july 03, 2014 catur sentosa adiprana...material shops. it also distributes consumer goods, such as...
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COMPANY FOCUS PT Trimegah Securities Tbk - www.trimegah.com 1
To double its “Mitra10” retail stores within 10 years
CSAP is a distribution (around 76% of revenue) and modern retail
(around 24% of revenue) company. The distribution segment distributes
building material, consumer goods, and chemicals. CSAP’s modern retail
stores named Mitra10 (building materials and home improvement) with
20 stores and Atria (home furnishing) with 10 showrooms. The company
plans to double the number of their Mitra10 stores (adding 20 new
stores) with a pace of 1-2 store per year. Mitra10 contributes around
23% to total revenue.
Consolidated margin expansion
We expect CSAP to achieve EPS growth of 26.1% CAGR in 2014E-17E
(vs. 20.2% CAGR in 2010-13). The growth is driven by retail’s 24.7%
and distribution’s 15.0% revenue CAGR during that period. Mitra10
posted strong SSSG in 2012/13 of 20.6/29.4%. Moreover, as the retail
has higher gross margin (FY2013 20.9%) compared to distribution
(FY2013 10.7%), we expect the higher sales growth from higher gross
margin business (retail) would improve the consolidated core profit of
0.8% in 2013 to 1.4% in 2017E.
CSAP’s Retail comparison with ACES (Risk vs. Potential Growth)
We think ACES (105 outlets up to Jun 2014) has less competition risk
compared to CSAP, but the retail segment of CSAP (only 20 Mitra10
stores and 10 Atria showrooms), might be able to experience higher
growth compared to ACES. FY2013 revenue for: ACES Rp3.9tr (+20.9%
YoY) vs. CSAP’s retail segment Rp1.5tr (+33.8%YoY). Our 2014E/15E
core ROAE is 12.0/14.4%, compared to WACC of 9.4%.
Valuation: DCF-based target price of Rp530 (22.1% upside)
The DCF valuation of Rp530 implies 22.1% upside. Target price implies
19.0x 2014PE. EPS CAGR is 26.1% (2014E-17E).
CSAP’s has 2 segments: Distribution and mod-ern retail. The distribution segment distributes building material, consumer goods, and chemi-cals. The modern retail consists of Mitra10 (building materials & home improvement) and Atria (home furnishing).
Share Price Rp434
Sector Retail
Price Target Rp530(22%)
Year end Dec 2012 2013 2014F 2015F 2016F
Sales 4,932 6,321 7,293 8,623 10,144
Net Profit 57 71 81 109 131
EPS (Rp) 20 25 28 38 45
EPS Growth (%) (14.4) 24.0 13.6 34.9 19.8
Core Profit 40 52 81 109 131
Core EPS (Rp) 14 18 28 38 45
Core EPS Growth (%) (25.2) 29.2 56.0 34.9 19.8
DPS (Rp) 3 5 6 8 9
BVPS (Rp) 200 222 245 277 314
P/E (x) 21.9 17.7 15.5 11.5 9.6
Core P/E (x) 31.3 24.3 15.5 11.5 9.6
Div Yield (%) 0.8 1.2 1.3 1.8 2.1
Catur Sentosa Adiprana Company Focus
BUY Rp530
Reuters Code CSAP.JK
Bloomberg Code CSAP.IJ
Issued Shares (m) 2,895
Mkt Cap (Rpbn) 1,256
Average Daily T/O (m) 1.9
52-Wk range Rp425 /Rp150
PT Buanatata Adisentosa 31.3%
NTAsian Discovery Master Fund 21.0%
Public 47.7%
EPS 14F 15F
Consensus (Rp) na na
TRIM vs Cons. (%) na na
Growing Modern Retail for Building Materials
Company Update
Stock Data
Major Shareholders
Consensus
Stock Price
Companies Data
Paula Ruth
July 03, 2014
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10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
-
50
100
150
200
250
300
350
400
450
6/26/2013
8/26/2013
10/26/2013
12/26/2013
2/26/2014
4/26/2014
6/26/2014
Volume Price
PT Trimegah Securities Tbk - www.trimegah.com COMPANY FOCUS 2
Indonesia’s Homeowners Supported by MAC Growth and Urbanization
Population in Indonesia reached 248mn in 2012 with expected population in 2020 of 267.6mn. Looking deeper
into Indonesia’s demographic statistics, two major trends have emerged: 1) the middle-class and affluent con-
sumers (MAC) growth of 91% from 2012 to 2020E (source: BCG), 2) increasing urbanization rate from 56.1% in
2012E to 62.7% in 2017E (source: EIU).
BCG categorized the MAC in Indonesia as the consumers with household expenditure at least Rp2mn per month.
