGRAM
Figure 39: New, innovative PHR outlets layout
SOURCES: CGS-CIMB RESEARCH, INSTAGRAM
Regulations
Based on Ministry of Trade regulation No.58/M-DAG/PER/9/2014, the franchiser of a restaurant, bar and café is allowed to self-own and self-manage a maximum of 250 outlets. Any franchiser who had more than 250 outlets as at 17 Sep 14 (the enactment date of the regulation) is still allowed to continue to self-own and self-manage them.
In the event the franchisee wants to expand its number of outlets to more than 250, the additional outlets are required to be: 1) franchised, and/or 2) in a capital participation scheme with a third party. The capital participation scheme is to be performed as follows: 1) for total investment of less than or equal to Rp10bn, the third-party investment is required to be at least 40% of total investment, and 2) for total investment of more than Rp10bn, the third-party investment is to be at least 30% of total investment.
Any violation of the above-mentioned regulation poses a risk to the company’s business, i.e. revocation of its operational license.
COMPANY OUTLOOK
Growth strategies
The company’s long-term strategy is to continue to grow its outlet base and position itself as a full-service family restaurant in both existing and new markets, which should translate into:
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%
Explore online shopping account
Explore funny or jokes account
Post travelling photos
Click search and look at new posts
View friend's or crush's accounts
Explore celebrity's account
Explore culinary post or account
Explore celebgram or vidgram account
Post food photos
Post cool place or cafe ambience
Posting meme
16
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
PHR and PHD outlets expanding into second-, third- and fourth-tier cities. The more matured PHR will focus its expansion mainly in third- and fourth-tier cities and PHD in second-tier cities.
Exploring new restaurant concepts, e.g. food court stalls.
To achieve the corporate growth target, the company plans to:
Relocate and enlarge the PHD dough ball factory as well as introduce new technology to produce frozen dough, which has a better shelf life of 30 days vs. the currently-used chilled dough’s short shelf life of 5 days (Source: company). The production of frozen dough will enable the company to establish only one factory to supply dough to a few regions at once, instead of having to establish many commissaries to supply dough to each region.
Expand its existing sausage factory and add another facility as the utilisation rate of the sausage factory has reached 100% despite only being able to supply sausages to 50% of SMK’s outlets. It currently still sources ~50% of its sausage requirement from third parties.
Add a new pasta factory since the utilisation rate of the existing pasta factory has reached 100%.
Expand and relocate its dry warehouse/distribution centre, which could bring some financial savings as warehouse rental fees continue to rise.
Possible expansion of vertically-integrated facilities, e.g. cheese, fresh pasta or ice-cream factories.
In addition, the company plans to enhance its software systems and continue to develop its organisational capabilities in order to further improve customer experience and operational performance.
SWOT analysis
Strengths
Market leader in Indonesia in the full-service pizza restaurant category in terms of retail value in 2016 (97% market share) and in the delivery chained restaurants category in terms of retail value in 2016 (65% market share).
Targeting middle-class consumers, the fastest-growing segment of the Indonesian population.
Internal sourcing of its raw materials, i.e. flour, sausage and lasagna, which allows the company to maintain consistency of quality and stock levels. This also results in a lower cost of goods sold.
Minimum exposure to currency risk as majority of its raw materials is locally sourced.
Ability to innovate its own product item to suit local preferences.
Weaknesses
Low barrier to entry. However, we believe Pizza Hut’s strong brand equity supports the company’s growth.
High dependency on Yum! as brand owner and high royalty fees.
Opportunities
Entering second- and third-tier cities.
Diversification to new business format and product item.
Macro-economic factors, which support growth in consumers’ disposable incomes.
Increasing awareness of ‘halal’ certified products may boost Pizza Hut’s sales.
Threats
Discouraging policies on number of retail outlets.
Lower pricing point from minimarts that offer similar products.
Aggressive increase in minimum wages.
17
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
FINANCIAL PERFORMANCE
1Q18 review
The company booked a stellar 72.6% yoy core net profit growth to Rp35bn in 1Q18. This, we think, was a notable achievement given that seasonality wise, 1Q usually contributes to a lesser extent to the full year performance. We note that PZZA booked an Rp20bn core net profit in 1Q17, which is a mere 14% of its FY17 core net profit of Rp139bn.
This was on the back of a strong 18.4% yoy revenue growth to Rp803bn in 1Q18, thanks to a solid 6.6% SSSG and 13 net additional new stores. PHD has reportedly portrayed a much stronger performance than PHR since the past year. PHD booked a 5.5% SSSG in FY17 and booked an even stronger 29.7% SSSG in 1Q18. This, we think, is positive given that the company is accelerating its PHD expansion given the smaller investment needed when compared to the larger-format PHR. In 1Q18, the company opened 12 PHD outlets (and closed 1 outlet), in addition to 2 PHR outlets (closed no outlet) – making a total of 13 net additional stores in the quarter, broadly in line of its target to open c.60 stores in FY18F.
Gross profit margin, despite the rupiah depreciation in 1Q18, also managed to expand by 0.6% pts yoy to 67.7%, as the company has secured the majority of its imported raw material needs (e.g. cheese) since the beginning of the year. In addition, the world cheese price (c.20% of PZZA’s COGS) has continuously fallen in the past few years. This drove the strong 69.8% yoy EBIT growth to Rp55bn, in addition to better operating leverage from stronger sales growth, as well as some cost efficiency.
Figure 40: SMK’s revenue contribution by formats (2015-1Q18) Figure 41: SMK’s SSSG by formats (2015-1Q18)
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
Figure 42: 1Q18 results
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
Title:
Source:
Please fill in the values above to have them entered in your report
85.4% 85.0% 81.0% 77.6%
14.6% 15.0% 19.0% 22.4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2015 2016 2017 1Q18
PHR PHD
Title:
Source:
Please fill in the values above to have them entered in your report
3.6%
6.1% 5.9% 6.6%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
2015 2016 2017 1Q18
PHR PHD Blended
1Q18 1Q17 yoy, %
chg
Net sales 803 678 18.4%
COGS (259) (223)
Gross profit 544 455 19.6%
Opex (500) (435)
Income from delivery fee 7 8
EBIT 51 28 79.3%
EBITDA 82 56 45.8%
Other operating income (charges) 4 4
Interest income (charges) (11) (6)
PBT 44 26 66.9%
Tax benefit (expense) (11) (8)
Net profit 33 18 79.6%
Core net profit 35 20 72.6%
18
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
The company, following its plan to accelerate stores expansion, has opened a net additional 13 outlets in 1Q18, in line with its target of opening a net additional 60 outlets in FY18F. This makes a total of 406 stores (239 PHR and 167 PHD) as of end-1Q18 (see Figures 1 and 2).
Out of the 13 net additional stores, 11 are PHDs while only 2 are PHRs. In line with its expansion plan, PHR’s new store is located in Gorontalo, Sulawesi – which is a third-tiered city and is a new city for Pizza Hut as a group. Meanwhile, PHD’s expansion was focused more on Java island, where they opened a total of 8 new outlets. They also opened 3 new PHD outlets in Greater Jakarta area and 1 outlet in Palembang (South Sumatera). For PHD, they ventured to two new second-tiered cities, Cirebon (West Java) and Palembang.
More positives than negatives from partnership with Go-Jek
We think PHD’s partnership with Go-Jek, which started in Jun 2017, will undeniably play a huge part in supporting PHD’s strong 29.7% SSSG in 2018F (see Figure 41).
This, however, indeed comes with additional costs to bear. We estimate that PHD pays c.10% of the ticket size ordered through Go-Jek. This aggregator fee is then recorded under professional fees in the income statement, which significantly increased by 697% yoy to Rp5.5bn in 1Q18 (from Rp0.7bn in 1Q17), now 0.7% of sales. Additionally, income from delivery fee dropped from Rp8.2bn in 1Q17 to Rp7.2bn in 1Q18 amidst the solid revenue growth, falling from 1.2% of sales in 1Q17 to 0.9% in 1Q18.
In FY18F, we estimate a Rp22bn increase in aggregator fee to Rp33bn (1.0% of sales). Meanwhile, income from delivery fee could drop by Rp6bn to Rp27bn in FY18F (0.8% of sales). These, with straight-forward calculation, shall imply a Rp28bn reduction in core net profit in FY18F, although it should be well compensated by the significant revenue growth in PHD, which in turn will lead to better operating leverage that should improve profitability.
Furthermore, in return, the company is able to reduce its employee cost as it reduces the number of delivery fleet from c.6 people per store. With assumption of Rp3.8m monthly minimum wage, reducing 1 delivery man in all 209 PHD stores in 2018F, should enable it to save c.Rp9.5bn annually, or roughly 0.3% of 2018F sales.
Figure 43: SMK’s historical and projected income from delivery fee (2015-20F)
Figure 44: SMK’s historical and projected professional fees, mostly paid to online aggregators (2015-20F)
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
Franchise fee reduction
The company is required to pay a franchise fee to Yum! Brands of c.6% p.a. Nevertheless, PZZA has negotiated for a lower franchise fee from Yum! Brands in return for opening 175 new outlets within the years 2017-19F.
Title:
Source:
Please fill in the values above to have them entered in your report
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
-
5
10
15
20
25
30
35
40
2015 2016 2017 2018F 2019F 2020F
Income from delivery fee (Rp bn) As % of sales
Title:
Source:
Please fill in the values above to have them entered in your report
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
-
10
20
30
40
50
60
70
2015 2016 2017 2018F 2019F 2020F
Professional fees As % of sales
19
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
We believe the company should be able to meet its agreement with Yum! Brands to open the 175 new outlets in 2017-19F, as the company has opened a net additional 64 outlets in 2017-1Q18, which then only requires them to open an average of 16 stores per quarter until 4Q19 to meet the remaining target.
Since there is no requirement from Yum! on what format to build, SMK plans to add more PHD outlets instead of PHR, which require a significantly smaller capex (thus, easier to accelerate expansion) of c.Rp2.0bn-2.5bn per outlet, vs. PHR which requires a Rp7.5bn-8.0bn capex for a stand-alone outlet and a Rp3.5bn-4.0bn capex for an outlet located in malls.
