Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Index Rebalance

<p>The LQ45 Index is a market cap weighted index of the 45 most liquid stocks listed on the Indonesia Stock Exchange. The LQ45 Index covers at least 70% of the stock market capitalization and transaction values in the Indonesia Stock Market.</p><p>The next rebalance of the LQ45 Index will be effective after the close of trading on 29 January and will be announced latest by 26 January, though it is likely that it could be announced as early as 22 January post market close.</p><p>Stocks that could be included in the index are <a href="https://www.smartkarma.com/entities/bank-brisyariah-tbk-pt" target="_blank" data-smartkarma-citation="entities:26981:1" rel="noopener">Bank Brisyariah (BRIS IJ)</a>, <a href="https://www.smartkarma.com/entities/kimia-farma-persero-tbk-pt" target="_blank" data-smartkarma-citation="entities:8524:1" rel="noopener">Kimia Farma Persero (KAEF IJ)</a>, <a href="https://www.smartkarma.com/entities/timah-persero-tbk-pt" target="_blank" data-smartkarma-citation="entities:11174:1" rel="noopener">Timah Persero (TINS IJ)</a> and <a href="https://www.smartkarma.com/entities/pp-london-sumatra-indones-pt" target="_blank" data-smartkarma-citation="entities:9039:1" rel="noopener">Pp London Sumatra Indones (LSIP IJ)</a>, while stocks that could be deleted from the index are <a href="https://www.smartkarma.com/entities/sri-rejeki-isman-tbk-pt" target="_blank" data-smartkarma-citation="entities:20178:1" rel="noopener">Sri Rejeki Isman (SRIL IJ)</a>, <a href="https://www.smartkarma.com/entities/summarecon-agung-tbk-pt" target="_blank" data-smartkarma-citation="entities:5693:1" rel="noopener">Summarecon Agung (SMRA IJ)</a>, <a href="https://www.smartkarma.com/entities/wijaya-karya-persero-tbk-pt" target="_blank" data-smartkarma-citation="entities:1877:1" rel="noopener">Wijaya Karya Persero (WIKA IJ)</a> and <a href="https://www.smartkarma.com/entities/jasa-marga-persero-tbk-pt" target="_blank" data-smartkarma-citation="entities:12747:1" rel="noopener">Jasa Marga (Persero) (JSMR IJ)</a>.</p><p>Given the subjective nature of stock inclusion and exclusion, plus the short time frame between announcement of the changes and the implementation, the adds outperform the deletes between announcement and implementation.</p><p>Though passive assets tracking the index are limited, the LQ45 is a very popular benchmark for mutual funds and pension funds and active managers will also be trading the stocks to realign their portfolios to the new index names.</p>

The LQ45 Index is a market cap weighted index of the 45 most liquid stocks listed on the Indonesia Stock Exchange. The LQ45 Index covers at least 70% of the stock market capitalization and transaction values in the Indonesia Stock Market.The next rebalance of the LQ45 Index will be effective after the close of trading on 29 January and will be announced latest by 26 January, though it is likely that it could be announced as early as 22 January post market close.Stocks that could be included in the index are Bank Brisyariah (BRIS IJ), Kimia Farma Persero (KAEF IJ), Timah Persero (TINS IJ) and Pp London Sumatra Indones (LSIP IJ), while stocks that could be deleted from the index are Sri Rejeki Isman (SRIL IJ), Summarecon Agung (SMRA IJ), Wijaya Karya Persero (WIKA IJ) and Jasa Marga (Persero) (JSMR IJ).Given the subjective nature of stock inclusion and exclusion, plus the short time frame between announcement of the changes and the implementation, the adds outperform the deletes between announcement and implementation.Though passive assets tracking the index are limited, the LQ45 is a very popular benchmark for mutual funds and pension funds and active managers will also be trading the stocks to realign their portfolios to the new index names.

