Navigating the High Seas of ASEAN Retail - Introduction to a Series

In this series of Insights, insight providers Angus Mackintosh and Jessica Irene will summarize the biggest players in the ASEAN retail sector, focusing on Indonesia, Thailand, and the Philippines. This will be done alongside with company meetings, site visits, and exclusive interviews with industry experts. Topics of discussions are as follows:

• Retail market sizes in each of the focus countries and the breakdown between its sub-categories, i.e. specialty store vs department stores, mini-markets versus hypermarkets, etc. Map out the growth opportunity by comparing the retail penetration, and compare how well developed are the modern retail versus the general trade and the structure of each market.
• Discuss which strategy works best against the e-commerce wave in ASEAN, which are winning and which are losing. Also, determine if the offline retailers can integrate themselves with the changing industry dynamics and preference towards convenience and online shopping.
• Discuss which online and offline formats are striving and their key reasons for success. We will have exclusive interviews with some of the biggest e-commerce players in the country.
• Taxation and regulations are quite diverse in each country, especially for imported goods. We will also discuss the recent changes and impact from government regulation towards the retailers.
• Detail each opex components, especially labour and rental costs. Discuss in detail the labour market in each focus country, and map out the major property players that may have a significant impact on rental rates expansion in the future.
• Discuss the details of each company's credentials from an ESG perspective and how focused they are in this area, which is increasingly important to investors.

ASEAN as a region has a huge and captive consumer population, with a population of over 622mn across its eleven member states. According to a recent study by the ASEAN retail market is currently worth around USD1tn in total. Given the diverse cultures and different cultures, varying levels of affluence in terms of GDP per capita across the region, consumer behavior is quite different from one country to another, with differing levels of success for the different modern retail formats versus the traditional markets or general trade.

We will travel to Thailand and the Philippines, the two other ASEAN countries with large consuming populations to explore the differing dynamics of those retail markets. Thailand is dominated by CP All PCL (CPALL TB), with around 11,000 7Eleven stores across the country and >50% market share. In the Philippines, the market continues to see better performance from supermarkets, with leaders such as Robinsons Retail Holdings (RRHI PM) continuing to expand on its existing network of more than 1,700 supermarkets. Competitor Puregold Price Club (PGOLD PM) also continues to expand at a fast pace. That country's convenience store segment also continues to make good headway, with Philippine Seven (SEVN PM) leading the charge, though general trade through Sari-Sari stores continues to thrive.

We will look at orphan modern retail players in brief such as AMRT and Hero Supermarket (HERO IJ), as well as smaller higher end supermarket operator Supra Boga Lestari (RANC IJ), home improvement retailer Catur Sentosa Adiprana Tbk (CSAP IJ), and hypermarket operator Pt Matahari Putra Prima (MPPA IJ).

We will look at valuations across the sector and determine which companies offer the most exciting prospects. Will Mitra Adiperkasa (MAPI IJ) and Ace Hardware Indonesia (ACES IJ) continue to outperform or will Pt Matahari Department Store (LPPF IJ) turnaround its sluggish performance with its smaller formats and specialty store push? Or will Ramayana finally bring about its renaissance?