It forecasts that the number of people categorized as MAC’s is expected to grow by 8% CAGR in 2012-20E and
MACs would be 53% of the country’s population in 2020E (vs. 30% in 2012). With higher urbanization rate and
expected disposable income growth of 11.8% CAGR for 2012E-17E (source: EIU), the current and future Indone-
sian MACs are predicted to seek products and shopping experience that gives higher level of convenience and
comfort, than just fulfilling their basic needs. Hence, modern retail, which provide selling area and facilities that is
modern, clean, air-conditioned, and other aspects that provides convenience to their customers, have the oppor-
tunity to grow along with the rising population of MACs.
Figure 1. Indonesia’s Consumer Categories
Source: BCG
Monthly household Population Growth
CAGR
Expenditure (Rpmn)
2012 2012 2020E 2020E 2012-2020E (in mn) % of total (in mn) % of total
Elite Rp7.5m and more 2.5 1% 6.9 3% 176% 14%
Affluent Rp5 - less than 7.5m 6.6 3% 16.5 6% 150% 12%
Upper middle Rp3 - less than 5m 23.2 9% 49.3 18% 113% 10%
Middle Rp2 - less than 3m 41.6 17% 68.2 25% 64% 6%
Middle class and affluent Rp2 and more 73.9 30% 140.9 53% 91% 8%
Emerging middle Rp1.5 - less than 2m 44.4 18% 50.5 19% 14% 2%
Aspirant Rp1.0 - less than 1.5m 65.4 26% 47.9 18% -27% -4%
Poor less than Rp1.0m 64.5 26% 28.3 11% -56% -10%
Total population All 248.2 100% 267.6 100% 8% 1%
Consumer Categoris
Source: EIU
Figure 2. Urbanization Rate and Disposable Income
56.1%
57.4%
58.6%
60.0%
61.3%
62.7%
50%
52%
54%
56%
58%
60%
62%
64%
2012E 2013E 2014E 2015E 2016E 2017E
Urbanization Rate
275.2 285.7
322.8
372.4
423.9
481.3
0
100
200
300
400
500
600
2012E 2013E 2014E 2015E 2016E 2017E
USD bn
Disposable Income
(U
SD
bn
)
PT Trimegah Securities Tbk - www.trimegah.com COMPANY FOCUS 3
From total of 62.6mn of Indonesian households in 2012, 76.4% households are home owners (source: Euromoni-
tor). Based on statistics provided by Bank Indonesia (BI), house and apartment ownership (outstanding) credits
grew 22.4% CAGR in 2007-13 and 20.8%YoY in April 2014. The growing number of homeowners in Indonesia is
expected to support the increase consumption for building materials, home improvement, and furnishings. Exist-
ing homeowner could also purchase those products to improve and renovate their homes. Considering the grow-
ing population of MACs and their purchasing behavior, MACs who are homeowners might purchase products that
could make their homes more comfortable.
Source: Euromonitor
Figure 3. Number of Households by Tenure 2012 in Indonesia
Source: Bank Indonesia
Figure 4. Indonesia: House and Apartment Ownership Credits
Distribution vs. Modern Retail
CSAP’s revenue comes from 2 business segments, which are distribution (around 76%) and modern retail
(around 24%). The modern retail segment grew 29.3% of CAGR for 2010-13, higher than distribution segment of
22.6% CAGR for 2010-13. CSAP was able to charge higher gross margin to its modern retail, compared to the
distribution segment. For 2011/12/13, the gross margin was 19.8/20.4/20.9% for retail, which is above the
84
108 124
141
183
222
281
-
50
100
150
200
250
300
2007 2008 2009 2010 2011 2012 2013
(Rp tr)
House and Apartment Ownership Credits
Outstanding
237
286
-
50
100
150
200
250
300
Apr 2013 Apr 2014
(Rp tr)
House and Apartment Ownership Credits
Outstanding
6.6
41.3
8.0 6 .8
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
Home owners, with mortgage Home owners, without mortgage Rented Others
(iIn Millions)
(in
mn
)
(R
ptr
)
(R
ptr
)
PT Trimegah Securities Tbk - www.trimegah.com COMPANY FOCUS 4
distribution segment’s margin of 10.8/10.4/10.7%. Margin in distribution segment also depends on the negotia-
tion or agreement between CSAP and its principals, which might cause lag in the ability to maintain margin when
there’s cost increase (e.g. increase in minimum wage). Retail and distribution contributed ~38% and ~62% to
FY2013 gross margin respectively.