LQ45 Index Rebalance Preview: Potential Candidates for Change

ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

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

<p>Leading Indonesian retailer <a href="https://www.smartkarma.com/entities/mitra-adiperkasa-tbk-pt" target="_blank" data-smartkarma-citation="entities:18684:1" rel="noopener">Mitra Adiperkasa (MAPI IJ)</a> released its 9M2020 results last week, with sales down by -34% to IDR10.2tn for 9M2020 but the group's e-commerce sales increased by +394% over the period, signaling huge success in the company's omnichannel strategy </p>
<p>3Q2020 net revenue saw a much better performance with a +62.1% QoQ increase in net sales to IDR3.4tn against IDR1.1tn in 2Q2020, in spite of continuing measures imposed by the government in Jakarta to restrict movement and mall traffic in the face of the pandemic (PSBB).</p>
<p>The improvement in sales comes across all business segments with especially strong growth in digital sales from MAPEMALL, Zara, Planet Sports, and DigiMAP. </p>
<section class="figure">The group's 3Q2020 numbers were further impacted due to pre-planned measures to clear aging inventory and also higher supply chain costs due to the pandemic, and some short-term staff cost increases. </section>
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<section class="figure">Digital sales also remained elevated even after store openings, boosted by targeted shopper marketing via MAP Club, as well as exclusive product launches across sports, fashion, and F&amp;B platforms.</section>
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<section class="figure"><a href="https://www.smartkarma.com/entities/mitra-adiperkasa-tbk-pt" target="_blank" data-smartkarma-citation="entities:18684:1" rel="noopener">Mitra Adiperkasa (MAPI IJ)</a> aims to run a 360 degree retail model covering sports, fashion, health, beauty, F&amp;B, and convenience stores, as well as a product mix from value to premium price points, brought together under the company's MAP Club Loyalty App.</section>
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<p>The company expects continuing momentum into the 4Q2020, which will help to confirm the ongoing recovery and we would also expect margins to improve given less need for discounting, with a healthier inventory position.</p>
<p><a href="https://www.smartkarma.com/entities/mitra-adiperkasa-tbk-pt" target="_blank" data-smartkarma-citation="entities:18684:1" rel="noopener">Mitra Adiperkasa (MAPI IJ)</a> trades on 22.6x FY21E PER and 15x FY22E PER and it continues to be one of our top picks for the recovery in Indonesia, with a significant increase in exposure to e-commerce and a gradual broadening of it South East Asian exposure, including Vietnam, Thailand, and the Philippines.</p>
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Leading Indonesian retailer Mitra Adiperkasa (MAPI IJ) released its 9M2020 results last week, with sales down by -34% to IDR10.2tn for 9M2020 but the group's e-commerce sales increased by +394% over the period, signaling huge success in the company's omnichannel strategy 
3Q2020 net revenue saw a much better performance with a +62.1% QoQ increase in net sales to IDR3.4tn against IDR1.1tn in 2Q2020, in spite of continuing measures imposed by the government in Jakarta to restrict movement and mall traffic in the face of the pandemic (PSBB).
The improvement in sales comes across all business segments with especially strong growth in digital sales from MAPEMALL, Zara, Planet Sports, and DigiMAP. 
The group's 3Q2020 numbers were further impacted due to pre-planned measures to clear aging inventory and also higher supply chain costs due to the pandemic, and some short-term staff cost increases. 





Digital sales also remained elevated even after store openings, boosted by targeted shopper marketing via MAP Club, as well as exclusive product launches across sports, fashion, and F&amp;B platforms.






Mitra Adiperkasa (MAPI IJ) aims to run a 360 degree retail model covering sports, fashion, health, beauty, F&amp;B, and convenience stores, as well as a product mix from value to premium price points, brought together under the company's MAP Club Loyalty App.









The company expects continuing momentum into the 4Q2020, which will help to confirm the ongoing recovery and we would also expect margins to improve given less need for discounting, with a healthier inventory position.
Mitra Adiperkasa (MAPI IJ) trades on 22.6x FY21E PER and 15x FY22E PER and it continues to be one of our top picks for the recovery in Indonesia, with a significant increase in exposure to e-commerce and a gradual broadening of it South East Asian exposure, including Vietnam, Thailand, and the Philippines.



