Indonesia

In this briefing:

1. Widodo Sets GIAA Fare / Ahok In PDI-P / Prabowo Still Misfiring / Oz Cepa / KPK on Beneficial Owners
2. OUE C-REIT – Beware of the CPPU Timebomb

1. Widodo Sets GIAA Fare / Ahok In PDI-P / Prabowo Still Misfiring / Oz Cepa / KPK on Beneficial Owners

Widodo intervened in the airfare pricing of Garuda Indonesia (Persero) (GIAA IJ), compelling it to drop its fares by 20%.  This serves a short-term election interest at the expense of investor confidence.  Ahok joined PDI-P, but only very peripherally.  The contradictory and hypocritical hyperbole in Prabowo’s persistent economic campaign messages still have yet to resonate with voters.  The trade agreement with Australia will happen in March, say ministers.  The KPK is prioritizing measures to disclose beneficial owners of companies. 

Politics: Jakarta Governor Basuki Tjahaja Purnama (‘Ahok’) announced that he had joined the PDI-Perjuangan party of Megawati, but officials made clear that he will not campaign for President Joko Widodo, nor does he have any status in the party other than “member” without rank.  He must work to attain the status of “cadre”.  Nonetheless, Megawati deserves credit for embracing an icon of pluralism and reform (Page 2).  Police named the hard-line Islamic leader Slamet Ma’arif as a suspect on charges of illegal campaigning.  Opposition figures decried this as yet another example of administration repression.  In fact, the charges against the cleric are sound (p. 3).  West Java Governor Ridwan Kamil rebutted accusations of campaign violations (p. 3).  Former First Lady Kristiani Herawati Yudhoyono is suffering from leukemia (p. 5).  Gerindra Chair Prabowo Subianto campaigned in Central Java and expounded on his familiar themes of wayward policymaking and economic deprivation.  Prabowo’s attempt to use hyperbole to excite voters has not worked in the four months of campaigning to date, but he has yet to alter his messaging (p. 5).  Widodo’s campaign team daily chair, Gen (ret) Moeldoko, declared that the strategy for the final 60 days of campaigning will be “total war”.  This elicited ridicule from the opposition (p. 8).  Former Constitutional Court Chief Justice Mahfud Mahmodin called on justices of the court to intervene in the leadership dispute dividing the Regional Representatives Assembly (DPD) (p. 9).  Solidarity Party (PSI) Chair Grace Natalie derided “faux‑nationalist” parties that fail to defend pluralism (p. 9). 

Justice: Anti-Corruption Commission (KPK) officials are prioritizing efforts to bring about better disclosure of the beneficial owners of companies (p. 10).

Policy News: The president prevailed upon the state airline Garuda to cut its domestic airfare after hikes last month.  The move avoids irking certain consumers prior to elections.  But ad hoc interventions by the president impose broad costs on the overall economy, by elevating perceptions of risk and deterring investment (p. 10).  The Islamic Justice Welfare Party (PKS) registered a host of objections to a proposed Bill on Sexual Abuse (p. 11).

International: The signing of the long-awaited Comprehensive Economic Part­nership Agreement (CEPA) with Australia will happen next month, say ministers (p. 11).

Economics: Investment Coordinating Board (BKPM) Chair Tom Lembong reiterated calls for revising the Negative Investment List (DNI) to allow investment in health and education (p. 11).

2. OUE C-REIT – Beware of the CPPU Timebomb

Whilst OUE C-REIT’s DPU yield and Price-to-NAV appears to be attractive vis-à-vis its peers, investors should take note of the implications of the S$375 mil Convertible Perpetual Preferred Units (“CPPU”) and its impact on OUE C-REIT’s DPU going forward.

Assuming that all S$375 mil CPPUs are converted, a total of 524.2 mil new OUE C-REIT will be issued to OUE Ltd, and the total unit base of OUE C-REIT will expand by 18% to 3,385.8 mil units.

For minority investors of OUE C-REIT, they face the risk of having their DPU yield diluted from a projected 7.1% (before conversion) to 6.2% after conversion.

 A Rights Issue to fund CPPU Redemption will be more dilutive than the conversion scenario. Assuming a Rights Issue at 20% discount, DPU yield of OUE C-REIT will drop from a projected 7.1% (before conversion) to 5.8% after Rights Issue.

Minority investors are likely to be at the losing end of this CPPU issue and suffer from yield dilution. Investors should avoid OUE C-REIT for now as the uncertainty over the CPPU conversion remains.