Source: Company
Figure 5. CSAP’s Revenue and Gross Profit Breakdown
Distribution – Major Revenue Contributor with Low Gross Margin
CSAP distributes building material, consumer goods, and chemical with contribution of around 60%, 10%, and
4% respectively to the company’s total revenue. Building material distribution is supported by 48 branches in 39
cities across Indonesia. This sub-segment supplied more than 15,000 SKUs with main principals mostly supply
ceramic tiles and paints, such as “Arwana” ceramic tiles (manufactured by ARNA), ICI Paints, Propan, Mowilex,
Mulia Ceramic. Customers of CSAP’s building material distribution are retail customers or traditional building
material shops. It also distributes consumer goods, such as “P&G”, “Frisian Flag”, and “Dua Kelinci”.
This year, the company plans to add branch offices at Aceh and Madiun (+4.2% to 48 branches) to support
building material distribution. It will also build 1 new warehouse at Tegal. CSAP has closed 1 chemical distribution
branch (Medan) on Dec 2013. The closure would not significantly affect the overall chemical distribution segment
contribution because sales volume in Medan area is not significant. We expect the distribution revenue to grow
14.0% in 2014E and 15.0% revenue CAGR for 2014-17E. 1Q14 distribution revenue grew 7.7% (1Q13 20.3%
YoY; 1Q12 18.2%YoY), while FY2013 sales reached Rp4.9tr which grew 25.7% (22.6% CAGR 2010-13). Lower
1Q14 revenue growth was mostly caused by lower sales of ceramic tiles to building material stores compared to
previous period. This might be happened due to the national election in July 2014 that caused the end users of
building materials received less construction and/or renovation projects. Sales of ceramic tiles were 38.8% of
total revenue in FY2013 and 1Q14.
Distribution segment has 10.7% of gross margin in FY2013. Gross margin was 12.1% in 1Q14, higher than
10.6% in 1Q13, which is driven by improvement of margin from principal of product (“Arwana” ceramic tiles).
“Arwana” is one of the major contributors to distribution segment’s revenue. In 2013, inventories purchased
(net) from ARNA’s subsidiary was 23.6% of CSAP’s cost of sales. We estimate gross margin to increase to 11.5%
in 2014E.
Distribution
revenue
76%
Retail revenue
24%
Distribution
62%
Retail
38%
Revenue Gross Profit
PT Trimegah Securities Tbk - www.trimegah.com COMPANY FOCUS 5
Source: Company, TRIM Research
Figure 6. CSAP’s Distribution Sales and Gross Margin
Modern Retail Expansion – Doubling Mitra10 Stores
CSAP’s retail business has two sub-segments: Mitra10 and Atria. Mitra10 sells building material and home im-
provement products. It has more than 65,000 SKUs with main principals for granite tiles, ceramic tiles and paint
products, such as Roman ceramic tiles and ICI Paints. Its target market is middle class customers and 90-95% of
the customers are homeowners. Atria sells furniture and furnishing products with more than 6,000 SKUs.
Mitra10 has 14 stores in Jabodetabek, 2 stores in East Java, 2 stores in Bali, and 2 stores in Sumatra. Those 20
existing stores consist of 15 Superstores and 5 Express Stores. The existing Superstore has selling area per store
between 1,300-3,600sqm, whereas Express Store is smaller, around 300-1,000sqm. Mitra10 has no new store in
2013 and, according to the management, there’s no plan for new store in 2014E. For 2013-14E, the company
said that it has focused on improving its existing stores by adding more fast-moving and new products, remodel-
ing, improving inventory management, and developing people. Starting 2015E, Mitra10 plans to add another 20
Superstore-type outlets with target of 2 new stores in 2015E continued with a pace of 1-2 stores each year. We
assume Mitra10 to add 1 store per year during 2015-16E continued by 2 stores per year in 2017-25E assuming
size 3,000sqm per store. Currently, Mitra10 total selling area was 40,525sqm. Assuming no change on total
existing stores area, we estimate that the new stores would add 148.1% (60,000sqm) of Mitra10 selling area to
total selling area of 100,525sqm by the end of 2025E.
Atria has 10 showrooms (13,385sqm) with 60% of the showrooms are located inside Mitra10 store, which could
facilitate one-stop-shopping experience for Mitra10 and Atria customers. Atria plans to add 1 showroom (around
2,800sqm) in Bali in 4Q2014E (vs. 2 and 3 new showrooms in 2012 and 2013). We estimate 1 showroom to be
opened every two years during 2015-25E.