Mitra Adiperkasa (MAPI IJ) - Digitally Remastered

<p><a href="https://www.smartkarma.com/entities/pt-matahari-department-store" target="_blank" data-smartkarma-citation="entities:5230:1" rel="noopener">Matahari Department Store (LPPF IJ)</a> hosted a business initiatives update for analysts last week, which provided some interesting updates on performance and fresh strategies, as we approach the end of the year. Apart from an update on sales, store closures and discontinued brands, the key initiatives discussed included the launch of a brand new Matahari.com and the collaboration with <a href="https://www.smartkarma.com/entities/bank-nationalnobu-tbk-pt" target="_blank" data-smartkarma-citation="entities:17016:1" rel="noopener">Bank Nationalnobu (NOBU IJ)</a> to provide branchless banking. </p>
<p>There has been a choppy sales recovery since the end of 3Q2020 partly due to the fact that 42 out of 153 stores are still under transition from the last set of PSBB measures.</p>
<p>There has been a mixed performance across different departments with casual wear and children's wear performing well but formalwear, travel, and cosmetics underperforming. </p>
<p><a href="https://www.smartkarma.com/entities/pt-matahari-department-store" target="_blank" data-smartkarma-citation="entities:5230:1" rel="noopener">Matahari Department Store (LPPF IJ)</a> has discontinued seven direct-purchase (DP) brands and intends to write down the stock in these brands by the end of the year. </p>
<p><a href="https://www.smartkarma.com/entities/pt-matahari-department-store" target="_blank" data-smartkarma-citation="entities:5230:1" rel="noopener"></a>The company intends to close a further six stores this year bringing the total number by the end of the year to 147 stores. There is a freeze on any new store openings next year with 23 stores under observation. </p>
<p><a href="https://www.smartkarma.com/entities/pt-matahari-department-store" target="_blank" data-smartkarma-citation="entities:5230:1" rel="noopener">Matahari Department Store (LPPF IJ)</a> only last week has launched its brand new Matahari.com, which is at its early stages and will be ramped up slowly as part of the company's omnichannel strategy.  </p>
<p>A key discussion point and the subject of a large portion of the questions in the recent analyst call was regarding the strategy behind the company's tie-up with <a href="https://www.smartkarma.com/entities/bank-nationalnobu-tbk-pt" target="_blank" data-smartkarma-citation="entities:17016:1" rel="noopener">Bank Nationalnobu (NOBU IJ)</a> to provide branchless banking services within Matahari stores. <a href="https://www.smartkarma.com/entities/pt-matahari-department-store" target="_blank" data-smartkarma-citation="entities:5230:1" rel="noopener">Matahari Department Store (LPPF IJ)</a> has taken a 16.41% direct stake in <a href="https://www.smartkarma.com/entities/bank-nationalnobu-tbk-pt" target="_blank" data-smartkarma-citation="entities:17016:1" rel="noopener">Bank Nationalnobu (NOBU IJ)</a>.</p>
<p>No doubt <a href="https://www.smartkarma.com/entities/pt-matahari-department-store" target="_blank" data-smartkarma-citation="entities:5230:1" rel="noopener">Matahari Department Store (LPPF IJ)</a> is cheap trading on 7.5x FY21E PER and 3.2x FY21E EV/EBITDA but there is still some uncertainty ahead, as it has a good number of underperforming stores still being monitored and its initiatives, appealing though they may be, will take time to gain traction.</p>

Matahari Department Store (LPPF IJ) hosted a business initiatives update for analysts last week, which provided some interesting updates on performance and fresh strategies, as we approach the end of the year. Apart from an update on sales, store closures and discontinued brands, the key initiatives discussed included the launch of a brand new Matahari.com and the collaboration with Bank Nationalnobu (NOBU IJ) to provide branchless banking. 
There has been a choppy sales recovery since the end of 3Q2020 partly due to the fact that 42 out of 153 stores are still under transition from the last set of PSBB measures.
There has been a mixed performance across different departments with casual wear and children's wear performing well but formalwear, travel, and cosmetics underperforming. 
Matahari Department Store (LPPF IJ) has discontinued seven direct-purchase (DP) brands and intends to write down the stock in these brands by the end of the year. 
The company intends to close a further six stores this year bringing the total number by the end of the year to 147 stores. There is a freeze on any new store openings next year with 23 stores under observation. 
Matahari Department Store (LPPF IJ) only last week has launched its brand new Matahari.com, which is at its early stages and will be ramped up slowly as part of the company's omnichannel strategy.  
A key discussion point and the subject of a large portion of the questions in the recent analyst call was regarding the strategy behind the company's tie-up with Bank Nationalnobu (NOBU IJ) to provide branchless banking services within Matahari stores. Matahari Department Store (LPPF IJ) has taken a 16.41% direct stake in Bank Nationalnobu (NOBU IJ).
No doubt Matahari Department Store (LPPF IJ) is cheap trading on 7.5x FY21E PER and 3.2x FY21E EV/EBITDA but there is still some uncertainty ahead, as it has a good number of underperforming stores still being monitored and its initiatives, appealing though they may be, will take time to gain traction.