The company also plans to launch a new, even smaller format outlet in food courts, called PH Kiosk (of which revenue and store counts will be calculated under PHD), which requires a mere c.Rp800m capex per outlet. It is expected to have 5 new PH Kiosk outlets to be opened in 2H18F as a trial. As an express format, it will source chilled dough from the factory or commissaries, like PHD. If the format is deemed successful, we believe it will be even easier for SMK to accelerate expansion. Besides, we think PH Kiosk may have a higher gross profit margin when compared with PHD, as it may be able sell more drinks which generate a more hefty gross margin.
As PZZA meets the target, they will be entitled for a certain franchise fee reduction from Yum! for the new outlets that should bring significant improvements to the company’s profitability. As of 2017, the royalty fee was 6.4% of reported revenue, which we project to dip to 6.2%, 5.9%, and 5.8% in 2018F, 2019F, and 2020F, respectively.
We also believe that the lower franchise fee agreement may be extended beyond 2020F, given Pizza Hut’s dominance and stability in the Indonesian market, when compared to those in other countries.
Figure 45: Net additional stores in 2017-19F will receive a franchise fee reduction from Yum!
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
Title:
Source:
Please fill in the values above to have them entered in your report
321 342 342 342 342 342
51111
176216
0
100
200
300
400
500
600
2015 2016 2017 2018 2019 2020
Existing stores (before 2017) Net additional stores (after 2017)
20
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Figure 46: Income from delivery fee (as % of sales) is on declining trend
Figure 47: Blended franchise fee (as % of sales) is on declining trend
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
Figure 48: Salary expenses (as % of sales) may improve as the company may be able to reduce the no. of delivery fleets in PHD outlets
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
In addition, the company is required to pay an initial franchise fee per outlet that can last up to 10 years and is subjected to a renewal fee amounting to half of the initial franchise fee.
Initial franchise fee for PHR, as of 2017, is US$50,100 per outlet (c.Rp700m). Meanwhile, PHD’s initial franchise fee is roughly half of PHR’s at US$25,100 per outlet (c.Rp350m) – see Figure 49.
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
-
5
10
15
20
25
30
35
40
2015 2016 2017 2018F 2019F 2020F
Income from delivery fee (Rp bn) As % of sales
Title:
Source:
Please fill in the values above to have them entered in your report
5.7%
5.8%
5.9%
6.0%
6.1%
6.2%
6.3%
6.4%
6.5%
6.6%
-
50
100
150
200
250
300
2015 2016 2017 2018F 2019F 2020F
Franchise fee (Rp bn) As % of sales
Title:
Source:
Please fill in the values above to have them entered in your report
22.6%
22.7%
22.8%
22.9%
23.0%
23.1%
23.2%
23.3%
23.4%
23.5%
23.6%
-
200
400
600
800
1,000
1,200
2015 2016 2017 2018F 2019F 2020F
Salary expenses (under selling) (Rp bn) As % of sales
21
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Figure 49: Master franchise fee based on format (2015-17)
SOURCES: CGS-CIMB RESEARCH, COMPANY
Financial outlook
SMK posted a 10.2% revenue CAGR in 2015-17, supported by a 3.6% SSSG in 2015 and stable c.6% SSSG in 2016-17 and aggressive new outlet expansion in 2017, especially for PHD. The company claimed that only c.3% of the c.6% SSSG in 2016-17 can be attributed to average selling price (ASP) growth while the remainder can be attributed to sales volume growth.
We expect SMK to post a strong 14.7% revenue CAGR in 2017-20F (vs. 10.2% revenue CAGR in 2015-17) on the back of 7.5%/5.3%/4.1% SSSG in 2018F, 2019F, and 2020F, respectively, coupled with more aggressive outlet expansion projected at a total 60 net new outlets in 2018, 65 in 2019 and 40 in 2020. From the 4.1-7.5% 2018-20 SSSG, we expect ASP growth to remain at 3% p.a., broadly in line with the Indonesian annual inflation rate.
We pencil in a higher revenue growth rate for PHD compared to PHR, with 60.6%/44.7%/27.9% in 2018F/19F/20F on the back of 20.0% SSSG in 2018, 10.0% in 2019 and 6.0% in 2020 as well as 157 net additional new outlets for PHD across the forecast period.
For PHR, we forecast revenue to climb 4.1%/4.7%/6.9% in 2018F/19F/20F on the back of a 3.0% SSSG in 2018-20F in addition to 9 net new outlets in 2018F-20F.
Following PHD’s impressive growth, we expect the format to contribute 26.5% revenue to the company’s total revenue by the end of this year (1Q18: 22.4%, FY17: 19.0%).
Figure 50: SMK’s historical and projected revenue and revenue growth (2015-20F)
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
2015 2016 2017
Initial fee per outlet (US$)
PHR 48,800 49,100 50,100
PHD 24,400 24,600 25,100
KPH 24,400 24,600 25,100
Renewal fee per outlet (US$)
PHR 24,400 24,550 25,500
PHD 12,200 12,300 12,550
KPH 12,200 12,300 12,550
Continuing franchise fee (as % of sales)
PHR 6%
PHD 5-6%
KPH 6%
Title:
Source:
Please fill in the values above to have them entered in your report
7.7%8.1%
12.3%
14.8%15.3%
13.9%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2015 2016 2017 2018F 2019F 2020F
22
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Figure 51: SMK’s historical and projected revenue contribution based on outlet formats (2015-20F)
Figure 52: SMK’s historical and projected SSSG (2015-20F)
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
Figure 53: PHR’s historical and projected revenue and revenue growth (2015-2020)
Figure 54: PHD’s historical and projected revenue and revenue growth (2015-2020)
SOURCES: CIMB RESEARCH, COMPANY REPORTS SOURCES: CIMB RESEARCH, COMPANY REPORTS
Figure 55: Historical and projected net outlet opening (2015-20F) Figure 56: Historical and projected no. of outlets based on format (2015-20F)
SOURCES: CIMB RESEARCH, COMPANY REPORTS SOURCES: CIMB RESEARCH, COMPANY REPORTS
85.4% 85.0% 81.0%73.5%
66.7%62.6%
14.6% 15.0% 19.0%26.5%
33.3%37.4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2015 2016 2017 2018F 2019F 2020F
PHR PHD
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2015 2016 2017 2018F 2019F 2020F
PHR PHD Blended
Title:
Source:
Please fill in the values above to have them entered in your report
7.5%7.1%
4.1%
4.7%
6.9%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
-
500
1,000
1,500
2,000
2,500
3,000
2015 2016 2017 2018F 2019F 2020F
Revenue Revenue growth, %
Title:
Source:
Please fill in the values above to have them entered in your report
11.6%
41.7%
60.6%
44.7%
27.9%
-5.0%
5.0%
15.0%
25.0%
35.0%
45.0%
55.0%
65.0%
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2015 2016 2017 2018F 2019F 2020F
Revenue Revenue growth, %
Title:
Source:
Please fill in the values above to have them entered in your report
-20
-10
0
10
20
30
40
50
60
70
80
2015 2016 2017 2018F 2019F 2020F
Opening Closure Net addition
Title:
Source:
Please fill in the values above to have them entered in your report
229 227 237 239 243 245
93 115156
214
275 313
0
100
200
300
400
500
600
2015 2016 2017 2018F 2019F 2020F
PHR PHD
23
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Despite a 0.6% pt gross margin improvement in 1Q18, we remain conservative in our FY18F gross margin estimate at 66.2%, which is down by 0.7% pts yoy from 66.9% in FY17.
The company benefitted from the lower cheese price at end-2017, and has its contract secured until Sep 2018. Hence, it will be less impacted by rising cheese price and rupiah depreciation, as we highlighted that cheese made up of c.20% of the company’s COGS and is imported. Another important raw material is wheat (c.4% of COGS), which is supplied by its sister company SFM and has its contract re-negotiated once every 6 months. Since the company has locked wheat price until end-1H18, it has less to worry about despite the rise in wheat price since early-2018F, as well as Rp depreciation (since pricing is fixed based on agreed terms, world wheat prices, and agreed fixed exchange rates in each period).
These, supported by a benign food inflation rate in FY18F, should lead to an improved gross profit margin in both PHR and PHD formats by 0.4-0.5% pts to 68.6% and 62.8%, respectively, in our estimate. This was despite the fact that c.30% of the company’s COGS is US$-linked. With an assumption of c.4.6% yoy Rp depreciation to an average of Rp14,000 (average FY17: Rp13,380), we expect the impact to remain under control for now.
Note that PHD’s gross profit margin is roughly 5% lower than PHR’s on the back of the different product mix, wherein 1) PHR sells more drinks, which has a higher margin than foods, and 2) PHD sells almost twice the number of bundles (e.g. Big Box) than PHR, which are usually sold at a discount, hence lower margins.
As a result, despite expecting improved gross profit margin in the respective formats, we estimate blended gross profit margin to fall by 0.7% pts to 66.2% in FY18F, as PHD’s sales are expected to grow by 60.6% yoy in FY18F, vs. the more-matured PHR with a mere 4.1% yoy sales growth. As such, revenue contribution from PHD may increase to 26.5% in FY18F (vs. 19.0% in FY17), in our estimates.
Figure 57: Estimated COGS breakdown (2016-20F) (in Rp bn) Figure 58: Historical and projected gross profit margin per outlet format (2016-20F)
SOURCE: CGS-CIMB RESEARCH
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2016 2017 2018F 2019F 2020F
Cheese Chicken & beefs Flour Milk / ice cream Edible oils Others
67.5%67.1%
67.6% 67.8%68.2%
62.1%61.8%
62.2% 62.1%62.5%
58.0%
60.0%
62.0%
64.0%
66.0%
68.0%
70.0%
2016 2017 2018F 2019F 2020F
PHR PHD
24
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Figure 59: Historical and projected gross profit and gross profit margin (2015-20F) (in Rp bn)
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
There are concerns that with its moderate SSSG of 4.1-7.5% estimated for 2018-20F, the company would not be able to sustain its current operating margins, as minimum wage hikes averaged at 10.0% p.a. in the past three years (2016-18). Nevertheless, as we expect the company to be able to reduce the number of delivery fleets in PHD, coupled with the company’s continuous effort to replace more permanent employees into contractual employees in PHR (which are c.20% cheaper), we estimate that the company’s salary expenses (under salary expenses) shall moderate to 22.8% of sales in 2018F (from 23.3% in 2017). It is worth highlighting that the company only added 24 permanent employees in 1Q18 despite 13 net additional new outlets.