The retail segment’s revenue mostly comes from Mitra10. Historically, Mitra10 was able to achieve SSSG of
20.6/29.4% in 2012/13, followed by 22% in 1Q14 (31% in 1Q13). Assuming that new store’s sales in 1st year of
opening would be similar to the minimum target (Rp2mn/sqm/month) adjusted with inflation assumption of 6%,
we estimate Mitra10 to grow 25.3% revenue CAGR in 2014-17E. Our expectation on 2014E Mitra10 sales growth
is 23.0%, based on Mitra10’s plan to increase ASP by 7% and sales growth in existing stores as no new store
planned for this year. We expect Mitra10 SSSG to be 22.5/22.0% in 2015/16E and then decreasing each year to
6.0% in 2025E considering higher base (1-2 new stores per year in 2015-25E) and possibility of sales cannibali-
zation from new stores opened near to other stores. Assuming 6% growth of average revenue per Atria show-
room, we estimate Atria to grow 11.8% revenue CAGR. We expect CSAP retail segment revenue to grow 24.7%
CAGR in 2014-17E (29.3% CAGR in 2010-13).
10.8%10.4% 10.7%
11.5% 11.5% 11.5% 11.5%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
-
2,000
4,000
6,000
8,000
10,000
12,000
2011 2012 2013 2014E 2015E 2016E 2017E
(Rp bn)
Net Revenue Gross Margin
(R
pb
m)
PT Trimegah Securities Tbk - www.trimegah.com COMPANY FOCUS 6
Source: Company
Figure 7. CSAP Modern Retail Locations
2013 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E
Revenue drivers
Number of stores 20 20 20 21 22 24 26 28 30
New stores built in the year 0 0 1 1 2 2 2 2 2
Average Revenue per store 72 89 105 126 146 169 193 218 241
Revenue per existing store 72 89 109 130 155 179 204 229 253
Revenue per new store 0 0 38 40 86 91 96 102 108
Revenue 1443 1775 2213 2775 3494 4396 5412 6526 7712
23.0% 24.6% 25.4% 25.9% 25.8% 23.1% 20.6% 18.2% Revenue growth (%)
Figure 8. Mitra10 Revenue Drivers and Estimates
Source: Company, TRIM Research
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Source: Company, TRIM Research
Figure 9. CSAP’s Modern Retail Sales and Gross Margin
Gross margin of retail segment in 2011/12/13 was 19.8/20.4/20.9%. We assume gross margin in 2014/15 to be
21.4/21.8% from selling items with higher margin. This is slightly lower than 1Q14 gross margin of 22.4%.
Expected Higher Modern Retail Contribution – Higher Consolidated Margin
We expect higher contribution from retail segment and lower contribution from distribution segment to total
revenue in 2014E-25E. This is supported by our expectation for higher revenue growth on retail (23.6% CAGR),
compared to distribution (15.0% CAGR) in 2014-17E. We estimate retail to contribute 25.7% in 2014E to 30.5%
in 2017E (FY2013 24.2%) to total revenue. 1Q14 company’s revenue grew 11.6%YoY, driven by revenue growth
of 23.4%YoY for retail and 7.7%YoY for distribution. We estimate 2014E total revenue to grow by 15.0% (retail
22.2%; distribution 14%), which is lower than management target of 23%. We expect CSAP to achieve 17.6%
revenue CAGR in 2014-17E.
Source: Company, TRIM Research
Figure 10. CSAP’s Segment Revenue and Consolidated Gross Margin
We estimate consolidated gross margin to improve from 13.2% in 2013 to 14.8% in 2017E, supported by expan-
sion of gross margin for retail (FY2013 20.9%; 2017E 21.8%) and distribution (FY2013 10.7%; 2017E 11.5%)
along with higher retail revenue contribution. We expect core EPS to grow 26.1% CAGR for 2014-17E. Our esti-
mated core ROAE is 12.0% in 2014E to 16.6% in 2017E, higher than 8.5% in FY2013.
19.8%
20.4%
20.9%
21.4%21.8% 21.8% 21.8%
15.0%
16.0%
17.0%
18.0%
19.0%
20.0%
21.0%
22.0%
23.0%
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2011 2012 2013 2014E 2015E 2016E 2017E
(Rp bn)
Net Revenue Gross Ma rgin
12.9%
12.8%13.2%
14.2%14.4%
14.6%14.8%
11.5%
12.0%
12.5%
13.0%
13.5%
14.0%
14.5%
15.0%
-
2
4
6
8
10
12
14
16
2011 2012 2013 2014E 2015E 2016E 2017E
(R
p t
r)
Distribution revenue Retail revenue Gross Margin
(R
pb
m)
PT Trimegah Securities Tbk - www.trimegah.com COMPANY FOCUS 8
Source: Company, TRIM Research
Figure 11. CSAP Core ROAE
Regarding cash flow from operation, the company posted negative Rp25bn in 2013, compared to Rp125bn of
positive cash flow in 2012. CSAP experienced cash cycle of 45 days (+6.3%YoY) in 2013. This was mostly result-
ed from increase in A/R days (6%YoY). Majority of the A/R belongs to the distribution segment as modern retail
mostly accepts payment in cash. We assume cash cycle to be 45 days in 2014E and 43 days in 2017E.
