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/mitra-adiperkasa-tbk-pt" target="_blank" data-smartkarma-citation="entities:18684:1" rel="noopener">Mitra Adiperkasa (MAPI IJ)</a> recently released a strong set of FY19 numbers, with net revenues up by 14% and net profit up by +43% YoY. No doubt that COVID-19 has had a significant negative impact since early March, with management admitting they cannot reliably predict the impact on sales at this time, given the constantly evolving situation. As a result, the company will not release any 2020 guidance but are gearing up for a recovery in 4Q2020. </p>
<p>The company's sales and marketing strategies bore fruit in 4Q19 with SSSG of +8% and headline revenue growth of +21.0% and net profit growth of +55%. SSSG for FY19 was in line with guidance at +4.0% for the year.</p>
<p>Management mentioned that the strong demand increase in 4Q19 did result in some supply chain shortages of fast-selling items but this did mean that inventory levels fortuitously fell to the most efficient level ever by the end of 2019.</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> has opened five more stores in Vietnam and also set up MAP Active Philippines. It also registered more than 100% growth in its various digital channels last year with online sales accounting for 4% of the total last year but probably more now.</p>
<p>2020 has seen especially strong growth in sales through digital channels as might be expected, with a strong response to marketing campaigns to its 3m MAP members.</p>
<p>The company has quickly imposed a number of measures to save costs in an attempt to alleviate the impact of the virus including a freeze on Capex, negotiations with landlords on rentals, and various measures to protect its staff. </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> is a long-term core holding facing COVID-19 head-on, given its predominantly retail exposure but it will survive the current onslaught to be a strong 2H20 recovery story. Consensus forecasts have been adjusted down quite significantly already, with earnings expected to fall 35% for FY2020E but to see a strong rebound in EPS in FY21E of +82% to an EPS level significantly above that of FY19. According to consensus, it is now trading on 9.4x FY21E versus its 10-year average of 21x forward PER and average over the last year of 15.8x, making it look attractive for long-term investors.</p>

Mitra Adiperkasa (MAPI IJ) recently released a strong set of FY19 numbers, with net revenues up by 14% and net profit up by +43% YoY. No doubt that COVID-19 has had a significant negative impact since early March, with management admitting they cannot reliably predict the impact on sales at this time, given the constantly evolving situation. As a result, the company will not release any 2020 guidance but are gearing up for a recovery in 4Q2020. 
The company's sales and marketing strategies bore fruit in 4Q19 with SSSG of +8% and headline revenue growth of +21.0% and net profit growth of +55%. SSSG for FY19 was in line with guidance at +4.0% for the year.
Management mentioned that the strong demand increase in 4Q19 did result in some supply chain shortages of fast-selling items but this did mean that inventory levels fortuitously fell to the most efficient level ever by the end of 2019.
Mitra Adiperkasa (MAPI IJ) has opened five more stores in Vietnam and also set up MAP Active Philippines. It also registered more than 100% growth in its various digital channels last year with online sales accounting for 4% of the total last year but probably more now.
2020 has seen especially strong growth in sales through digital channels as might be expected, with a strong response to marketing campaigns to its 3m MAP members.
The company has quickly imposed a number of measures to save costs in an attempt to alleviate the impact of the virus including a freeze on Capex, negotiations with landlords on rentals, and various measures to protect its staff. 
Mitra Adiperkasa (MAPI IJ) is a long-term core holding facing COVID-19 head-on, given its predominantly retail exposure but it will survive the current onslaught to be a strong 2H20 recovery story. Consensus forecasts have been adjusted down quite significantly already, with earnings expected to fall 35% for FY2020E but to see a strong rebound in EPS in FY21E of +82% to an EPS level significantly above that of FY19. According to consensus, it is now trading on 9.4x FY21E versus its 10-year average of 21x forward PER and average over the last year of 15.8x, making it look attractive for long-term investors.

Mitra Adiperkasa (MAPI IJ) - In the Eye of the Storm

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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>'s new CEO Terry O'Connor hosted a conference call for the company's FY19 results yesterday afternoon. The surprise did not come in the numbers but in his forthright and adamant statements that he was making big changes to the company's future strategy and addressing past missteps immediately. There is a full strategic review underway. Is this the catalyst investors have been waiting for to return to the stock? </p>
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<p>Firstly, the company will continue to address the company's lingering inventory issues, which although improving will take another two quarters to put straight, as it streamlines its assortment and depth of products and flushes out products that should not be there.</p>
<p>Secondly, the company will abandon its speciality store strategy with no more speciality store openings. It will close its <a href="https://www.smartkarma.com/entities/361-degrees-international" target="_blank" data-smartkarma-citation="entities:20744:1" rel="noopener">361 Degrees International (1361 HK)</a> stores, whilst monitoring its OVS stores. He stressed that this was not the brands they were abandoning but the format, which was not working for those brands.</p>
<p>Thirdly, the company would reassess its omnichannel approach to online sales, which remain slow but this would not happen immediately with the immediate focus on getting the core department store business right. </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> will continue to expand and will open 4-6 new large-format stores in 2020, all to be opened before Lebaran. It will also focus on improving existing store design. </p>
<p>Corona Virus has started to impact sales but mainly in areas such as Batam and Bali, which are impacted by falling tourism. The supply chain may be impacted by "a single-digit percentage" if manufacturing gets delayed much longer. </p>
<p>This is a company with no debt and a forecast ROE of 55% for FY20E, trading on a forward PER of 6.2x and with a forecast dividend yield of 8.7%. Now that we have a number of positive catalysts for change, investors should now revisit the company's fundamentals. </p>


Matahari Department Store (LPPF IJ)'s new CEO Terry O'Connor hosted a conference call for the company's FY19 results yesterday afternoon. The surprise did not come in the numbers but in his forthright and adamant statements that he was making big changes to the company's future strategy and addressing past missteps immediately. There is a full strategic review underway. Is this the catalyst investors have been waiting for to return to the stock? 