For investors who are still keen to take a position in OUE C-REIT, a fair post-conversion diluted DPU yield would be 6.6%, translating to a recommended entry price of S$0.465 per unit.

In this briefing:

1. OUE C-REIT – Beware of the CPPU Timebomb

1. OUE C-REIT – Beware of the CPPU Timebomb

Whilst OUE C-REIT’s DPU yield and Price-to-NAV appears to be attractive vis-à-vis its peers, investors should take note of the implications of the S$375 mil Convertible Perpetual Preferred Units (“CPPU”) and its impact on OUE C-REIT’s DPU going forward.

Assuming that all S$375 mil CPPUs are converted, a total of 524.2 mil new OUE C-REIT will be issued to OUE Ltd, and the total unit base of OUE C-REIT will expand by 18% to 3,385.8 mil units.

For minority investors of OUE C-REIT, they face the risk of having their DPU yield diluted from a projected 7.1% (before conversion) to 6.2% after conversion.

 A Rights Issue to fund CPPU Redemption will be more dilutive than the conversion scenario. Assuming a Rights Issue at 20% discount, DPU yield of OUE C-REIT will drop from a projected 7.1% (before conversion) to 5.8% after Rights Issue.

Minority investors are likely to be at the losing end of this CPPU issue and suffer from yield dilution. Investors should avoid OUE C-REIT for now as the uncertainty over the CPPU conversion remains.

For investors who are still keen to take a position in OUE C-REIT, a fair post-conversion diluted DPU yield would be 6.6%, translating to a recommended entry price of S$0.465 per unit.

In this briefing:

1. Oil Exploration: We Expect a Resurgence in 2019 Pointing to Strong Performance for E&Ps

1. Oil Exploration: We Expect a Resurgence in 2019 Pointing to Strong Performance for E&Ps

We see oil exploration making a comeback in 2019, as drilling spending sees an increase and on the back of encouraging well results year to date. Already in 2019 there have been 4 high impact discoveries in the UK, South Africa and Guyana. Given the need of companies, especially the majors, to replenish their portfolios, there will still be a number of frontier, high impact wells being drilled. The areas where we see material exploration wells being drilled this year are Guyana, US GoM, Mexico, Brazil the Eastern Mediterranean and West Africa.

If there is some exploration success, the pure-play exploration companies will be good performers, especially those that have exposure to several wells that could be material relative to their size. A pick up in drilling will also be positive for the offshore drilling companies and seismic names. We look at the merits and pitfalls of investing in exploration, performance in 2018, outlook for 2019, the debate over exploring for resource versus buying it, how the economics of exploration have improved and the impact of the time value of money. 

In this briefing:

1. Oil Exploration: We Expect a Resurgence in 2019 Pointing to Strong Performance for E&Ps
2. Indonesia: Waiting To Unleash The Potential

1. Oil Exploration: We Expect a Resurgence in 2019 Pointing to Strong Performance for E&Ps

We see oil exploration making a comeback in 2019, as drilling spending sees an increase and on the back of encouraging well results year to date. Already in 2019 there have been 4 high impact discoveries in the UK, South Africa and Guyana. Given the need of companies, especially the majors, to replenish their portfolios, there will still be a number of frontier, high impact wells being drilled. The areas where we see material exploration wells being drilled this year are Guyana, US GoM, Mexico, Brazil the Eastern Mediterranean and West Africa.

If there is some exploration success, the pure-play exploration companies will be good performers, especially those that have exposure to several wells that could be material relative to their size. A pick up in drilling will also be positive for the offshore drilling companies and seismic names. We look at the merits and pitfalls of investing in exploration, performance in 2018, outlook for 2019, the debate over exploring for resource versus buying it, how the economics of exploration have improved and the impact of the time value of money. 

2. Indonesia: Waiting To Unleash The Potential

As regular followers would know, we at River Valley Asset Mgt. usually spend the early part of the year travelling, kicking the tyres, sniffing out opportunities, getting comfortable with our investment views and watching out for lurking risks. January 2019 took us to Indonesia where we attended a conference, met up with companies, heard the local take on politics and got a feel for the investment landscape in this emerging and dynamic economy at the heart of ASEAN. The time was well spent but we came back wondering how long it is going to take Indonesia to deliver on its full potential.