Takeaways from on the ground visits
Following are our findings during the on the ground visit to Mitra10 & Atria (Serpong; May 11 and Jun 13), Depo
Bangunan (Serpong; Jun 13), and traditional building material store (Southern Jakarta; Jun 12):
Depo Bangunan that we visited has larger store area (6,500sqm) compared to Mitra10 (3,600sqm), while the
traditional store has around 300sqm of selling area. The size of aisle is varies within Mitra10 and Depo
Bangunan. We estimate that aisle in Depo Bangunan and Mitra10 could reach around 1.5.m. Traditional store has
less than 1m of “aisle”, which is the area where the store’s visitors standing when making purchases (asking) the
sales staffs. We feel that Depo Bangunan is almost like a warehouse-type of store with its less polished high
ceiling. Compared to traditional store, Mitra10 and Depo Bangunan are more neat and clean. Mitra10 has 4 cash-
ier counters vs. Depo Bangunan’s 9 cashier counters. For traditional store, during our visit, the store has 2 sales
staffs and 1-2 supervisors.
During our visit, Depo Bangunan has more foot traffic compared to Mitra10. This also might be due to the store
location factor Depo Bangunan located near the main city road vs. Mitra10 at developer’s (SMRA) area which is
further from the main city road) and earlier opening of Depo Bangunan (open in 2000) than Mitra10 (open in
2009) in that city. The traditional store has around 2-4 visitors when we visited. As it has smaller “aisle”, it is
already felt crowded in the traditional store with only 2-4 visitors.
Depo Bangunan put its promotional program information “bordering” the store entrance door making it easily
noticed by the time the visitors going into the store building. Mitra10 and Depo Bangunan both has in-store pro-
motion, such as promo products near the cashiers and area where visitors walked from one aisle to other aisle.
We noticed that Depo Bangunan put clearance sales items on outside the selling area (outside cashier) at the
back part of the building with less foot traffic compared to inside the selling area. Traditional store does not have
promo signs. The visitors have to ask the store supervisor or staff to know specific product’s price.
We saw sales and design consultation service area at the center of Mitra10’s store, which provide services, such
as interior design consultation. We have not noticed if Depo Bangunan also provides similar service.
10.7%
7.2%
8.5%
12.0%
14.4%15.3%
16.6%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
2011 2012 2013 2014E 2015E 2016E 2017E
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Source: TRIM Research
Figure 12. Store Front
Source: TRIM Research
Figure 13. Mitra10’s Aisle
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Source: TRIM Research
Figure 14. Depo Bangunan’s Aisle
Source: TRIM Research
Figure 15. Inside Traditional Store
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Source: TRIM Research
Figure 16. Mitra10’s Store Promotion
Source: TRIM Research
Figure 17. Depo Bangunan’s Store Promotion
Source: TRIM Research
Figure 18. Mitra10’s Product Arrangement
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Source: TRIM Research
Figure 19. Mitra10 2nd Floor with Atria (same building)
Source: TRIM Research
Figure 20. Depo Bangunan’s Product Arrangement
Source: TRIM Research
Figure 21.Traditional Store’s Product Arrangement
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Quick price survey on 6 popular items
For the survey, we picked 6 items which we considered to be popular in traditional and modern retail store
(Mitra10 & Depo Bangunan) of building materials. We rank the items in range of 1 (cheapest) to 3 (most expen-
sive). Store with the lower of sum indicates that it has most items with cheaper price. For the the items sur-
veyed, the rank analysis shows that Depo Bangunan (10 points) sold more items with cheaper price, compared
to Mitra10 (13 points) and traditional store (13 points).
From our visit and interview at the traditional store, the store’s supervisor mentioned that the ceramic tiles sold
there are mostly plain white colors with the exception for bathroom ceramic tiles. Note that we have not con-
firmed whether the store would not mind to order the non-plain white ceramic tiles if there’s order from custom-
ers, whether it depends on the order quantity, and how frequent the customers purchase from the store (regular
customer or not).