Besides, rental expenses should continue to improve as the company aims to open more standalone outlets for PHR, instead of opening in malls, as rental growth rates in malls tend to be a lot faster than those in standalone outlets. Furthermore, as expansion is more aggressive for PHD, as compared to PHR, it should also help to ensure a benign rental growth rate of 3-4% p.a. as PHD outlets are mostly located in shophouses. As such, we project rental expenses to continue to fall to 5.4%, 5.2%, and 5.1% of sales in 2018, 2019, and 2020, respectively, from 5.6% of sales in 2017.
With salary and rental expenses under control, coupled with a lowered franchise fee, all in, we expect EBITDA margin (adjusted for income from delivery fee and sponsorship) to be maintained at 11.0% in FY18F, as the strong sales growth and cost efficiency measures should be more than enough to cover the rising expenses to aggregators (e.g. Go-Jek) and the declining blended gross profit margin.
Figure 60: SMK’s historical and projected opex-to-sales ratio (2015-2020F)
Figure 61: SMK’s historical and projected operating expenses breakdown (2015-2020F)
66.6%
67.6%
66.9%
66.2%
65.9%
66.1%
65.8%
66.0%
66.2%
66.4%
66.6%
66.8%
67.0%
67.2%
67.4%
67.6%
67.8%
-
500
1,000
1,500
2,000
2,500
3,000
3,500
2015 2016 2017 2018F 2019F 2020F
Title:
Source:
Please fill in the values above to have them entered in your report
-63.7%
-61.6%
-61.1%
-60.1%-59.9%
-59.6%
-64.0%
-63.0%
-62.0%
-61.0%
-60.0%
-59.0%
-58.0%
-57.0%2015 2016 2017 2018F 2019F 2020F
Title:
Source:
Please fill in the values above to have them entered in your report
40.4% 43.2% 43.2% 43.1% 43.2% 43.4%
10.3%10.6% 10.5% 10.3% 9.9% 9.7%
9.1%8.3% 8.2% 7.8% 7.9% 7.9%
9.5% 9.4% 9.1% 8.9% 8.7% 8.6%
6.8% 5.9% 6.3% 6.4% 6.5% 6.5%0.4% 0.6% 1.0% 2.0% 2.3% 2.7%
23.6% 22.1% 21.7% 21.4% 21.6% 21.3%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2015 2016 2017 2018F 2019F 2020F
Salary and benefits Continuing franchise fee Electricity, water, gas
Rental Advertising and promotions Professional fees
Others
25
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
All in, core net profit should expand by 26.3% yoy to Rp176bn in 2018, 16.7% yoy to Rp205bn in 2019, and 23.0% yoy to Rp252bn in 2020, with 21.9% CAGR over 2017-20F, in our estimates.
Figure 62: SMK’s historical and projected EBITDA and EBITDA margin (2015-20F) (in Rp bn)
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
Figure 63: SMK’s historical and projected core net profit and core net profit margin (2015-20F) (in Rp bn)
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
Balance sheet and cash flow outlook
PZZA’s inventory days rose to 89 days as at end-1Q18, as the company procured more cheese in the beginning of the year to anticipate more store openings. As its receivable and payable days remained at 2 and 62 days in 1Q18, respectively, its cash cycle days were at 29 days (rising from 16 days at end-2017 and 8 days at end-2016).
As raw materials stock should normalise, we pencil in a more benign 80 inventory days at end-2018F, still on the higher side to anticipate another bulk of raw materials procurement amidst aggressive new store openings.
On a more positive note, as the company is constantly acknowledged as the best and fastest-growing Pizza Hut franchisee around the world, the company should have a better bargaining power over its suppliers, not only by getting product discounts, but also getting better terms of payment. Hence, we expect payable days to improve to 65 days at end-2018F (from 62 days at end-2017 and at end-1Q18) and further to 70 days at end-2019F onwards. Meanwhile,
Title:
Source:
Please fill in the values above to have them entered in your report9.0%
11.8%
11.0% 11.0% 11.0% 11.2%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
-
100
200
300
400
500
600
2015 2016 2017 2018F 2019F 2020F
EBITDA EBITDA margin, %
Title:
Source:
Please fill in the values above to have them entered in your report
2.5%
5.1%
4.6%
5.1% 5.1%
5.5%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
-
50
100
150
200
250
300
2015 2016 2017 2018F 2019F 2020F
Core net profit Core margin, %
26
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
receivable days should be maintained at 2 days at end-2018F, hence a broadly stable cash cycle of 17 days (vs. 16 days at end-2017).
Figure 64: SMK’s historical and projected working capital days (2016-2020F)
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
The company spent Rp54bn capex in 1Q18, mainly used for stores expansion. We expect expansion to accelerate further in 2Q-4Q18F as they received their IPO proceeds amounting to Rp665bn in May 2018. Going forward, we project Rp300bn, Rp364bn, and Rp194bn capex for 2018F, 2019F, and 2020F, respectively, mainly to be used for 1) more aggressive outlet expansion, and 2) development of supporting facitilies (e.g. sausage and pasta factory, dough ball commissaries and warehouses).
We expect pre-construction for SMK’s sausage and pasta factory to start this year, while construction should start at the beginning of 2019. Currently the company is still on an early stage of land acquisition. This should be at the top of the company’s priority list, alongside its plan to develop a larger-scale frozen dough factory, which we have yet to include in our model. This frozen dough factory, after it is built, will oil the expansion of PHD to new cities since the company no longer needs to build a new commissary each time it enters a new city.
Figure 65: SMK’s projected capex needs based on allocation (2018F-20F) (in Rp bn)
Figure 66: SMK’s historical and projected capex needs based on type of assets (2018F-20F) (in Rp bn)
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
In 2017, following its high capex, coupled with an increase in inventory days from 67 in 2016 to 76 in 2017, FCF turned negative. Nevertheless, following the company’s strong earnings improvement forecasted in 2018F and a relatively unchanged cash cycle, we project a Rp114bn FCF in 2018F, followed by a Rp63bn and Rp292bn FCF in 2019F and 2020F, respectively.
Title:
Source:
Please fill in the values above to have them entered in your report
-
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
2016 2017 2018F 2019F 2020F
No
. o
f d
ays
A/R days A/P days Inventory days CCC
191 209
117
55
95
10
24
27
31
30
33
36
-
50
100
150
200
250
300
350
400
2018F 2019F 2020F
New outlets Factories, commissaries, warehouses
Store renovation Maintenance capex
Title:
Source:
Please fill in the values above to have them entered in your report
-
50
100
150
200
250
300
350
400
2015 2016 2017 2018F 2019F 2020F
Land Buildings Leasehold improvements
Restaurant equipment Furniture and fixtures Office equipment
Vehicles
27
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Figure 67: SMK’s historical and projected cash flow analysis (2015-20F) (in Rp bn)
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
As at end-1Q18, the company’s net debt was relatively maintained at Rp387bn (end-FY17: Rp359bn), with a debt-to-equity ratio of 1.1x and net gearing of 1.0x. Since the IPO proceeds has only been received in May 2018, and will be partially used to repay down debt, we estimate a Rp310bn debt repayment over 2018, 2019, and 2020, which should lead the company to a much healthier DER level of 0.2x, 0.1x and 0.1x in the respective years. Furthermore, we expect to see the company turned net cash starting this year, with net cash of Rp311bn, Rp215bn, and Rp412bn in 2018F, 2019F, and 2020F, respectively.
Figure 68: SMK’s historical and projected gross debt and debt-to-equity ratio (2015-20F) (in Rp bn)
Figure 69: SMK’s historical and projected net debt/(cash) and net gearing (2015-20F) (in Rp bn)
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
The company has set a policy to distribute cash dividends of up to 50% of its net profit, starting in 2018. Following PZZA’s strong OCF generation, as well as its projected net cash position, we pencil in a 50% dividend payout in 2018F, 2019F, and 2020F amounting to Rp70bn, Rp88bn, and Rp103bn, respectively.
Title:
Source:
Please fill in the values above to have them entered in your report
130
207
-56
114
63
292
-100
-50
-
50
100
150
200
250
300
350
2015 2016 2017 2018F 2019F 2020F
Title:
Source:
Please fill in the values above to have them entered in your report
-
0.2
0.4
0.6
0.8
1.0
1.2
1.4
-
50
100
150
200
250
300
350
400
450
500
2015 2016 2017 2018F 2019F 2020F
Gross debt (Rp bn) DER
Title:
Source:
Please fill in the values above to have them entered in your report
-0.4
-0.2
-
0.2
0.4
0.6
0.8
1.0
1.2
-500
-400
-300
-200
-100
-
100
200
300
400
2015 2016 2017 2018F 2019F 2020F
Net debt (Rp bn) Net gearing
28
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Figure 70: Projected dividend and dividend payout ratio (2018F-20F)
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
RISKS
We identify several key risks to Pizza Hut’s business and earnings, as follows:
Low purchasing power
Pizza Hut targets the middle-class segment. Hence, lower purchasing power, which may result in downtrading by consumers, will negatively impact the company’s revenue and profitability.
Termination of brand license
SMK holds the international franchise agreement from Yum! Brands to operate the Pizza Hut brand in Indonesia. SMK is entitled to pay 6% royalty fees from its sales p.a. Currently, each Pizza Hut outlet has a franchise agreement of 10 years and this can be renewed for another 10 years under certain conditions that must be met beforehand. If the company fails to comply with the terms, Yum! Brands has the right to terminate the agreement.
Given the company’s dependency on the brand, revocation of the agreement may materially impact its operations. Nevertheless, the relationship has been established since 1987 and Yum! Brands needs local partnership to maintain its presence in Indonesia.
Higher-than-expected minimum wage growth
Salary expenses comprise c.40% of the company’s operating expenses in 2017. Hence, any increase in minimum wage may lower the company’s profits.
‘Halal’ certification
As Pizza Hut is one of the few ‘halal’ certified restaurants in Indonesia, we believe the loss of the ‘halal’ certificate may have a material and adverse impact on the company’s business. The company obtained its ‘halal’ certificate in 1998 and has maintained the certification to date.
Rental
The company leases most of its property from third parties, with a lease term generally up to 20 years for Pizza Hut and 10 years for PHD. As such, the stability of the company’s business depends on the continuity of the lease agreements.