Jakarta at this time of the year is nice and pleasant and traffic was not too onerous. We had two full days of back-to-back company meetings in addition to listening to political pundits pontificating on the implication of the impending elections. While there were diverging views, nobody expected a significant change in direction after the elections. Consensus was veering round to the view that the economy should start looking up in the second half of the year, once the dust settles. There were a few cautionary risks mentioned, for instance an unexpected upset or a slip towards populism, though they were dismissed as quickly as they were raised. The economy seems to be chugging along at a steady pace and the improving global environment is providing reasons for optimism to corporates who are all directly impacted by exchange rate fluctuations of the currency.

In this briefing:

1. Indonesia: Waiting To Unleash The Potential
2. Indonesia Upstream Gas Asset Sale: Positive Read-Through to Other SE Asia Gas Companies

1. Indonesia: Waiting To Unleash The Potential

As regular followers would know, we at River Valley Asset Mgt. usually spend the early part of the year travelling, kicking the tyres, sniffing out opportunities, getting comfortable with our investment views and watching out for lurking risks. January 2019 took us to Indonesia where we attended a conference, met up with companies, heard the local take on politics and got a feel for the investment landscape in this emerging and dynamic economy at the heart of ASEAN. The time was well spent but we came back wondering how long it is going to take Indonesia to deliver on its full potential.

Jakarta at this time of the year is nice and pleasant and traffic was not too onerous. We had two full days of back-to-back company meetings in addition to listening to political pundits pontificating on the implication of the impending elections. While there were diverging views, nobody expected a significant change in direction after the elections. Consensus was veering round to the view that the economy should start looking up in the second half of the year, once the dust settles. There were a few cautionary risks mentioned, for instance an unexpected upset or a slip towards populism, though they were dismissed as quickly as they were raised. The economy seems to be chugging along at a steady pace and the improving global environment is providing reasons for optimism to corporates who are all directly impacted by exchange rate fluctuations of the currency.

2. Indonesia Upstream Gas Asset Sale: Positive Read-Through to Other SE Asia Gas Companies

We analyse the sale of a stake in the Mako gas field in Indonesia to Coro Energy PLC (CORO LN) by West Natuna Exploration Limited, majority owned by private Singapore company Conrad Petroleum and UK listed Empyrean Energy PLC (EME LN), which has a 10% stake. It has implications in terms of read-through valuations for other S.E. Asia focused energy companies especially those with Indonesian gas production such as Premier Oil PLC (PMO LN), Ophir Energy (OPHR LN) and Medco Energi Internasional T (MEDC IJ). 

In this briefing:

1. Indonesia Upstream Gas Asset Sale: Positive Read-Through to Other SE Asia Gas Companies
2. Semiconductor Sales Dive A Record 7% MoM In December. 2019 Will Be A Low-To-No Growth Year.

1. Indonesia Upstream Gas Asset Sale: Positive Read-Through to Other SE Asia Gas Companies

We analyse the sale of a stake in the Mako gas field in Indonesia to Coro Energy PLC (CORO LN) by West Natuna Exploration Limited, majority owned by private Singapore company Conrad Petroleum and UK listed Empyrean Energy PLC (EME LN), which has a 10% stake. It has implications in terms of read-through valuations for other S.E. Asia focused energy companies especially those with Indonesian gas production such as Premier Oil PLC (PMO LN), Ophir Energy (OPHR LN) and Medco Energi Internasional T (MEDC IJ). 

2. Semiconductor Sales Dive A Record 7% MoM In December. 2019 Will Be A Low-To-No Growth Year.

Global Semiconductor Sales for December 2018 amounted to $38.2 billion, down a record 7.0% MoM, according to the latest data published by the Semiconductor Industry Association (SIA). The December data reflects a sharp acceleration of a downward trend which began in November and comes as little surprise following an earnings season characterised by profit warnings led by industry giants such as Apple, Samsung and Nvidia. 

The December decline amounted to ~$3 billion in absolute terms, far less than the roughly $15 billion that failed to materialise in fourth quarter sector revenues and implying that substantial amounts of inventory still remain to be consumed from within the supply chain. 

As such we anticipate monthly semiconductor sales continuing to decline through April-May timeframe before stabilizing and returning to growth thereafter. We now anticipate growth to moderate significantly from the 13.7% experienced in 2018 to just 1% in 2019. 