In Rp In USD Rank
Item Product Category Mitra
10
Depo Bangu
nan
Tradi-tional Store
Mitra 10
Depo Bangun
an
Tradi-tional Store
Mitra 10
Depo Bangu
nan
Tradi-tional Store
Vinilex Super Pearly White 5kg
Paint for Wall 128,700 110,500 100,000 10.7 9.2 8.3 3 2 1
Ftalit Gloss Pearl White 1 kg
Paint for Metal and Wood
48,200 47,900 49,500 4.0 4.0 4.1 2 1 3
Semen MU-380 40kg Instant Cement 130,700 130,800 125,000 10.9 10.9 10.4 2 3 1
No Drop 1kg Waterproofing Paint 42,700 41,700 45,000 3.6 3.5 3.8 2 1 3
No Drop 20kg Waterproofing Paint 742,700 723,600 735,000 61.9 60.3 61.3 3 1 2
Mulia Signature Glossy White KW1
Ceramic Tiles 20cm x 20 cm
50,800 51,700 53,000 4.2 4.3 4.4 1 2 3
13 10 13
Source: TRIM Research
Figure 22. Price survey in Mitra10, Depo Bangunan, and Traditional Store (assume:
Focusing rank analysis to the modern retail stores and added another 3 items consists of 2 non-plain-white ce-
ramic tiles and 1 different paint brand for specific color, we found a consistent result that Depo Bangunan (12
points) sold more cheaper items compared to Mitra10 (15 points).
To be noted that this survey is performed at one location for each store, which caused the result might not re-
flect the overall trend. The traditional store we visited is located at southern Jakarta, while the Mitra10 and Depo
Bangunan at outer Jakarta, which could have different product pricing between Jakarta and outer Jakarta. We
also noticed in the modern retail store we visited that several items have promo / discounted price. Normal price
(purchase during other period) might be the same with price at competitor store. The survey was also done only
on several items or categories. Broadening the number of items or categories might give different findings con-
sidering a store could implement different pricing strategy for different product categories or items.
Source: TRIM Research
Figure 23. Price survey in Mitra10 and Depo Bangunan (assume: Rp12,000/USD)
In Rp In USD
Item Product Category Mitra
10 Depo
Bangunan Mitra
10 Depo
Bangunan Mitra
10 Depo
Bangunan
Vinilex Super Pearly White 5kg Paint for Wall 128,700 110,500 10.7 9.2 2 1
Ftalit Gloss Pearl White 1 kg Paint for Metal and Wood 48,200 47,900 4.0 4.0 2 1
Semen MU-380 40kg Instant Cement 130,700 130,800 10.9 10.9 1 2
No Drop 1kg Waterproofing Paint 42,700 41,700 3.6 3.5 2 1
No Drop 20kg Waterproofing Paint 742,700 723,600 61.9 60.3 2 1
Mulia Signature Glossy White KW1 Ceramic Tiles 20cm x 20 cm 50,800 51,700 4.2 4.3 1 2
Dulux Pentalite Bluebell White 2.5 ltr Paint for Wall 136,000 128,400 11.3 10.7 2 1
Centro Hybrid WT Cenit FS 2501 Beige KWA Ceramic Tiles 25cm x 25 cm 113,000 107,350 9.4 8.9 2 1
Asia Canary Basic KWA Ceramic Tiles 20cm x 25cm 50,200 50,750 4.2 4.2 1 2
15 12
Rank
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Risks
Delay on Completion or Construction of New Store, Warehouse, and/or Branch
CSAP’s revenue growth achievement could depend on whether the planned new store, branch, or warehouse is
completed on time. To fulfill specific building requirement, most of these buildings were custom built by CSAP.
Rental risk
Most of CSAP’s store is located in rented locations. The increase in rental rate would decrease margin. By the
time the rental contract is expired, there is also risk if the owner of land plans to use the area for other purpose
(refuse to extend the rental to CSAP).
Minimum wage increase
Significant rise in minimum wage would cause decrease in margin. CSAP employs 7,150 employees with 56% are
permanent employees.
Decreasing Purchasing Power and National Election Effect
If economic condition changes or other circumstances caused decrease in purchasing power, it might negatively
affect the revenue and margin of CSAP. For example, customers of retail segment could lower their purchase for
building material if their purchasing power is reduced due to, for example, significant fuel increase. National
election might affect CSAP’s business as well, particularly to the building material distribution segment, because
traditional building material stores (CSAP’s distribution segment’s customers), might order lower volume of build-
ing material to CSAP. This is possibly impacted from contractors receiving lower construction projects due to
political uncertainty.
Competition Risk
Some of other competitors in modern retail of building material are Depo Bangunan, Dunia Bangunan, and Pasar
Keramik (specific for ceramic tiles). Competitor for home furnishing store, includes Informa and Ikea. CSAP’s
distribution business is also competing with other distributors. If competitors significantly become more aggres-
sive, it might cause lower revenue growth and margin projection.
Brand Principal or Supplier Risk
Most of CSAP business is in forms of distribution business. The revenue for distribution business would depend on
whether the brand principals or supplier still agree to use CSAP as their product distributor when the (principal –
distributor) agreement period is completed. For distribution segment, CSAP has managed to maintain long term
relationship with most of its principals. Margin for distribution segment depends on the negotiation or agreement
between principal and CSAP.