Matahari Department Store (LPPF IJ) - Slow Transition to Newness

<p><a href="https://www.smartkarma.com/entities/pt-matahari-department-store" target="_blank" data-smartkarma-citation="entities:5230:1" rel="noopener">Matahari Department Store (LPPF IJ)</a> released its 3Q2020 results, which saw some improvement in 3Q2020, with a -41.0% decline in gross sales versus a -57.6% decline for 9M2020.</p>
<p>The 9M2020 results were impacted by the fact that most of the company's stores were closed for a six week period during 2Q2020, with 3Q2020 only seeing minimal closures from the second round of PSBB measures, which have now been relaxed.</p>
<p>SSSG fell by a similar -40.9% during 3Q2020 versus a -57.7% decline for 9M2020, again reflecting the pandemic situation.</p>
<p><a href="https://www.smartkarma.com/entities/pt-matahari-department-store" target="_blank" data-smartkarma-citation="entities:5230:1" rel="noopener">Matahari Department Store (LPPF IJ)</a> booked a negative EBITDA of (IDR37bn) for 3Q2020 and (IDR99bn) for 9M2020, with a net income loss of IDR259bn, with a negative net income margin -13.4% versus +0.8%  for 3Q19.</p>
<p>We do expect a gradual improvement going into 4Q2020, with the company putting a number of positive initiatives in place to help underpin the recovery, including collaboration with a number of market places. </p>
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<p><a href="https://www.smartkarma.com/entities/pt-matahari-department-store" target="_blank" data-smartkarma-citation="entities:5230:1" rel="noopener">Matahari Department Store (LPPF IJ)</a> valuations look attractive on the face of it, with the company trading on 5.4x and 3.5x PER for FY21E and FY22E respectively, with the company's earnings forecast to recover sharply over the next two years. We would however wait to see a significant pick up in SSSG before becoming more bullish on the outlook. </p>
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Matahari Department Store (LPPF IJ) released its 3Q2020 results, which saw some improvement in 3Q2020, with a -41.0% decline in gross sales versus a -57.6% decline for 9M2020.
The 9M2020 results were impacted by the fact that most of the company's stores were closed for a six week period during 2Q2020, with 3Q2020 only seeing minimal closures from the second round of PSBB measures, which have now been relaxed.
SSSG fell by a similar -40.9% during 3Q2020 versus a -57.7% decline for 9M2020, again reflecting the pandemic situation.
Matahari Department Store (LPPF IJ) booked a negative EBITDA of (IDR37bn) for 3Q2020 and (IDR99bn) for 9M2020, with a net income loss of IDR259bn, with a negative net income margin -13.4% versus +0.8%  for 3Q19.
We do expect a gradual improvement going into 4Q2020, with the company putting a number of positive initiatives in place to help underpin the recovery, including collaboration with a number of market places. 

Matahari Department Store (LPPF IJ) valuations look attractive on the face of it, with the company trading on 5.4x and 3.5x PER for FY21E and FY22E respectively, with the company's earnings forecast to recover sharply over the next two years. We would however wait to see a significant pick up in SSSG before becoming more bullish on the outlook. 