In this briefing:

1. Indonesia Upstream Gas Asset Sale: Positive Read-Through to Other SE Asia Gas Companies
2. Semiconductor Sales Dive A Record 7% MoM In December. 2019 Will Be A Low-To-No Growth Year.
3. The Week that Was in ASEAN@Smartkarma – Elections, Inflation, and Indonesian Retail Therapy

1. Indonesia Upstream Gas Asset Sale: Positive Read-Through to Other SE Asia Gas Companies

We analyse the sale of a stake in the Mako gas field in Indonesia to Coro Energy PLC (CORO LN) by West Natuna Exploration Limited, majority owned by private Singapore company Conrad Petroleum and UK listed Empyrean Energy PLC (EME LN), which has a 10% stake. It has implications in terms of read-through valuations for other S.E. Asia focused energy companies especially those with Indonesian gas production such as Premier Oil PLC (PMO LN), Ophir Energy (OPHR LN) and Medco Energi Internasional T (MEDC IJ). 

2. Semiconductor Sales Dive A Record 7% MoM In December. 2019 Will Be A Low-To-No Growth Year.

Global Semiconductor Sales for December 2018 amounted to $38.2 billion, down a record 7.0% MoM, according to the latest data published by the Semiconductor Industry Association (SIA). The December data reflects a sharp acceleration of a downward trend which began in November and comes as little surprise following an earnings season characterised by profit warnings led by industry giants such as Apple, Samsung and Nvidia. 

The December decline amounted to ~$3 billion in absolute terms, far less than the roughly $15 billion that failed to materialise in fourth quarter sector revenues and implying that substantial amounts of inventory still remain to be consumed from within the supply chain. 

As such we anticipate monthly semiconductor sales continuing to decline through April-May timeframe before stabilizing and returning to growth thereafter. We now anticipate growth to moderate significantly from the 13.7% experienced in 2018 to just 1% in 2019. 

3. The Week that Was in ASEAN@Smartkarma – Elections, Inflation, and Indonesian Retail Therapy

In the first country piece in elections in a series under Smartkarma Originals, 2019 Elections – Part 1. Thailand: Magic Moment for Democracy’s Return?, Virgil Fernandez Esguerra focuses on the upcoming Thai Election.

In part 2 of a series under Smartkarma Originals, 2019 Elections – Part 2. Indonesia: Jokowi’s Policies – Magic Bullet or Bitter Pill?, Virgil Fernandez Esguerra zero in on Indonesia’s upcoming Presidential election. 

In Army Offered Plums / Widodo Hammers ‘propaganda’ / Steady GDP / March KCIC Land Target / Kamil 2024, Kevin O’Rourke comments on the most significant political and economic developments in Indonesia over the last week. 

In Indonesia’s Negative Investment List – “Open For Business” Is Lip-Service Only, Dr Jim Walker zeros in on Indonesia’s negative investment list which has yet to be published. 

In Philippine CPI: Normalization Begins in January with Another Inflation Fade Out, Jun Trinidad provides us with his views on inflation in the Philippines. 

Equity Bottom-Up Insights

In Mitra Adiperkasa (MAPI IJ) – Retail Therapy Is Alive and Well, CrossASEAN Insight provider Angus Mackintosh revisits Mitra Adiperkasa (MAPI IJ) post a meeting with management in Jakarta. 

In BDMN/BBNP Merger Leads to BDMN Buyout Arb, Events Specialist Travis Lundy revisits the ongoing acquisition of Bank Danamon Indonesia (BDMN IJ) by Mitsubishi Ufj Financial Group Inc (ADR) (MTU US) and finds there is a trade to be done.  

In Wilmar: China Listing at ~20x Might Prove Too Optimistic. , commodity specialists Charles Spencer discusses Wilmar International (WIL SP) ‘s China list and os sceptical about lofty valuations. 

In Silverlake Axis Rally Ignition and Hurdles, technical specialist Thomas Schroeder works his magic on Silverlake Axis (SILV SP). 

Sector and Thematic Insights

In Sathorn Series N: Thai Cryptocurrency Regulations Update, Thai Guru Athaporn Arayasantiparb, CFA zeros in on Cryptocurrency regulations in Thailand. 

In this briefing:

1. Semiconductor Sales Dive A Record 7% MoM In December. 2019 Will Be A Low-To-No Growth Year.
2. The Week that Was in ASEAN@Smartkarma – Elections, Inflation, and Indonesian Retail Therapy
3. Capital Flows Return To Asia and India

1. Semiconductor Sales Dive A Record 7% MoM In December. 2019 Will Be A Low-To-No Growth Year.

Global Semiconductor Sales for December 2018 amounted to $38.2 billion, down a record 7.0% MoM, according to the latest data published by the Semiconductor Industry Association (SIA). The December data reflects a sharp acceleration of a downward trend which began in November and comes as little surprise following an earnings season characterised by profit warnings led by industry giants such as Apple, Samsung and Nvidia. 