There is no guarantee that the lease for the current retail outlets will not be terminated by the respective landlord. Given the limited strategic locations and relatively high lease cost, there is no guarantee that the company will be able to renew the lease on the same terms.
The company may be able to relocate for the same or more favourable terms but the relocation will take time and result in a temporary loss of sales. In addition, relocation may incur extra costs, such as goods transport.
0%
10%
20%
30%
40%
50%
60%
-
20
40
60
80
100
120
2018F 2019F 2020F
Dividend (Rp bn) DPR
29
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Regulatory and political issues
Any changes in government regulation, e.g. max number of outlets franchised or higher restaurant taxes, may have a negative impact on the company’s business.
VALUATION
Peers comparison
Despite its scalability and although profitability margins were still below its regional peers’ (as of 2017), in the past 3 years (2015-2017), the company displayed the highest EPS CAGR of 47.4% on the back of strong revenue CAGR of 10.2% (third-highest among regional peers).
The company also had the highest ROE of 39.3% as of 2017 on the back of a strong asset turnover ratio of 2.5x and good equity multiplier of 4.0x, the highest among regional peers.
Figure 71: Regional peers’ revenue CAGR comparison (2015-17) Figure 72: Regional peers’ net profit CAGR comparison (2015-17)
SOURCE: CGS-CIMB RESEARCH SOURCES: CGS-CIMB RESEARCH
Figure 73: Regional peers’ no. of stores comparison (2017) Figure 74: Regional peers’ revenue per store comparison (2017)
SOURCE: CGS-CIMB RESEARCH SOURCES: CGS-CIMB RESEARCH
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
7,983
3,797
2,135
649 628 474 393 184 68
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,0003,481,765
2,465,783
894,902 755,332 687,412 630,979 575,572 531,943
384,696
-
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
Re
ven
ue
/sto
re (
US$
)
30
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Figure 75: Regional peers’ EBITDA margin comparison (2017) Figure 76: Regional peers’ net profit margin comparison (2017)
SOURCE: CGS-CIMB RESEARCH SOURCES: CGS-CIMB RESEARCH
Figure 77: Regional peers’ asset turnover, equity multiplier and ROE comparison (2017)
SOURCES: CGS-CIMB RESEARCH
Initiating coverage with an Add call and TP of Rp1,500
The company is currently trading at 18.7x 2018F P/E, which is at a 25% discount to its regional F&B peers’ weighted-average 2018 P/E of 25.0x. It is also at a 4% discount to its closest peer, Shakey’s Pizza Philippines (PIZZA PM).
Both Sarimelati Kencana and Shakey’s Pizza Philippines are the market leaders in chained pizza full service restaurants in their respective countries, according to Euromonitor. The latter has operated in Philippines since 1975 and had a total of 184 outlets nationwide as of end-2017. Meanwhile, Sarimelati Kencana has a total of 393 outlets across Indonesia (as of end-2017) since it opened its first outlet in 1987.
In short, Sarimelati Kencana has more than twice the number of outlets owned by Shakey’s, despite entering Indonesia 12 years after Shakey’s entry to the Philippines. Given Indonesia’s large population, we believe PZZA still has much room for growth: we expect PZZA to have a total of 558 stores as of end-2020F which in turn will help to drive a sales CAGR of 14.7% in 2017-20F. Along with continuous efficiency measures, we estimate PZZA to record a 21.9% earnings CAGR in 2017-20F, higher than Shakey’s 12.8% earnings CAGR in 2017-20F, according to Bloomberg consensus’ estimates. Assuming a 50% dividend payout ratio, we also expect PZZA to have a higher dividend yield of 2.1-2.7% in 2018-19F vs. Shakey’s 0.9-1.3%. Nevertheless, PZZA’s net profit margin is roughly half of Shakey’s.
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
SarimelatiKencana
Domino'sPizza
EnterprisesLtd
Yum! China Shakey'sPizza
Phillippines
JollibeeFoods Corp
Cafe deCoral
Fast FoodIndonesia
Ajisen China Tsui Wah
Asset turnover Equity multiplier ROE (RHS)
31
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
As such, we assign a valuation target of 22.0x 2019 P/E to PZZA and arrive at a target price of Rp1,500. Pizza Hut’s strong brand equity, supported by its mass target market and opportunity to penetrate lower-tiered cities, are some of the key catalysts that support our Add call, especially as mass-market consumption should recover this year and dining out trends continue upwards.
We believe our TP is justified as it also implies 9.7x 2019 EV/EBITDA (32% discount to its regional peer, despite 20% premium to Indonesia retail sector) and 1.3x 2019 PEG.
Figure 78: Sector comparison
*) based on Bloomberg estimates **) based on 3 Jul 2018 closing price
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
Figure 79: Ace Hardware Indonesia’s 5-year rolling P/E band Figure 80: Matahari Department Store’s 3-year rolling P/E band
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
PriceTarget
Price
(local curr) (local curr) 2018F 2019F 2018F 2019F 2018F 2019F 2018F 2019F 2018F 2019F
Sarimelati Kencana PZZA IJ Add 1,090 1,500 229 18.7 16.1 21.9% 2.9 2.7 23.4 17.2 7.8 7.0 2.1% 2.7%
Ace Hardware Indonesia ACES IJ Add 1,250 1,700 1,490 23.2 19.4 18.6% 5.3 4.7 24.8 25.5 17.1 14.4 1.8% 2.6%
Matahari Department Store LPPF IJ Add 8,500 11,000 1,724 12.4 11.4 6.4% 8.3 6.6 76.3 64.4 7.5 6.8 5.4% 5.7%
Mitra Adi Perkasa MAPI IJ Add 790 925 911 21.4 17.9 30.3% 3.1 2.8 14.1 14.3 6.6 5.9 0.5% 1.3%
Ramayana Lestari RALS IJ Add 1,325 1,550 653 18.5 16.1 18.3% 2.5 2.4 14.4 15.1 10.2 8.9 2.8% 3.8%
Indonesia consumer discretionary 17.1 15.1 18.4% 4.4 3.9 28.4 27.6 9.1 8.1 3.6% 4.4%
Fast Food Indonesia* FAST IJ na 1,500 na 209 17.0 14.9 9.1% na na 13.2 14.0 6.9 6.0 na na
Yum! China* YUMC US na 38.0 na 14,667 23.6 21.2 11.9% 4.5 4.0 21.6 20.6 9.7 9.1 1.3 1.5
Cafe De Coral* 341 HK na 19.00 na 1,418 20.6 19.0 12.0% 3.2 3.1 14.5 16.1 10.3 9.5 4.3 4.3
Ajisen (China) Holdings Ltd 538 HK Add 3.10 4.80 431 9.7 8.7 14.3% 1.0 0.9 10.3 11.0 3.2 2.5 5.1 5.7
Tsui Wah* 1314 HK na 0.97 na 175 13.9 9.7 18.4% 0.9 0.8 9.0 8.9 4.9 4.1 5.2 6.2
Jumbo Group Limited JUMBO SP Add 0.5 0.6 251 25.7 19.7 13.9% 5.0 4.5 19.8 24.0 14.2 11.2 2.9 3.6
Jollibee Foods Corp* JFC PM na 260.00 na 5,291 36.5 31.4 13.8% 6.2 5.5 18.2 18.8 20.5 17.4 1.0 1.1
Shakey's Pizza Phillippines* PIZZA PM na 12.32 na 354 21.9 19.6 12.8% 4.1 3.5 19.7 19.3 15.0 13.2 0.9 1.3
Domino's Pizza Enterprises Ltd DMP AU Hold 52.95 51.5 3,294 33.9 27.7 18.4% 14.9 12.9 45.6 52.5 18.9 15.8 2.1 2.6
Yum! Brands Inc.* YUM US na 78.11 na 25,175 22.9 20.4 6.4% na na na na 17.2 16.2 1.9 2.1
Regional F&B 25.0 22.0 9.8% 3.0 2.7 11.8 12.1 15.1 13.8 1.7 2.0
P/BV (x)Recurring
ROE (%)
EV/EBITDA
(x)
Dividend
Yield (%)CompanyBloomberg
TickerRecom.
Market
Cap (US$
m)
Core P/E (x)3-year
EPS
CAGR (%)
Title:
Source:
Please fill in the values above to have them entered in your report
10.0
15.0
20.0
25.0
30.0
35.0
Jul-13
Nov-
13
Mar-
14
Jul-14
Nov-
14
Mar-
15
Jul-15
Nov-
15
Mar-
16
Jul-16
Nov-
16
Mar-
17
Jul-17
Nov-
17
Mar-
18
Rolling P/E 5-year mean 1 s.d. -1 s.d.
Title:
Source:
Please fill in the values above to have them entered in your report
10.0
15.0
20.0
25.0
30.0
35.0
Rolling P/E 3-year mean 1 s.d. -1 s.d.
32
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Figure 81: Mitra Adi Perkasa’s 3-year rolling P/E band Figure 82: Ramayana Lestari’s 5-year rolling P/E band
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
Figure 83: Fast Food Indonesia’s 5-year rolling P/E band Figure 84: Yum! China’s rolling P/E band, since inception
SOURCES: CIMB RESEARCH, COMPANY REPORTS SOURCES: CIMB RESEARCH, COMPANY REPORTS
Figure 85: Cafe De Coral’s 5-year rolling P/E band Figure 86: Ajisen China’s 5-year rolling P/E band
SOURCES: CIMB RESEARCH, COMPANY REPORTS SOURCES: CIMB RESEARCH, COMPANY REPORTS
Title:
Source:
Please fill in the values above to have them entered in your report
10.0
15.0
20.0
25.0
30.0
35.0
Jul-15
Oct-15
Jan-1
6
Apr-
16
Jul-16
Oct-16
Jan-1
7
Apr-
17
Jul-17
Oct-17
Jan-1
8
Apr-
18
Rolling P/E 3-year mean 1 s.d. -1 s.d.
Title:
Source:
Please fill in the values above to have them entered in your report
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
Jun-1
3
Sep-1
3
Dec-
13
Mar-
14
Jun-1
4
Sep-1
4
Dec-
14
Mar-
15
Jun-1
5
Sep-1
5
Dec-
15
Mar-
16
Jun-1
6
Sep-1
6
Dec-
16
Mar-
17
Jun-1
7
Sep-1
7
Dec-
17
Mar-
18
Rolling P/E 5-year mean 1 s.d. -1 s.d.