Matahari Department Store (LPPF IJ) - Too Early to Be Early

<p><a href="https://www.smartkarma.com/entities/pt-matahari-department-store" target="_blank" data-smartkarma-citation="entities:5230:1" rel="noopener">Matahari Department Store (LPPF IJ)</a> just released its 1Q2020 results, which already reflected the onset on COVID-19 in mid-March, as PSBB measures took hold.</p>
<p>1Q2020 SSSG fell by -18.2% over but March alone saw a -92% decline in SSSG given PSBB measures. The company closed all of its stores temporarily by the end of March.</p>
<p>The full extent of the fallout will be reflected in the company's 2Q2020 numbers. Along the way, the company has ensured that it has the financial ability to withstand the pressure of this period by building a cash pile of IDR1.5tn at the end of March by drawing down debt. </p>
<p>The company has used this period to close down five underperforming large format stores, as well as fully closing all of its 12 speciality stores plus halting sales of 107 underperforming brands.</p>
<p>In an effort to continue to do business, the company has shifted emphasis to online channels both through its own matahari.com but also more significantly through Shopee, which is its first online store on a 3rd party online marketplace. </p>
<p>Management has pushed through a number of cost-saving measures including salary cuts, a halt to marketing activity in 2Q20, cutting non-essential costs such as travel, and halting all uncommitted capex. </p>
<p>With the company trading on 4.7x FY21E PER, there is not much recovery built into valuations. The question is have the new management team done enough to convince investors, after a catalogue of disappointments under previous leadership. </p>

Matahari Department Store (LPPF IJ) just released its 1Q2020 results, which already reflected the onset on COVID-19 in mid-March, as PSBB measures took hold.
1Q2020 SSSG fell by -18.2% over but March alone saw a -92% decline in SSSG given PSBB measures. The company closed all of its stores temporarily by the end of March.
The full extent of the fallout will be reflected in the company's 2Q2020 numbers. Along the way, the company has ensured that it has the financial ability to withstand the pressure of this period by building a cash pile of IDR1.5tn at the end of March by drawing down debt. 
The company has used this period to close down five underperforming large format stores, as well as fully closing all of its 12 speciality stores plus halting sales of 107 underperforming brands.
In an effort to continue to do business, the company has shifted emphasis to online channels both through its own matahari.com but also more significantly through Shopee, which is its first online store on a 3rd party online marketplace. 
Management has pushed through a number of cost-saving measures including salary cuts, a halt to marketing activity in 2Q20, cutting non-essential costs such as travel, and halting all uncommitted capex. 
With the company trading on 4.7x FY21E PER, there is not much recovery built into valuations. The question is have the new management team done enough to convince investors, after a catalogue of disappointments under previous leadership. 

Matahari Department Store (LPPF IJ) - Opportunity Knocks?

Indonesia

PT MDS Retailing Tbk is an Indonesian retail company that operates department store chains and online channels under the Matahari brand. It offers a diverse range of products including clothing, fashion apparel, accessories, bags, shoes, cosmetics, beauty products, and household appliances. The company also provides management consulting services. PT MDS Retailing Tbk was founded in 1958 and is headquartered in Tangerang, Indonesia.

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MDS Retailing (LPPF IJ)

LQ45 Index Rebalance Preview: Potential Candidates for Change

The LQ45 rebalance will be effective after the close of trading on 29 January and the announcement will be made in the next few days. There could...

Brian Freitas

Mitra Adiperkasa (MAPI IJ) - Digitally Remastered

MAPI is one of our top picks for the recovery in Indonesia, with a significant increase in exposure to e-commerce and a gradual broadening of its...

Angus Mackintosh

Matahari Department Store (LPPF IJ) - Slow Transition to Newness

Matahari Department Store's latest strategies such as the relaunch of Matahari.com and its collaboration with Bank Nobu seem sensible but it may...

Angus Mackintosh

Matahari Department Store (LPPF IJ) - Too Early to Be Early

Matahari Department Store has one of the most interesting retail franchises in Indonesia but has been impacted by COVID-19 whilst in the midst of a...

Angus Mackintosh

Matahari Department Store (LPPF IJ) - Opportunity Knocks?

Matahari Department Store (LPPF IJ) just released its 1Q2020 results, which already reflected the onset on COVID-19 in mid-March, as PSBB measures...

Angus Mackintosh

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