The December decline amounted to ~$3 billion in absolute terms, far less than the roughly $15 billion that failed to materialise in fourth quarter sector revenues and implying that substantial amounts of inventory still remain to be consumed from within the supply chain. 

As such we anticipate monthly semiconductor sales continuing to decline through April-May timeframe before stabilizing and returning to growth thereafter. We now anticipate growth to moderate significantly from the 13.7% experienced in 2018 to just 1% in 2019. 

2. The Week that Was in ASEAN@Smartkarma – Elections, Inflation, and Indonesian Retail Therapy

In the first country piece in elections in a series under Smartkarma Originals, 2019 Elections – Part 1. Thailand: Magic Moment for Democracy’s Return?, Virgil Fernandez Esguerra focuses on the upcoming Thai Election.

In part 2 of a series under Smartkarma Originals, 2019 Elections – Part 2. Indonesia: Jokowi’s Policies – Magic Bullet or Bitter Pill?, Virgil Fernandez Esguerra zero in on Indonesia’s upcoming Presidential election. 

In Army Offered Plums / Widodo Hammers ‘propaganda’ / Steady GDP / March KCIC Land Target / Kamil 2024, Kevin O’Rourke comments on the most significant political and economic developments in Indonesia over the last week. 

In Indonesia’s Negative Investment List – “Open For Business” Is Lip-Service Only, Dr Jim Walker zeros in on Indonesia’s negative investment list which has yet to be published. 

In Philippine CPI: Normalization Begins in January with Another Inflation Fade Out, Jun Trinidad provides us with his views on inflation in the Philippines. 

Equity Bottom-Up Insights

In Mitra Adiperkasa (MAPI IJ) – Retail Therapy Is Alive and Well, CrossASEAN Insight provider Angus Mackintosh revisits Mitra Adiperkasa (MAPI IJ) post a meeting with management in Jakarta. 

In BDMN/BBNP Merger Leads to BDMN Buyout Arb, Events Specialist Travis Lundy revisits the ongoing acquisition of Bank Danamon Indonesia (BDMN IJ) by Mitsubishi Ufj Financial Group Inc (ADR) (MTU US) and finds there is a trade to be done.  

In Wilmar: China Listing at ~20x Might Prove Too Optimistic. , commodity specialists Charles Spencer discusses Wilmar International (WIL SP) ‘s China list and os sceptical about lofty valuations. 

In Silverlake Axis Rally Ignition and Hurdles, technical specialist Thomas Schroeder works his magic on Silverlake Axis (SILV SP). 

Sector and Thematic Insights

In Sathorn Series N: Thai Cryptocurrency Regulations Update, Thai Guru Athaporn Arayasantiparb, CFA zeros in on Cryptocurrency regulations in Thailand. 

3. Capital Flows Return To Asia and India

• Latest January ‘flash’ data show cross-border capital returning to Asia
• Asian EM and India favoured
• Reinforces similar evidence in December and helps reverse big outflows a year ago
• Adds support to our view that Asia is leading the Global cycle higher

In this briefing:

1. Capital Flows Return To Asia and India

1. Capital Flows Return To Asia and India

• Latest January ‘flash’ data show cross-border capital returning to Asia
• Asian EM and India favoured
• Reinforces similar evidence in December and helps reverse big outflows a year ago
• Adds support to our view that Asia is leading the Global cycle higher

In this briefing:

1. Army Offered Plums / Widodo Hammers ‘propaganda’ / Steady GDP / March KCIC Land Target / Kamil 2024
2. Mitra Adiperkasa (MAPI IJ) – Retail Therapy Is Alive and Well – On the Ground in J-Town

1. Army Offered Plums / Widodo Hammers ‘propaganda’ / Steady GDP / March KCIC Land Target / Kamil 2024

As election campaigning enters the final 10 weeks, the Widodo administration appears intent to offer up to 500 coveted civil-service posts to military personnel, which would role back a key reform of the reformasi era.  But allied parties may object.  Widodo hammered Prabowo for ‘Russian propaganda’ and hiring foreign consultants.  GDP remained steady in 4Q18 at 5.17% yoy.  KCIC targets March for completing land acquisition for its Bandung fast train.  West Java Gov Ridwan Kamil acknowledged eyeing the presidency in 2024.

