ASEAN Insight Provider

Jessica Irene

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/18684" target="_blank" data-smartkarma-citation="entities:18684:1">Mitra Adiperkasa (MAPI IJ)</a> is the biggest retailer in Indonesia in terms of turnover and store count, holding exclusive licenses to over 150 global brands, and operates over 2,000 stores across 66 cities. Their road to the top is not without hurdles as the company has had two rounds of consolidation.
The company went on aggressive expansion stages in 2006-2008 and 2011-2013, adding 44% and 54% of store space within the three years’ time frame. The rapid expansion, lack of inventory control, and unfortunate timing of Rupiah depreciation resulted in elevated gearing levels and more than an 80% core profit drop in the following year.
The last overexpansion pushed MAPI to rationalize their brands and lost ownership in some of their major subsidiaries. This may change investors’ perspective as MAPI is valued less as an operator but more as a holding company. With the crown jewel <a href="https://www.smartkarma.com/entities/27291" target="_blank" data-smartkarma-citation="entities:27291:1">Map Aktif Adiperkasa PT (MAPA IJ)</a> listed last June, we feel that we are at that tipping point. The euphoria of MAPI unlocking value of its subsidiaries should be offset by potentially steeper holding company discount and a larger than expected earnings dilution.
Our financial model shows flat net profit growth in FY19E as the increase in minority interests outweighs operational growth. Bloomberg consensus is still expecting some 20% earnings growth for FY19E. This coupled with 9% Rupiah depreciation YTD suggests downside risk to earnings forecasts and hence to the fair value per share.

Mitra Adiperkasa (MAPI IJ) is the biggest retailer in Indonesia in terms of turnover and store count, holding exclusive licenses to over 150 global brands, and operates over 2,000 stores across 66 cities. Their road to the top is not without hurdles as the company has had two rounds of consolidation.
The company went on aggressive expansion stages in 2006-2008 and 2011-2013, adding 44% and 54% of store space within the three years’ time frame. The rapid expansion, lack of inventory control, and unfortunate timing of Rupiah depreciation resulted in elevated gearing levels and more than an 80% core profit drop in the following year.
The last overexpansion pushed MAPI to rationalize their brands and lost ownership in some of their major subsidiaries. This may change investors’ perspective as MAPI is valued less as an operator but more as a holding company. With the crown jewel Map Aktif Adiperkasa PT (MAPA IJ) listed last June, we feel that we are at that tipping point. The euphoria of MAPI unlocking value of its subsidiaries should be offset by potentially steeper holding company discount and a larger than expected earnings dilution.
Our financial model shows flat net profit growth in FY19E as the increase in minority interests outweighs operational growth. Bloomberg consensus is still expecting some 20% earnings growth for FY19E. This coupled with 9% Rupiah depreciation YTD suggests downside risk to earnings forecasts and hence to the fair value per share.

Mitra Adiperkasa (MAPI IJ): Digesting the New Structure