Title:
Source:
Please fill in the values above to have them entered in your report
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
Rolling P/E 5-year mean 1 s.d. -1 s.d.
10.0
15.0
20.0
25.0
30.0
35.0
Nov-16 Feb-17 May-17 Aug-17 Nov-17 Feb-18 May-18
Rolling P/E Mean 1 s.d. -1 s.d.
Title:
Source:
Please fill in the values above to have them entered in your report
20.0
22.0
24.0
26.0
28.0
30.0
32.0
34.0
Rolling P/E 5-year mean 1 s.d. -1 s.d.
Title:
Source:
Please fill in the values above to have them entered in your report
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
Rolling P/E 5-year mean 1 s.d. -1 s.d.
33
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Figure 87: Tsui Wah’s 5-year rolling P/E band Figure 88: Jumbo Group Limited’s rolling P/E band, since inception
SOURCES: CIMB RESEARCH, COMPANY REPORTS SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
Figure 89: Jollibee Foods Corp’s 5-year rolling P/E band Figure 90: Shakey’s Pizza Philippines’s rolling P/E band, since inception
SOURCES: CIMB RESEARCH, COMPANY REPORTS SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
Figure 91: Domino’s Pizza Enterprises Ltd’s 5-year rolling P/E band
Figure 92: Yum! Brands Inc’s 5-year rolling P/E band
SOURCES: CIMB RESEARCH, COMPANY REPORTS SOURCES: CIMB RESEARCH, COMPANY REPORTS
Title:
Source:
Please fill in the values above to have them entered in your report
(5.0)
5.0
15.0
25.0
35.0
45.0
55.0
Rolling P/E 5-year mean 1 s.d. -1 s.d.
Title:
Source:
Please fill in the values above to have them entered in your report
10.0
15.0
20.0
25.0
30.0
35.0
40.0
Rolling P/E Mean 1 s.d. -1 s.d.
Title:
Source:
Please fill in the values above to have them entered in your report
20.0
25.0
30.0
35.0
40.0
45.0
50.0
Rolling P/E 5-year mean 1 s.d. -1 s.d.
Title:
Source:
Please fill in the values above to have them entered in your report
20.0
22.0
24.0
26.0
28.0
30.0
32.0
34.0
Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18
Rolling P/E Mean 1 s.d. -1 s.d.
Title:
Source:
Please fill in the values above to have them entered in your report
15.0
25.0
35.0
45.0
55.0
65.0
Rolling P/E 5-year mean 1 s.d. -1 s.d.
Title:
Source:
Please fill in the values above to have them entered in your report
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
Rolling P/E 5-year mean 1 s.d. -1 s.d.
34
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
APPENDIX
Management profile
Figure 93: SMK’s Board of Commissioners
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
35
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Figure 94: SMK’s Board of Directors
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
36
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
BY THE NUMBERS
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
14.0%
18.4%
22.8%
27.1%
31.5%
35.9%
40.3%
44.6%
49.0%
3.90
4.10
4.30
4.50
4.70
4.90
5.10
5.30
5.50
Jan-14A Jan-15A Jan-16A Jan-17A Jan-18F Jan-19F
P/BV vs ROE
Rolling P/BV (x) (lhs) ROE (rhs)
0.0%
3.8%
7.5%
11.3%
15.0%
18.8%
22.5%
26.3%
30.0%
16.00
16.50
17.00
17.50
18.00
18.50
19.00
19.50
20.00
Jan-14A Jan-15A Jan-16A Jan-17A Jan-18F Jan-19F
12-mth Fwd FD Core P/E vs FD Core EPS Growth
12-mth Fwd Rolling FD Core P/E (x) (lhs)
FD Core EPS Growth (rhs)
Profit & Loss
(Rpb) Dec-16A Dec-17A Dec-18F Dec-19F Dec-20F
Total Net Revenues 2,695 3,027 3,474 4,006 4,563
Gross Profit 1,823 2,025 2,300 2,640 3,014
Operating EBITDA 317 333 382 441 511
Depreciation And Amortisation -106 -118 -135 -166 -183
Operating EBIT 211 215 247 275 328
Financial Income/(Expense) -31 -33 -23 -16 -11
Pretax Income/(Loss) from Assoc. 0 0 0 0 0
Non-Operating Income/(Expense) -4 8 11 15 19
Profit Before Tax (pre-EI) 176 189 234 274 336
Exceptional Items
Pre-tax Profit 176 189 234 274 336
Taxation -46 -50 -59 -68 -84
Exceptional Income - post-tax
Profit After Tax 130 139 176 205 252
Minority Interests
Preferred Dividends
FX Gain/(Loss) - post tax
Other Adjustments - post-tax
Net Profit 130 139 176 205 252
Recurring Net Profit 137 139 176 205 252
Fully Diluted Recurring Net Profit 137 139 176 205 252
Cash Flow
(Rpb) Dec-16A Dec-17A Dec-18F Dec-19F Dec-20F
EBITDA 317.0 333.1 381.7 441.3 510.7
Cash Flow from Invt. & Assoc.
Change In Working Capital 71.7 (67.4) 62.7 3.8 14.8
(Incr)/Decr in Total Provisions
Other Non-Cash (Income)/Expense
Other Operating Cashflow (29.3) (22.8) 19.8 17.3 22.0
Net Interest (Paid)/Received (32.5) (33.6) (31.9) (18.9) (13.2)
Tax Paid (45.9) (50.1) (58.6) (68.4) (84.1)
Cashflow From Operations 281.1 159.1 373.7 375.1 450.2
Capex (109.2) (257.5) (305.0) (370.1) (197.3)
Disposals Of FAs/subsidiaries
Acq. Of Subsidiaries/investments
Other Investing Cashflow 12.6 15.6 11.4 (4.7) 54.9
Cash Flow From Investing (96.5) (241.8) (293.6) (374.9) (142.4)
Debt Raised/(repaid) (55.9) 153.9 (208.1) (61.7) (54.6)
Proceeds From Issue Of Shares (11.1) 213.7 659.3 (8.0) (8.4)
Shares Repurchased
Dividends Paid (68.0) (322.0) (69.7) (87.9) (102.6)
Preferred Dividends
Other Financing Cashflow
Cash Flow From Financing (135.0) 45.6 381.4 (157.6) (165.6)
Total Cash Generated 49.6 (37.1) 461.5 (157.4) 142.2
Free Cashflow To Equity 128.7 71.2 (128.1) (61.5) 253.2
Free Cashflow To Firm 217.0 (49.1) 112.0 19.1 321.1
37
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
BY THE NUMBERS… cont’d
SOURCES: CGS-CIMB RESEARCH, COMPANY REPORTS
Balance Sheet
(Rpb) Dec-16A Dec-17A Dec-18F Dec-19F Dec-20F
Total Cash And Equivalents 112.5 75.5 537.0 379.5 521.8
Total Debtors 17.4 18.4 21.4 22.4 25.5
Inventories 148.2 268.7 246.0 299.4 318.3
Total Other Current Assets 119.8 152.7 171.4 194.5 220.0
Total Current Assets 397.9 515.3 975.7 895.9 1,085.5
Fixed Assets 498.9 671.0 848.8 1,061.9 1,090.6
Total Investments 0.0 0.0 0.0 0.0 0.0
Intangible Assets 0.0 0.0 0.0 0.0 0.0
Total Other Non-Current Assets 254.9 307.7 333.2 388.9 388.6
Total Non-current Assets 753.8 978.7 1,182.0 1,450.8 1,479.1
Short-term Debt 134.9 147.0 0.0 0.0 0.0
Current Portion of Long-Term Debt 66.2 60.6 61.7 54.6 54.6
Total Creditors 165.1 173.1 209.1 262.0 297.1
Other Current Liabilities 156.5 228.4 263.6 303.0 347.7
Total Current Liabilities 522.7 609.1 534.4 619.6 699.4
Total Long-term Debt 79.0 226.5 164.2 109.6 55.0
Hybrid Debt - Debt Component
Total Other Non-Current Liabilities 211.3 288.8 324.0 373.2 424.7
Total Non-current Liabilities 290.4 515.2 488.2 482.8 479.7
Total Provisions 0.0 0.0 0.0 0.0 0.0
Total Liabilities 813.1 1,124.3 1,022.7 1,102.4 1,179.1
Shareholders' Equity 338.6 369.7 1,135.1 1,244.3 1,385.6
Minority Interests
Total Equity 338.6 369.7 1,135.1 1,244.3 1,385.6
Key Ratios
Dec-16A Dec-17A Dec-18F Dec-19F Dec-20F
Revenue Growth 8.1% 12.3% 14.8% 15.3% 13.9%
Operating EBITDA Growth 41.6% 5.1% 14.6% 15.6% 15.7%
Operating EBITDA Margin 11.8% 11.0% 11.0% 11.0% 11.2%
Net Cash Per Share (Rp) (55.5) (118.7) 102.9 71.3 136.4
BVPS (Rp) 112.0 122.3 375.6 411.8 458.5
Gross Interest Cover 6.49 6.39 7.72 14.58 24.73
Effective Tax Rate 26.0% 26.4% 25.0% 25.0% 25.0%
Net Dividend Payout Ratio 52% 231% 40% 43% 41%
Accounts Receivables Days 1.40 1.58 1.65 1.56 1.48
Inventory Days 67.25 75.98 80.00 72.87 72.98
Accounts Payables Days 49.74 49.83 47.61 50.89 53.40
ROIC (%) 29.0% 30.0% 24.2% 24.0% 23.4%
ROCE (%) 34.3% 30.3% 23.6% 20.1% 22.7%
Return On Average Assets 14.7% 13.0% 10.9% 9.8% 10.7%
Key Drivers
Dec-16A Dec-17A Dec-18F Dec-19F Dec-20F
ASP (% chg, main prod./serv.) N/A N/A N/A N/A N/A
Unit sales grth (%, main prod./serv.) N/A N/A N/A N/A N/A
No. of POS (main prod/serv) 227 237 239 243 245
SSS grth (%, main prod/serv) 6.1% 5.9% 7.5% 5.3% 4.1%
ASP (% chg, 2ndary prod./serv.) N/A N/A N/A N/A N/A
Unit sales grth (%,2ndary prod/serv) N/A N/A N/A N/A N/A
No. of POS (2ndary prod/serv) 115 156 214 275 313
SSS grth (%, 2ndary prrod/serv) N/A N/A N/A N/A N/A
38
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
DISCLAIMER The content of this report (including the views and opinions expressed therein, and the information comprised therein) has been prepared by and belongs to CGS-CIMB or CIMB Investment Bank Berhad (“CIMB”), as the case may be. Reports relating to a specific geographical area are produced and distributed by the corresponding CGS-CIMB entity as listed in the table below. Reports relating to Malaysia are produced and distributed by CIMB.