Politics: Military leaders, with the apparent backing of the administration, aim to revise the landmark 2004 Military Law and place up to 500 active officers into civilian posts throughout the state bureaucracy – a throwback to Soeharto‑era policies and an unwinding of a key reformasi‑era reform.  Excessively cautious advisors to the president may perceive a need to dangle sinecures before the Army, lest it align behind the challenger, Lt Gen (ret) Prabowo Subianto.  In any event, President Joko Widodo may drop the plan: resistance is likely from the public, the press, NGOs, the civil service, the police and perhaps (most significantly) parties in his own nominating alliance (Page 2).  A week ahead of a much‑anticipated one‑on‑one presidential debate, Widodo landed blows on Prabowo, accusing the Gerindra chair of resorting to “Russian[‑style] propaganda” and employing a foreign campaign consultant (p. 5).  Prabowo reiterated complaints about foreign workers (p. 7).  West Java Governor Ridwan Kamil readily acknowledged the possibility that he will run for president in 2024.  The move is unorthodox but he might earn credit for candor.  The prospect helps the long‑term outlook (p. 7).

Justice: Two Anti-Corruption Commission (KPK) investigators suffered assault while observing a Home Affairs conference with the Papua governor and his staff (p. 8). 

Infrastructure: Optimistic projections about completing land acquisition in March emanated from PT KCIC, developer of the Jakarta‑Bandung fast train.  Meanwhile, a Jakarta‑Surabaya semi‑fast train project is still under study (p. 8).  Construction of Soekarno‑Hatta’s third runway is on track, due in June (p. 9)

Appointments: Parliamentarians are considering 11 candidates, including two incumbents, for two seats on the nine‑member Constitutional Court.  Given a record of devasting impacts from rulings from the court, the appointment process merits the utmost care.  But parties appear inclined to decide along partisan lines (p. 10).   

Health: A nationwide Dengue outbreak has killed 169 but Jakarta Province officials have not yet declared a crisis.  The severity is still below that of 2016 (p. 10).

International: Tax officials said that a new mutual legal‑assistance agreement (MLAA) with Switzerland – Indonesia’s 10^th MLAA – will help track fraud (p. 11).

Economics: GDP remained steady in the fourth quarter, bringing full‑year growth to 5.17 percent.  Household demand remained firm, while fixed‑capital formation softened slightly from the preceding quarter (p. 12).  Spending on Community Funds – a key component of Widodo’s program – reached Rp60 trillion again in 2018 (p. 13).

2. Mitra Adiperkasa (MAPI IJ) – Retail Therapy Is Alive and Well – On the Ground in J-Town

With the huge investment that has been going into e-commerce in Indonesia, especially in the consumer space, there are doomsayers out there crying out that the end is nigh for traditional offline retail as we know it.

Anyone who has actually visited popular destination Jakarta malls such as Grand Indonesia or Kota Kassablanca with their eyes open would almost certainly take a different view. 

A visit to Mitra Adiperkasa (MAPI IJ) management in Jakarta last week confirmed that middle-class retail therapy in Indonesia is alive and well and the company is well positioned to take advantage.  

Mitra Adiperkasa (MAPI IJ) finished 2019 with +8% Same Store Sales Growth (SSSG), with a particularly strong performance from its Sports Station Stores within Ramayana Lestari Sentosa (RALS IJ) stores. 

The company continues to expand its footprint in Indonesia, with plans to increase its floor area by 60,000 sqm in 2019 and a focus on MAP Active, Fashion, and Starbucks. 

MAP continues to take an omnichannel approach to sales, working with all the major online marketplaces and selling through its own Mapemall.com. Online sales only account for around 1% of total sales currently. 

Mitra Adiperkasa (MAPI IJ) remains a key proxy for middle-class consumption in Indonesia, with an increasingly broad spectrum of exposure through alliances with other retailers such as Ramayana Lestari Sentosa (RALS IJ) and Pt Matahari Department Store (LPPF IJ), as well as through its Starbucks expansion. After a few years of restructuring, the company is now harvesting on its transformation, with its specialty business now growing at a faster pace, its department stores in much better shape, and Starbucks enjoying better scale benefits. The company’s margins have improved, it has a stronger balance sheet and more efficient working capital management. According to Capital IQ, the company is trading on 19.6x FY19E PER and 16.5x FY20E PER, with forecast EPS growth of +14.0% and +18.2% for FY19E and FY20E respectively, which continues to look attractive in valuation terms.