Valuation
By using DCF calculation method (assuming 9.5% WACC, 5% long-term growth), we arrive at target price of
Rp530 and 22.1% upside. Using adjusted beta of ACES (0.940) as retail (25% contribution) and EPMT (0.403) as
distribution (75% contribution) segment benchmark, we calculate comparison-Beta of 0.54. Based on CSAP’s
adjusted Beta of 0.79, we assume beta of 0.80 for our DCF calculation.
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Market Cap P/E Dividend Yield
Ticker Price (Rpbn) 2014 2015F 2014 2015F Value (Rp) Volume
ACES 875 15,006 26.7 22.5 0.8 0.9 15,063.3 19.1
MPPA 3,125 16,806 41.0 30.1 0.7 1.0 108,923.1 43.8
RALS 1,130 8,018 17.5 15.3 2.8 3.2 3,239.6 2.5
AMRT 525 19,819 33.2 27.0 1.2 1.4 754.5 1.6
RANC 585 915 30.3 26.1 0.7 0.8 518.6 0.8
HERO 2,700 11,296 NA NA NA NA 331.8 0.1
11,977 30.0 24.4 1.2 1.4 21,471.8 11.3
AVERAGE 6 Month
Risk free rate 7.5%
Market premium 5.0%
Beta 0.8
Debt rate 10.7%
Debt proportion 57.3%
Tax rate 25.0%
Equity cost of capital 11.5%
Debt cost of capital 8.0%
WACC 9.5%
LT growth rate 5.0%
Description 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E
EBIT (1- tax) 200 239 286 341 402 468 537 607 676 757 829
Depreciation and Amortisation 70 84 100 121 143 169 198 232 269 313 362
Changes in non-cash Working
Capital (201) (163) (195) (190) (197) (206) (202) (200) (194) (182) (170)
Capex (160) (196) (254) (303) (332) (394) (433) (510) (563) (658) (726)
FCFF (91) (37) (63) (31) 16 37 99 129 189 230 295
Discounted FCFF (83) (30) (48) (22) 10 21 53 62 83 93 2,413
Total discounted FCFF 2,553
Net cash (debt) (1,016)
NAV 1,537
# of shares (bn) 2.9
NAV / share 531
Target price after rounding 530
Source: TRIM Research
Figure 24. WACC and DCF Calculations
CSAP’s Retail Comparison to ACES
ACES already opened 105 outlets until Jun 2014. Thus, we think ACES has less competition risk compared to
CSAP. In the other hand, the retail segment of CSAP, with only 20 Mitra10 stores and 10 Atria showrooms, might
be able to experience higher growth compared to ACES. ACES’ revenue was Rp3.9tr (+20.9%YoY) in FY2013. In
2013, ACES opened 19 new Ace stores (25% of total up to 2012) and 4 Toys Kingdom stores (25.0% of total up
to 2012). In the same year, CSAP’s retail segment posted Rp1.5tr (+33.8%YoY) of revenue. Atria (around 1.4%
of FY2013 consolidated sales) opened 3 new showrooms that year. No new Mitra10 store in 2013, but that year
the company focused on improving existing stores by adding fast-moving & new products, remodeling, and other
ways of improvement. FY2013 gross margin of ACES, which mostly sells lifestyle and home improvement prod-
ucts, was 49.6% (vs. CSAP’s retail 20.9%) of net sales. CSAP plans to increase its gross margin by adding owned
brand products, such as granite tiles (imported from China) using owned brand “Sincere”.
Figure 25. Retail Comparison
Source: TRIM Research, Bloomberg
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Source: Company
Figure 26. CSAP Ownership
Source: Company
Figure 27. CSAP’s Company Structure
PT Buanatata
Adisentosa31%
NT Asian Discovery
Fund21%
Management
8%
Public
40%
PT Buanatata Adisentosa
NT Asian Discovery Fund
Management
Public
Company background and ownership
PT Catur Sentosa Adiprana was initially started in 1966 as a small shop in selling paint and other building mate-
rials in Jakarta which expanded into distribution business. The family business then established as PT Catur
Sentosa Adiprana in 1983. Its retail segment was started in 1997 by opening modern retail store for building
materials in Indonesia using “Mitra10” brand. The company added home furnishing into its retail segment by
opening “Atria” showroom in 2006. In 2007, the company went public with ticker CSAP. The company already
has 48 building materials distribution branches in 39 cities, 4 chemicals distribution branches, 14 consumer
goods distribution areas, 20 stores of Mitra10, and 10 showrooms of Atria in Indonesia. In 2013, the distribution
business contributes 76.8% of revenue and the rest from its retail business. NT Asian Discovery Fund (Thailand)
bought 21% of CSAP shares on May 2014.