This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
By accepting this report, the recipient hereof represents and warrants that he is entitled to receive such report in accordance with the restrictions set forth below and agrees to be bound by the limitations contained herein (including the “Restrictions on Distributions” set out below). Any failure to comply with these limitations may constitute a violation of law. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this report may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CGS-CIMB or CIMB, as the case may be.
The information contained in this research report is prepared from data believed to be correct and reliable at the time of issue of this report. CGS-CIMB or CIMB, as the case may be, may or may not issue regular reports on the subject matter of this report at any frequency and may cease to do so or change the periodicity of reports at any time. Neither CGS-CIMB nor CIMB has an obligation to update this report in the event of a material change to the information contained in this report. Neither CGS-CIMB nor CIMB accepts any, obligation to (i) check or ensure that the contents of this report remain current, reliable or relevant, (ii) ensure that the content of this report constitutes all the information a prospective investor may require, (iii) ensure the adequacy, accuracy, completeness, reliability or fairness of any views, opinions and information, and accordingly, CGS-CIMB and CIMB, their respective affiliates and related persons including China Galaxy International Financial Holdings Limited (“CGIFHL”) and CIMB Group Sdn. Bhd. (“CIMBG”) and their respective related corporations (and their respective directors, associates, connected persons and/or employees) shall not be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance thereon or usage thereof. In particular, CGS-CIMB and CIMB disclaim all responsibility and liability for the views and opinions set out in this report.
Unless otherwise specified, this report is based upon sources which CGS-CIMB or CIMB, as the case may be, considers to be reasonable. Such sources will, unless otherwise specified, for market data, be market data and prices available from the main stock exchange or market where the relevant security is listed, or, where appropriate, any other market. Information on the accounts and business of company(ies) will generally be based on published statements of the company(ies), information disseminated by regulatory information services, other publicly available information and information resulting from our research.
Whilst every effort is made to ensure that statements of facts made in this report are accurate, all estimates, projections, forecasts, expressions of opinion and other subjective judgments contained in this report are based on assumptions considered to be reasonable as of the date of the document in which they are contained and must not be construed as a representation that the matters referred to therein will occur. Past performance is not a reliable indicator of future performance. The value of investments may go down as well as up and those investing may, depending on the investments in question, lose more than the initial investment. No report shall constitute an offer or an invitation by or on behalf of CGS-CIMB or CIMB, as the case may be, or any of their respective affiliates (including CGIFHL, CIMBG and their respective related corporations) to any person to buy or sell any investments.
CGS-CIMB, CIMB, their respective affiliates and related corporations (including CGIFHL, CIMBG and their respective related corporations) and/or their respective directors, associates, connected parties and/or employees may own or have positions in securities of the company(ies) covered in this research report or any securities related thereto and may from time to time add to or dispose of, or may be materially interested in, any such securities. Further, CGS-CIMB, CIMB, their respective affiliates and their respective related corporations (including CGIFHL, CIMBG and their respective related corporations) do and seek to do business with the company(ies) covered in this research report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory, underwriting or placement services for or relating to such company(ies) as well as solicit such investment, advisory or other services from any entity mentioned in this report.
CGS-CIMB, CIMB or their respective affiliates (including CGIFHL, CIMBG and their respective related corporations) may enter into an agreement with the company(ies) covered in this report relating to the production of research reports. CGS-CIMB or CIMB, as the case may be, may disclose the contents of this report to the company(ies) covered by it and may have amended the contents of this report following such disclosure.
The analyst responsible for the production of this report hereby certifies that the views expressed herein accurately and exclusively reflect his or her personal views and opinions about any and all of the issuers or securities analysed in this report and were prepared independently and autonomously. No part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations(s) or view(s) in this report. The analyst(s) who prepared this research report is prohibited from receiving any compensation, incentive or bonus based on specific investment banking transactions or for providing a specific recommendation for, or view of, a particular company. Information barriers and other arrangements may be established where necessary to prevent conflicts of interests arising. However, the analyst(s) may receive compensation that is based on his/their coverage of company(ies) in the performance of his/their duties or the performance of his/their recommendations and the research personnel involved in the preparation of this report may also participate in the solicitation of the businesses as described above. In reviewing this research report, an investor should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additional information is, subject to the duties of confidentiality, available on request.
Reports relating to a specific geographical area are produced by the corresponding CGS-CIMB entity as listed in the table below. The term “CGS-CIMB” shall denote, where appropriate, the relevant entity distributing or disseminating the report in the particular jurisdiction referenced below, or, in every other case except as otherwise stated herein, CGS-CIMB Securities International Pte. Ltd. and its affiliates, subsidiaries and related corporations.
39
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Country CGS-CIMB Entity Regulated by
Hong Kong CGS-CIMB Securities (Hong Kong) Limited Securities and Futures Commission Hong Kong
India CGS-CIMB Securities (India) Private Limited Securities and Exchange Board of India (SEBI)
Indonesia PT CGS-CIMB Sekuritas Indonesia Financial Services Authority of Indonesia
Singapore CGS-CIMB Research Pte. Ltd. Monetary Authority of Singapore
South Korea CGS-CIMB Securities (Hong Kong) Limited, Korea Branch Financial Services Commission and Financial Supervisory Service
Thailand CGS-CIMB Securities (Thailand) Co. Ltd. Securities and Exchange Commission Thailand
Reports relating to Malaysia are produced by CIMB as listed in the table below:
Country CIMB Entity Regulated by
Malaysia CIMB Investment Bank Berhad Securities Commission Malaysia
Other Significant Financial Interests:
(i) As of July 3, 2018 CIMB has a proprietary position in the securities (which may include but not limited to shares, warrants, call warrants and/or any other derivatives) in the following company or companies covered or recommended in this report:
(a) -
(ii) Analyst Disclosure: As of July 4, 2018, the analyst(s) who prepared this report, and the associate(s), has / have an interest in the securities (which may include but not limited to shares, warrants, call warrants and/or any other derivatives) in the following company or companies covered or recommended in this report:
(a) -
This report does not purport to contain all the information that a prospective investor may require. Neither CGS-CIMB or CIMB, as the case may be, nor any of their respective affiliates (including CGIFHL, CIMBG and their related corporations) make any guarantee, representation or warranty, express or implied, as to the adequacy, accuracy, completeness, reliability or fairness of any such information and opinion contained in this report. Neither CGS-CIMB or CIMB, as the case may be, nor any of their respective affiliates nor their related persons (including CGIFHL, CIMBG and their related corporations) shall be liable in any manner whatsoever for any consequences (including but not limited to any direct, indirect or consequential losses, loss of profits and damages) of any reliance thereon or usage thereof.
This report is general in nature and has been prepared for information purposes only. It is intended for circulation amongst CGS-CIMB’s or CIMB’s (as the case may be) clients generally and does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. The information and opinions in this report are not and should not be construed or considered as an offer, recommendation or solicitation to buy or sell the subject securities, related investments or other financial instruments or any derivative instrument, or any rights pertaining thereto.
Investors are advised to make their own independent evaluation of the information contained in this research report, consider their own individual investment objectives, financial situation and particular needs and consult their own professional and financial advisers as to the legal, business, financial, tax and other aspects before participating in any transaction in respect of the securities of company(ies) covered in this research report.
The securities of such company(ies) may not be eligible for sale in all jurisdictions or to all categories of investors.
Australia: Despite anything in this report to the contrary, this research is provided in Australia by CGS-CIMB Securities (Singapore) Pte. Ltd. and CGS-CIMB Securities (Hong Kong) Limited. This research is only available in Australia to persons who are “wholesale clients” (within the meaning of the Corporations Act 2001 (Cth) and is supplied solely for the use of such wholesale clients and shall not be distributed or passed on to any other person. You represent and warrant that if you are in Australia, you are a “wholesale client”. This research is of a general nature only and has been prepared without taking into account the objectives, financial situation or needs of the individual recipient. CGS-CIMB Securities (Singapore) Pte. Ltd. and CGS-CIMB Securities (Hong Kong) Limited do not hold, and are not required to hold an Australian financial services license. CGS-CIMB Securities (Singapore) Pte. Ltd. and CGS-CIMB Securities (Hong Kong) Limited rely on “passporting” exemptions for entities appropriately licensed by the Monetary Authority of Singapore (under ASIC Class Order 03/1102) and the Securities and Futures Commission in Hong Kong (under ASIC Class Order 03/1103).
Canada: This research report has not been prepared in accordance with the disclosure requirements of Dealer Member Rule 3400 – Research Restrictions and Disclosure Requirements of the Investment Industry Regulatory Organization of Canada. For any research report distributed by CIBC, further disclosures related to CIBC conflicts of interest can be found at https://researchcentral.cibcwm.com .
China: For the purpose of this report, the People’s Republic of China (“PRC”) does not include the Hong Kong Special Administrative Region, the Macau Special Administrative Region or Taiwan. The distributor of this report has not been approved or licensed by the China Securities Regulatory Commission or any other relevant regulatory authority or governmental agency in the PRC. This report contains only marketing information. The distribution of this report is not an offer to buy or sell to any person within or outside PRC or a solicitation to any person within or outside of PRC to buy or sell any instruments described herein. This report is being issued outside the PRC to a limited number of institutional investors and may not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose.
France: Only qualified investors within the meaning of French law shall have access to this report. This report shall not be considered as an offer to subscribe to, or used in connection with, any offer for subscription or sale or marketing or direct or indirect distribution of financial instruments and it is not intended as a solicitation for the purchase of any financial instrument.
Germany: This report is only directed at persons who are professional investors as defined in sec 31a(2) of the German Securities Trading Act (WpHG). This publication constitutes research of a non-binding nature on the market situation and the investment instruments cited here at the time of the publication of the information.
