leurs fashion
TRANSCRIPT
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Presented by:
Moch Hasan
CEO of Indonesia
Jakarta, 31 May 2012
Business Meeting with GE Bank
Welcome ,to LeursFashionspresentation
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Presentation Outline
We have prepared to take off and grow
So, We offer save and attractiveinvestment opportunity
,because We have seen the
opportunities to grow
and We execute to build better business
and win the market
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We have prepared to take off and grow (1/2)
We are financially flexible. Our abilityto generate cash has improved. Rp6.3 B
of Rp8.2 B operating earning has been
generated in cash.
The sale continuously grows 33.12%in line with 24% growth of stores
served in 2011Sales Growth
Cash and Cash
Equivalent
The increase of ROE is mainly due tobetter asset utilization (79.3% in 2011
compare to 64.3% in 2010)Asset Turnover
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We have prepared to take off and grow (2/2)
We have strong cash flow to serve our debt
Our shareholders have commitment tosupport us by providing Rp200 B additional
capital for ten year expansions
Even we financially more leveraged, we
have higher ability to cover our debt
Retain Cash Flow
to Debt
Interest Coverage
Additional Investment
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So, We offer save and attractive investment opportunity
Rp250 Billions
11%We offer interest rate of
11 %
7.3 of 10Our business will grow and
more be diversified in term
of geographic and product
segment
We got supportfrom ourshareholder
We financially prepared
to meet out liability
8.2 of 10
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Upper Class
Middle Class I
Low Class IMiddle Class II
Middle Class III Low Class II
Current Market
P
otentialGrowtho
fMarket
Sumatera
Jawa & Bali
Jawa & Bali
Jawa &
Bali
Sumater
a
Jawa &
Bali
Source: Roy Morgan, Indonesia Textile Association, and Statistic Indonesia
,because We have seen the opportunities to grow (1/3)
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Roy Morgan Database, Nielsen Report, and
Indonesia Investment Coordinating Board
10.9% middle class will pay
more for eco-friendly
product and itll expected to
increase
10.6%
73.6%Customer believe that
sustainable products give
positive impact on the
environment
79.4%Its important for company
to have environmental
program
The cloth consumption is
expected to grow
10.9%
50%The Government have
allocated special fund for
cloth SME to modernized, atleast, 50% of machinery by
2014
,because We have seen the opportunities to grow (2/3)
Source:
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The middle class want to be look
goodand be seen their wealth49.3%
63.2%Woman is the one decidingwhat will be bought, even
for mans fashion
The middle class see brand as
primary factor to decide what
product they buy
76.8%The middle class own smart
phone and would likely want to
use it to help shopping 81.9%The middle class prefer to
go to small and middle
boutique
95.3%The middle class use internet
as their preliminary survey for
shopping reference
,because We have seen the opportunities to grow (3/3)
Source: Roy Morgan Database and Nielsen Report
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and We build better business and win the market (1/3)
Improve the sale per store by increasing
efficiency of business process
Boost online marketing to capture Y generation
Encourage customers self service by using
smart phone personal wardrobe application
We invest Rp180 B to
expand at 2nd and 3rd
tier cities of Java & Bali
We invest Rp70 B to
improve System
Information to
increase sale per store
We are expected to win 8.84% of market share by 2022
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We have prepared to take off and grow (1/2)
'13 '14 '15 '16 '17 '18 '19 '20 '21 '22
'13 '14 '15 '16 '17 '18 '19 '20 '21 '22
'13 '14 '15 '16 '17 '18 '19 '20 '21 '22Operating Expense
Revenue Operating Income
Saving of 5% in operatingexpense and rapid growth ofsale are expected to boost theOperating Income
and We build better business and win the market (2/3)
3,018
1,908
1,224
800536372268201157125
4935 41 62 79107
151217
327
499
9 17 29 4674 119
198
329
547
916
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0 10 1728 46
74120
198
329
547
916
-120
-60 -58
9 2243
77
136
234
397
770
-120
-54 -46
6 14 2439
6195
