An interesting call with Miquel Staal, previously investor relations of Mitra Adiperkasa Tbk Pt (MAPI IJ) but now more corporate finance focused, revealed a company in an increasingly well-honed state.
Whilst SSSG remains sluggish at around 2% for 1Q17, the company expects SSSG of +4% - 5% for FY17E. Margins continue to improve, as the company's restructuring efforts start to manifest themselves in earnest.
MAPI has been focused on tackling its lingering inventory issues, especially within its MAP Active business. This is now fully under control with inventory days down to 138 days from a peak of 180 days. It's monitoring systems and controls are now in place to prevent any recurrence of this problem.
The company continues to reduce its department store exposure, having already closed Debenhams in Kemang and two other Lotus stores. Its main exposure is through SOGO, which continue to do well. This restructuring is a multi-year process, given the nature of the beast (long leases etc), but it is likely that it will exit Debenhams in the long term and possibly Lotus.
Burger King has broken even this year, after private equity involvement in management but Dominos continues to lose money as it needs greater scale.
The company has spun off its food & beverage business (including Starbucks, Pizza Express, Krispy Kreme, Cold Stone Creamery and Godiva) under PT Map Boga Adiperkasa Utama Tbk (MAPB IJ). It plans to ramp up the Starbucks rollout to 70 outlets a year, with 600 outlets targeted in four years time from the current 250.
MAPI remains a unique way to get exposure to the Indonesian middle-class consumer, with an unparalleled stable of 150 international brands with exclusivity. Vietnam will only provide another string to the company's bow, with a spectacular start with Zara already under the belt. The restructuring efforts over the last couple of years are already well underway and yielding results and the Inventory Issues are now well under control. According to Bloomberg consensus, the company is trading on 31x PER for FY17E and 23x for FY18E, with forecast EPS growth of +73% and +35% for FY17E and FY18E respectively, with a further +30% growth in FY19E.
This insight is part of Smartkarma. For more follow this link.