The current prices/yields in this issue are based upon closing prices from Bloomberg as of the day preceding publication. Please note that neither the German Federal Financial Supervisory Agency (BaFin), nor any other supervisory authority exercises any control over the content of this report.
Hong Kong: This report is issued and distributed in Hong Kong by CGS-CIMB Securities (Hong Kong) Limited (“CHK”) which is licensed in Hong Kong by the Securities and Futures Commission for Type 1 (dealing in securities), Type 4 (advising on securities) and Type 6 (advising on corporate finance) activities. Any investors wishing to purchase or otherwise deal in the securities covered in this report should contact the Head of Sales at
40
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
CGS-CIMB Securities (Hong Kong) Limited. The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CHK has no obligation to update its opinion or the information in this research report.
This publication is strictly confidential and is for private circulation only to clients of CHK.
CHK does not make a market on other securities mentioned in the report.
India: This report is issued and distributed in India by CGS-CIMB Securities (India) Private Limited (“CGS-CIMB India”) which is registered with the National Stock Exchange of India Limited and BSE Limited as a trading and clearing member under the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992. In accordance with the provisions of Regulation 4(g) of the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013, CGS-CIMB India is not required to seek registration with the Securities and Exchange Board of India (“SEBI”) as an Investment Adviser. CGS-CIMB India is registered with SEBI as a Research Analyst pursuant to the SEBI (Research Analysts) Regulations, 2014 ("Regulations").
This report does not take into account the particular investment objectives, financial situations, or needs of the recipients. It is not intended for and does not deal with prohibitions on investment due to law/jurisdiction issues etc. which may exist for certain persons/entities. Recipients should rely on their own investigations and take their own professional advice before investment.
The report is not a “prospectus” as defined under Indian Law, including the Companies Act, 2013, and is not, and shall not be, approved by, or filed or registered with, any Indian regulator, including any Registrar of Companies in India, SEBI, any Indian stock exchange, or the Reserve Bank of India. No offer, or invitation to offer, or solicitation of subscription with respect to any such securities listed or proposed to be listed in India is being made, or intended to be made, to the public, or to any member or section of the public in India, through or pursuant to this report.
The research analysts, strategists or economists principally responsible for the preparation of this research report are segregated from the other activities of CGS-CIMB India and they have received compensation based upon various factors, including quality, accuracy and value of research, firm profitability or revenues, client feedback and competitive factors. Research analysts', strategists' or economists' compensation is not linked to investment banking or capital markets transactions performed or proposed to be performed by CGS-CIMB India or its affiliates.
CGS-CIMB India has not received any investment banking related compensation from the companies mentioned in the report in the past 12 months.
CGS-CIMB India has not received any compensation from the companies mentioned in the report in the past 12 months.
Indonesia: This report is issued and distributed by PT CGS-CIMB Sekuritas Indonesia (“CGS-CIMB Indonesia”). The views and opinions in this research report are our own as of the date hereof and are subject to change. CGS-CIMB Indonesia has no obligation to update its opinion or the information in this research report. Neither this report nor any copy hereof may be distributed in Indonesia or to any Indonesian citizens wherever they are domiciled or to Indonesian residents except in compliance with applicable Indonesian capital market laws and regulations.
This research report is not an offer of securities in Indonesia. The securities referred to in this research report have not been registered with the Financial Services Authority (Otoritas Jasa Keuangan) pursuant to relevant capital market laws and regulations, and may not be offered or sold within the territory of the Republic of Indonesia or to Indonesian citizens through a public offering or in circumstances which constitute an offer within the meaning of the Indonesian capital market law and regulations.
Ireland: CGS-CIMB is not an investment firm authorised in the Republic of Ireland and no part of this document should be construed as CGS-CIMB acting as, or otherwise claiming or representing to be, an investment firm authorised in the Republic of Ireland.
Malaysia: This report is distributed by CIMB solely for the benefit of and for the exclusive use of our clients. CIMB has no obligation to update, revise or reaffirm its opinion or the information in this research reports after the date of this report.
New Zealand: In New Zealand, this report is for distribution only to persons who are wholesale clients pursuant to section 5C of the Financial Advisers Act 2008.
Singapore: This report is issued and distributed by CGS-CIMB Research Pte Ltd (“CGS-CIMBR”). CGS-CIMBR is a financial adviser licensed under the Financial Advisers Act, Cap 110 (“FAA”) for advising on investment products, by issuing or promulgating research analyses or research reports, whether in electronic, print or other form. Accordingly CGS-CIMBR is a subject to the applicable rules under the FAA unless it is able to avail itself to any prescribed exemptions.
Recipients of this report are to contact CGS-CIMB Research Pte Ltd, 50 Raffles Place, #16-02 Singapore Land Tower, Singapore in respect of any matters arising from, or in connection with this report. CGS-CIMBR has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only. If you have not been sent this report by CGS-CIMBR directly, you may not rely, use or disclose to anyone else this report or its contents.
If the recipient of this research report is not an accredited investor, expert investor or institutional investor, CGS-CIMBR accepts legal responsibility for the contents of the report without any disclaimer limiting or otherwise curtailing such legal responsibility. If the recipient is an accredited investor, expert investor or institutional investor, the recipient is deemed to acknowledge that CGS-CIMBR is exempt from certain requirements under the FAA and its attendant regulations, and as such, is exempt from complying with the following : (a) Section 25 of the FAA (obligation to disclose product information); (b) Section 27 (duty not to make recommendation with respect to any investment product without having a reasonable basis where you may be reasonably expected to rely on the recommendation) of the FAA; (c) MAS Notice on Information to Clients and Product Information Disclosure [Notice No. FAA-N03]; (d) MAS Notice on Recommendation on Investment Products [Notice No. FAA-N16]; (e) Section 36 (obligation on disclosure of interest in securities), and (f) any other laws, regulations, notices, directive, guidelines, circulars and practice notes which are relates to the above, to the extent permitted by applicable laws, as may be amended from time to time, and any other laws, regulations, notices, directive, guidelines, circulars, and practice notes as we may notify you from time to time. In addition, the recipient who is an accredited investor, expert investor or institutional investor acknowledges that a CGS-CIMBR is exempt from Section 27 of the FAA, the recipient will also not be able to file a civil claim against CGS-CIMBR for any loss or damage arising from the recipient’s reliance on any recommendation made by CGS-CIMBR which would otherwise be a right that is available to the recipient under Section 27 of the FAA, the recipient will also not be able to file a civil claim against CGS-CIMBR for any loss or damage arising from the recipient’s reliance on any recommendation made by CGS-CIMBR which would otherwise be a right that is available to the recipient under
41
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Section 27 of the FAA.
CGS-CIMBR, its affiliates and related corporations, their directors, associates, connected parties and/or employees may own or have positions in securities of the company(ies) covered in this research report or any securities related thereto and may from time to time add to or dispose of, or may be materially interested in, any such securities. Further, CGS-CIMBR, its affiliates and its related corporations do and seek to do business with the company(ies) covered in this research report and may from time to time act as market maker or have assumed an underwriting commitment in securities of such company(ies), may sell them to or buy them from customers on a principal basis and may also perform or seek to perform significant investment banking, advisory, underwriting or placement services for or relating to such company(ies) as well as solicit such investment, advisory or other services from any entity mentioned in this report.
As of July 3, 2018, CGS-CIMBR does not have a proprietary position in the recommended securities in this report.
CGS-CIMBR does not make a market on the securities mentioned in the report.
South Korea: This report is issued and distributed in South Korea by CGS-CIMB Securities (Hong Kong) Limited, Korea Branch (“CGS-CIMB Korea”) which is licensed as a cash equity broker, and regulated by the Financial Services Commission and Financial Supervisory Service of Korea. In South Korea, this report is for distribution only to professional investors under Article 9(5) of the Financial Investment Services and Capital Market Act of Korea (“FSCMA”).
Spain: This document is a research report and it is addressed to institutional investors only. The research report is of a general nature and not personalised and does not constitute investment advice so, as the case may be, the recipient must seek proper advice before adopting any investment decision. This document does not constitute a public offering of securities.
CGS-CIMB is not registered with the Spanish Comision Nacional del Mercado de Valores to provide investment services.
Sweden: This report contains only marketing information and has not been approved by the Swedish Financial Supervisory Authority. The distribution of this report is not an offer to sell to any person in Sweden or a solicitation to any person in Sweden to buy any instruments described herein and may not be forwarded to the public in Sweden.
Switzerland: This report has not been prepared in accordance with the recognized self-regulatory minimal standards for research reports of banks issued by the Swiss Bankers’ Association (Directives on the Independence of Financial Research).
Thailand: This report is issued and distributed by CGS-CIMB Securities (Thailand) Co. Ltd. (“CGS-CIMB Thailand”) based upon sources believed to be reliable (but their accuracy, completeness or correctness is not guaranteed). The statements or expressions of opinion herein were arrived at after due and careful consideration for use as information for investment. Such opinions are subject to change without notice and CGS-CIMB Thailand has no obligation to update its opinion or the information in this research report.
CGS-CIMB Thailand may act or acts as Market Maker, and issuer and offerer of Derivative Warrants and Structured Note which may have the following securities as its underlying securities. Investors should carefully read and study the details of the derivative warrants in the prospectus before making investment decisions.
AAV, ADVANC, AMATA, AOT, AP, BANPU, BBL, BCH, BCP, BCPG, BDMS, BEAUTY, BEM, BGRIM, BJC, BH, BLA, BLAND, BPP, BTS, CBG, CENTEL, CHG, CK, CKP, COM7, CPALL, CPF, CPN, DELTA, DTAC, EA, EGCO, EPG, ERW, ESSO, GGC, GFPT, GLOBAL, GLOW, GPSC, GUNKUL, HANA, HMPRO, INTUCH, IRPC, ITD, IVL, KBANK, KCE, KKP, KTB, KTC, LH, LPN, MAJOR, MEGA, MINT, MTLS, ORI, PRM, PSH, PSL, PTG, PTT, PTTEP, PTTGC, QH, RATCH, ROBINS, RS, SAWAD, SCB, SCC, SGP, SIRI, SPALI, SPRC, STA, STEC, SUPER, TASCO, TCAP, THAI, THANI, TISCO, TKN, TMB, TOA, TOP, TPIPL, TPIPP, TRUE, TTW, TU, TVO, UV, WHA, WHAUP, WORK.