Firstly, the company will continue to address the company's lingering inventory issues, which although improving will take another two quarters to put straight, as it streamlines its assortment and depth of products and flushes out products that should not be there.
Secondly, the company will abandon its speciality store strategy with no more speciality store openings. It will close its 361 Degrees International (1361 HK) stores, whilst monitoring its OVS stores. He stressed that this was not the brands they were abandoning but the format, which was not working for those brands.
Thirdly, the company would reassess its omnichannel approach to online sales, which remain slow but this would not happen immediately with the immediate focus on getting the core department store business right. 
Matahari Department Store (LPPF IJ) will continue to expand and will open 4-6 new large-format stores in 2020, all to be opened before Lebaran. It will also focus on improving existing store design. 
Corona Virus has started to impact sales but mainly in areas such as Batam and Bali, which are impacted by falling tourism. The supply chain may be impacted by "a single-digit percentage" if manufacturing gets delayed much longer. 
This is a company with no debt and a forecast ROE of 55% for FY20E, trading on a forward PER of 6.2x and with a forecast dividend yield of 8.7%. Now that we have a number of positive catalysts for change, investors should now revisit the company's fundamentals. 

Matahari Department Store (LPPF IJ) - About Turn and Back to the Core

<p><strong>A meeting with <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> management in Jakarta last week</strong> revealed a <strong>relatively upbeat outlook for this leading Indonesian retailer</strong>, despite the lingering Corona Virus fears. Implausible though it may seem, Indonesia has officially had no confirmed cases of the virus to date. </p>
<p>Assuming that Indonesia remains virus-free, any potential impact from Corona would likely come from supply chain disruption in the company sports and leisure segment under <a href="https://www.smartkarma.com/entities/map-aktif-adiperkasa-pt" target="_blank" data-smartkarma-citation="entities:27291:1" rel="noopener">Map Aktif Adiperkasa PT (MAPA IJ),</a> given that 30%-40% of its sports shoes are manufactured in China but inventories should help cushion any impact. </p>
<p>The company has less exposure in its fashion segment given that 60% comes from Inditex in Spain which has a highly diversified manufacturing capacity outside China in locations such as Morocco, Portugal, Turkey, and Bangladesh. </p>
<p>The company expanded its store area quite aggressively in 2019 and will slow expansion in 2020, with a continuing focus on sports&amp; leisure and Starbucks. It will also add selective new brands such as Boots Health &amp; Pharmacy and a number of brands from <a href="https://www.smartkarma.com/entities/amorepacific-corp" target="_blank" data-smartkarma-citation="entities:20854:1" rel="noopener">Amorepacific Corp (090430 KS)</a> in 2020. </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> continues to take an omnichannel approach, working with all the major e-tailers such as Tokopedia and Bukalapak but also through its own MapeMall and a number of its own mono-brand sites.</p>
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<p>The recent Corona Virus driven correction looks overdone, with valuations on a forward PER basis on a 3-year low, despite the fact that there has been minimal impact on the company to date. This presents an interesting buying opportunity in our view.</p>
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A meeting with Mitra Adiperkasa (MAPI IJ) management in Jakarta last week revealed a relatively upbeat outlook for this leading Indonesian retailer, despite the lingering Corona Virus fears. Implausible though it may seem, Indonesia has officially had no confirmed cases of the virus to date. 
Assuming that Indonesia remains virus-free, any potential impact from Corona would likely come from supply chain disruption in the company sports and leisure segment under Map Aktif Adiperkasa PT (MAPA IJ), given that 30%-40% of its sports shoes are manufactured in China but inventories should help cushion any impact. 
The company has less exposure in its fashion segment given that 60% comes from Inditex in Spain which has a highly diversified manufacturing capacity outside China in locations such as Morocco, Portugal, Turkey, and Bangladesh. 
The company expanded its store area quite aggressively in 2019 and will slow expansion in 2020, with a continuing focus on sports&amp; leisure and Starbucks. It will also add selective new brands such as Boots Health &amp; Pharmacy and a number of brands from Amorepacific Corp (090430 KS) in 2020. 
Mitra Adiperkasa (MAPI IJ) continues to take an omnichannel approach, working with all the major e-tailers such as Tokopedia and Bukalapak but also through its own MapeMall and a number of its own mono-brand sites.

The recent Corona Virus driven correction looks overdone, with valuations on a forward PER basis on a 3-year low, despite the fact that there has been minimal impact on the company to date. This presents an interesting buying opportunity in our view.


Mitra Adiperkasa (MAPI IJ) - Oversold Indonesian King of Retail - On the Ground in J-Town

Indonesia

PT Mitra Adiperkasa Tbk is a leading lifestyle retailer in Indonesia, operating a diversified portfolio of over 3,800 retail stores across various categories including sports, fashion, department stores, kids, food & beverage, and lifestyle products. The company also acts as a distributor for several international brands. It was incorporated in 1995 and is headquartered in Jakarta Pusat, Indonesia.

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Mitra Adiperkasa (MAPI IJ)