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CSAP acts as a holding company for the group’s subsidiaries as well as an operational company with activities in
the distribution of building materials and consumer goods (P&G and Frisian Flag Products)
Source: Company
Figure 28. CSAP Distribution Business
Cities with building material distribution branch
Chemical distribution braches
Consumer good distribu�on areas
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Income Statement (Rpbn) Balance Sheet (Rpbn)
Cash Flow Key Ratio Analysis
Interim Results Capital History
Date
12-Des-07 IPO @ Rp200
Year end Dec 2012 2013 2014F 2015F 2016F
Revenue 4,932 6,321 7,293 8,623 10,144
Growth (%) 20.1 28.2 15.4 18.2 17.6
Gross Profit 632 835 1,034 1,242 1,477
Opr. Profit 127 153 215 266 319
EBITDA 193 226 274 337 402
Growth (%) 6.3 16.8 21.7 22.7 19.4
Net Int Inc/(Exp) (64) (81) (100) (112) (134)
Other Inc/(Exp) 24 25 0 0 0
Pre-tax Profit 86 97 115 154 184
Tax 23 21 29 39 46
Minority Int. (6) (5) (5) (6) (8)
Extra. Items 0 0 0 0 0
Reported Net Profit 57 71 81 109 131
Core Net Profit 40 52 81 109 131
growth (%) (25.2) 29.2 56.0 34.9 19.8
DPS 3 5 6 8 9
growth (%) (22.2) 42.9 13.6 34.9 19.8
Dividend payout
ratio (%) 17.7 20.4 20.4 20.4 20.4
Year end Dec 2012 2013 2014F 2015F 2016F
Cash and equivalents 66 57 36 43 51
Other curr asset 1,691 2,209 2,498 2,990 3,476
Net fixed asset 663 734 794 884 996
Other asset 92 108 144 184 225
Total asset 2,512 3,108 3,472 4,101 4,748
ST debt 579 772 865 1,030 1,174
Other curr liab 1,016 1,339 1,501 1,792 2,115
LT debt 186 167 187 229 262
Other LT Liab 84 114 128 151 175
Minority interest 70 74 83 97 113
Total Liabilities 1,864 2,391 2,680 3,202 3,726
Shareholders Equity 578 643 709 802 910
Net debt / (cash) 687 870 1,016 1,216 1,386
Total cap employed 918 997 1,107 1,279 1,459
Net Working capital 163 155 169 211 238
Debt 764 938 1,052 1,259 1,436
Year end Dec 2012 2013 2014F 2015F 2016F
Core Net Profit 40 52 81 109 131
Depr / Amort 43 47 60 70 84
Chg in Working Cap (15) (195) (139) (201) (163)
Others 57 71 0 0 0
CF's from oprs 125 (25) 2 (21) 51
Capex (284) (111) (120) (160) (196)
Others (25) (28) 0 0 0
CF's from investing (310) (139) (120) (160) (196)
Net change in debt 235 173 114 207 177
Others (15) (18) (17) (19) (25)
CF's from financing 220 155 98 188 152
Net cash flow 35 (9) (21) 7 8
Cash at BoY 31 66 57 36 43
Cash at EoY 66 57 36 43 51
Free Cashflow (152) (128) (38) (91) (37)
Year end Dec 2012 2013 2014F 2015F 2016F
Profitability
Gross Margin (%) 12.8 13.2 14.2 14.4 14.6
Opr Margin (%) 2.6 2.4 2.9 3.1 3.1
EBITDA Margin (%) 3.9 3.6 3.8 3.9 4.0
Core Net Margin (%) 0.8 0.8 1.1 1.3 1.3
ROAE (%) 10.3 11.7 12.0 14.4 15.3
ROAA (%) 2.5 2.5 2.5 2.9 3.0
Stability
Current ratio (x) 1.1 1.1 1.1 1.1 1.1
Net Debt to Equity (x) 1.2 1.4 1.4 1.5 1.5
Net Debt to EBITDA (x) 3.6 3.9 3.7 3.6 3.4
Interest Coverage (x) 2.3 2.2 2.2 2.4 2.4
Efficiency
A/P (days) 81 82 81 82 83
A/R (days) 51 54 54 53 51
Inventory (days) 72 73 73 75 75
Year end Dec 1Q13 2Q13 3Q13 4Q13 1Q14
Sales 1,437 1,590 1,518 1,775 1,604
Gross Profit 186 207 207 235 239
Operating Profit 24 39 31 59 42
Net Profit 11 21 8 31 19
Gross Margins (%) 12.9 13.0 13.7 13.2 14.9
Opr Margins (%) 1.7 2.5 2.1 3.3 2.6
Net Margins (%) 0.8 1.3 0.5 1.8 1.2
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