Corporate Governance Report:
The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information.
The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that date. CGS-CIMB Thailand does not confirm nor certify the accuracy of such survey result.
Score Range: 90 - 100 80 – 89 70 - 79 Below 70 or No Survey Result
Description: Excellent Very Good Good N/A
United Arab Emirates: The distributor of this report has not been approved or licensed by the UAE Central Bank or any other relevant licensing authorities or governmental agencies in the United Arab Emirates. This report is strictly private and confidential and has not been reviewed by, deposited or registered with UAE Central Bank or any other licensing authority or governmental agencies in the United Arab Emirates. This report is being issued outside the United Arab Emirates to a limited number of institutional investors and must not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose. Further, the information contained in this report is not intended to lead to the sale of investments under any subscription agreement or the conclusion of any other contract of whatsoever nature within the territory of the United Arab Emirates.
United Kingdom and European Economic Area (EEA): In the United Kingdom and European Economic Area, this material is also being distributed by CGS-CIMB Securities (UK) Limited (“CGS-CIMB UK”). CGS-CIMB UK is authorized and regulated by the Financial Conduct Authority and its registered office is at 27 Knightsbridge, London, SW1X7YB. The material distributed by CGS-CIMB UK has been prepared in accordance with CGS-CIMB’s policies for managing conflicts of interest arising as a result of publication and distribution of this material. This material is for distribution only to, and is solely directed at, selected persons on the basis that those persons: (a) are eligible counterparties and professional clients of CGS-CIMB UK; (b) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Order”), (c) fall within Article 49(2)(a) to (d) (“high net worth companies, unincorporated associations etc”) of the Order; (d) are outside the United Kingdom subject to relevant regulation in each jur isdiction, material(all such persons together being referred to as “relevant persons”). This material is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this material relates is available only to relevant persons and will be engaged in only with relevant persons.
42
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
Where this material is labelled as non-independent, it does not provide an impartial or objective assessment of the subject matter and does not constitute independent “research” (cannot remove research from here under the applicable rules of the Financial Conduct Authority in the UK. Consequently, any such non-independent material will not have been prepared in accordance with legal requirements designed to promote the independence of research (cannot remove research from here) and will not subject to any prohibition on dealing ahead of the dissemination of research. Any such non-independent material must be considered as a marketing communication.
United States: This research report is distributed in the United States of America by CGS-CIMB Securities (USA) Inc, a U.S. registered broker-dealer and a related company of CGS-CIMB Research Pte Ltd, PT CGS-CIMB Sekuritas Indonesia, CGS-CIMB Securities (Thailand) Co. Ltd, CGS-CIMB Securities (Hong Kong) Limited, CGS-CIMB Securities (India) Private Limited, and is distributed solely to persons who qualify as “U.S. Institutional Investors” as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. This communication is only for Institutional Investors whose ordinary business activities involve investing in shares, bonds, and associated securities and/or derivative securities and who have professional experience in such investments. Any person who is not a U.S. Institutional Investor or Major Institutional Investor must not rely on this communication. The delivery of this research report to any person in the United States of America is not a recommendation to effect any transactions in the securities discussed herein, or an endorsement of any opinion expressed herein. CGS-CIMB Securities (USA) Inc, is a FINRA/SIPC member and takes responsibility for the content of this report. For further information or to place an order in any of the above-mentioned securities please contact a registered representative of CGS-CIMB Securities (USA) Inc.
CIMB Securities (USA) Inc. does not make a market on other securities mentioned in the report.
CGS-CIMB Securities (USA) Inc. has not managed or co-managed a public offering of any of the securities mentioned in the past 12 months.
CGS-CIMB Securities (USA) Inc. has not received compensation for investment banking services from any of the company mentioned in the past 12 months.
CGS-CIMB Securities (USA) Inc. neither expects to receive nor intends to seek compensation for investment banking services from any of the company mentioned within the next 3 months.
Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.
Spitzer Chart for stock being researched ( 2 year data )
Sarimelati Kencana PT (PZZA IJ)
Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (Thai IOD) in 2017, Anti-Corruption 2017
AAV – Very Good, n/a, ADVANC – Excellent, Certified, AEONTS – Good, n/a, AMATA – Very Good, n/a, ANAN – Excellent, n/a, AOT – Excellent, Declared, AP – Excellent, Declared, ASK – Very Good, Declared, ASP – Very Good, Certified, BANPU – Excellent, Certified, BAY – Excellent, Certified, BBL – Very Good, Certified, BCH – Good, Declared, BCP - Excellent, Certified, BCPG – Very Good, n/a, BEM – Very Good, n/a, BDMS – Very Good, n/a, BEAUTY – Good, n/a, BEC – Very Good, n/a, , BGRIM – not available, n/a, BH - Good, n/a, BJC – Very Good, Declared, BJCHI – Very Good, Declared, BLA – Very Good, Certified, BPP – Good, n/a, BR - Good, Declared, BTS - Excellent, Certified, CBG – Good, n/a, CCET – Good, n/a, CENTEL – Very Good, Certified, CHG – Very Good, Declared, CK – Excellent, n/a, COL – Very Good, Declared, CPALL – not available, Declared, CPF – Excellent, Declared, CPN - Excellent, Certified, DELTA - Excellent, n/a, DEMCO – Excellent, Certified, DIF – not available, n/a, DTAC – Excellent, Certified, EA – Very Good, n/a, ECL – Very Good, Certified, EGCO - Excellent, Certified, EPG – Very Good, n/a, GFPT - Excellent, Declared, GGC – not available, Declared, GLOBAL – Very Good, Declared, GLOW – Very Good, Certified, GPSC – Excellent, Declared, GRAMMY - Excellent, n/a, GUNKUL – Excellent, Declared, HANA - Excellent, Certified, HMPRO - Excellent, Certified, ICHI – Excellent, n/a, III – not available, n/a, INTUCH - Excellent, Certified, IRPC – Excellent, Certified, ITD – Very Good, n/a, IVL - Excellent, Certified, JAS – not available, Declared, JASIF – not available, n/a, JUBILE – Good, Declared, KAMART – not available, n/a, KBANK - Excellent, Certified, KCE - Excellent, Certified, KGI – Very Good, Certified, KKP – Excellent, Certified, KSL – Very Good, Certified, KTB - Excellent, Certified, KTC – Excellent, Certified, LH - Very Good, n/a, LPN – Excellent, Certified, M – Very Good, n/a, MACO – Very Good, n/a,
Rating Distribution (%) Inv estment Banking clients (%)
Add 61.1% 5.5%
Hold 29.7% 2.0%
Reduce 8.9% 0.4%
Distribution of stock ratings and inv estment banking clients for quarter ended on 31 March 2018
1275 companies under cov erage for quarter ended on 31 March 2018
1,000
1,050
1,100
1,150
1,200
1,250
1,300
1,350
May-18 May-18 Jun-18 Jun-18 Jun-18 Jul-18
Price Close
43
Food Retail│Indonesia
Sarimelati Kencana PT│July 4, 2018
MAJOR – Very Good, n/a, MAKRO – Very Good, Declared, MALEE – Very Good, n/a, MBKET – Very Good, Certified, MC – Very Good, Declared, MCOT – Excellent, Certified, MEGA – Very Good, n/a, MINT - Excellent, Certified, MTLS – Very Good, Declared, NYT – Excellent, n/a, OISHI – Very Good, n/a, PLANB – Excellent, Declared, PLAT – Very Good, Certified, PSH – Excellent, Certified, PSL - Excellent, Certified, PTT - Excellent, Certified, PTTEP - Excellent, Certified, PTTGC - Excellent, Certified, QH – Excellent, Certified, RATCH – Excellent, Certified, ROBINS – Excellent, Certified, RS – Very Good, n/a, SAMART - Excellent, n/a, SAPPE - Good, n/a, SAT – Excellent, Certified, SAWAD – Very Good, n/a, SC – Excellent, Declared, SCB - Excellent, Certified, SCBLIF – not available, n/a, SCC – Excellent, Certified, SCN – Very Good, Declared, SCCC - Excellent, Declared, SIM - Excellent, n/a, SIRI – Very Good, Declared, SPA - Good, n/a, SPALI - Excellent, n/a, SPRC – Excellent, Declared, STA – Very Good, Declared, STEC – Excellent, n/a, SVI – Excellent, Certified, TASCO – Very Good, n/a, TCAP – Excellent, Certified, THAI – Very Good, n/a, THANI – Very Good, Certified, THCOM – Excellent, Certified, THRE – Very Good, Certified, THREL – Excellent, Certified, TICON – Very Good, Declared, TIPCO – Very Good, Certified, TISCO - Excellent, Certified, TK – Very Good, n/a, TKN – Very Good, Declared, TMB - Excellent, Certified, TNR – Good, n/a, TOP - Excellent, Certified, TPCH – Good, n/a, TPIPP – not available, n/a, TRUE – Excellent, Declared, TTW – Very Good, n/a, TU – Excellent, Declared, TVO – Excellent, Declared, UNIQ – not available, Declared, VGI – Excellent, Declared, WHA – not available, Declared, WHART – not available, n/a, WORK – not available, n/a.
Companies participating in Thailand’s Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) under Thai Institute of Directors (as of October 28, 2016) are categorized into:
- Companies that have declared their intention to join CAC, and
- Companies certified by CAC
Recommendation Framework
Stock Ratings Definition:
Add The stock’s total return is expected to exceed 10% over the next 12 months.
Hold The stock’s total return is expected to be between 0% and positive 10% over the next 12 months.
Reduce The stock’s total return is expected to fall below 0% or more over the next 12 months.
The total expected return of a stock is defined as the sum of the: (i) percentage difference between the target price and the current price and (ii) the forward net dividend yields of the stock. Stock price targets have an investment horizon of 12 months.
Sector Ratings Definition:
Overweight An Overweight rating means stocks in the sector have, on a market cap-weighted basis, a positive absolute recommendation.
Neutral A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral absolute recommendation.
Underweight An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a negative absolute recommendation.
Country Ratings Definition:
Overweight An Overweight rating means investors should be positioned with an above-market weight in this country relative to benchmark.
Neutral A Neutral rating means investors should be positioned with a neutral weight in this country relative to benchmark.
Underweight An Underweight rating means investors should be positioned with a below-market weight in this country relative to benchmark.
#01