144
249
Relevant cash in flow of investment until 2022
Present value of discounted free cash flow ofinvestment until 2022 is about Rp435.79 Billions. Andpresent value of incremental cash flow is about
Rp602.56 Billions
Cash in Flow
Free Cash in Flow
Discounted Free Cash Flow
and We build better business and win the market (3/3)
14 18 20 2216
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Jakarta, 31 May 2012
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P r o u d t o b e g r e e n
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Profile of Leurs Fashion Indonesia
Organic fashion retailing company
that established on 2006 in Jakarta
Specialize in organic fashion with
tagline proud to be green
Has two main strong brands, Citeur
and Tachier, offering high fashion
taste
Leurs Fashion Indonesia issubsidiary company of Leurs
Fashion International, Retail
Fashion Company based on
France
Leurs Fashion Indonesiamainly operated in main cities
and 1st tier cities at Indonesia
Targeting upper class market
segment
The stores of Leurs Fashion is
exclusively placed at downtown
and center of cities
Has 5 distributions center that
serve 58 exclusive stores spread atJava & Bali
Currently considering emerging
middle class as source to grow
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Leurs Fashions Balance Sheet (in millions)
2011 2010
Current Liabilities 6,135 4,196
Non-current Liabilities 16,719 11,269
Total Liabilities 22,854 15,465
Share Equity 38,000 38,000
Retain Earning 46,227 45,806
Total Equity 84,227 83,806
Total Liabilities and Equity 107,082 99,272
Financial Statement of Leurs Fashion Indonesia
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Financial Statement of Leurs Fashion IndonesiaIncome Statement of Leurs Fashion (in millions)
2011 2010
Net Sales 84,920 63,791
Cost of Good Sold (65,490) (49,753)
Gross Profit 19,430 14,038
Operating Expense (11,219) (8,557)
Other Income /(Other Expense) (521) 1,320
EBITDA 7,690 6,800
Depreciation (1,719) (1,542)EBIT 5,971 5,258
Interest Paid (1,431) 1,279
EBT 4,540 (3,979)
Tax (1,135) (995)
Net Income 3,405 2,984
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Financial Statement of Leurs Fashion Indonesia
Operating Activities
Net Income 3,405
Depre Expense 1,719
Decrease in Current Asset 1,247
Increase in Current Liability 1,939
Loss of Write Down Assets 32
Gain of Sale fix Assets (1,106)
Gain of Debt Retirement (976)
Cash of Operating Activities 6,260
Investing Activities
Sale of Equipment 32,621
Purchase of Equipment (37,103)
Cash for Investing Activities (4,482)
Financing Activities
Cash for long term debt (1,087)
Cash of long term debt 5,120
Cash of Financing Activities 4,033
Net Cash Flow 5,811
Beginning Balance 18,937
Ending Balance 24,748
Leurs Fashion Cash Flow Statement 2011 (in millions)
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Activity Ratio 2011 2010
Inventory Turnover 2.92 2.08
Days of Inventory on
Hand121 144
Working Capital
Turnover1.57 1.32
Total Asset Turnover 0.79 0.64
Receivable Turnover 34.22 23.35
Days of Sale Outstanding 9 13
Purchases 10.67 11.86
Number of Days Payable 28 25
Liquidity Ratio 2011 2010
Current Ratio 8.62 11.52
Cash Ratio 4.03 4.51
Cash Conversion 102 131
Overall, We perform better to
manage our business activities in
efficient way and our capability ofgenerating cash flow to meet short
term obligation is improved
Financial Analysis of Leurs Fashion Indonesia
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Assessment of credit risk for Leurs FashionWeighting Score Total Score
Operationally
Growand
Diversified Revenue Growth 4 9 36
Gross Profit Margin 5 8 40
Growth of Stores 5 9 45
Segment Diversification 4 6 24
Geographic Diversification 4 6 24
Financially
Prepared RCF/total debt 25 8 200
Total Debt/EBITDA 15 8 120
EBITDA/Interest 10 9 90
EBIT/Capital 10 8 80
EfficientlyUtilized
EBITDA Margin 10 9 90EBITDA/Assets 8 9 72
Total 100 8.21
The assessment of credit risk shows that our credit risk is relatively low. The score
of 8.21 of 10 show how strong we are in managing credit risk
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'13 '14 '15 '16 '17 '18 '19 '20 '21 '22
103 126156
201259
41
108283
743
1950
12 34
97
280
809
Sale revenue per market segment until 2022
Emerging middle class is projected to be our main source ofgrowth in the future. We expect to seize 8.84% targeted
market share
Sale revenue from upper class customer
Sale revenue from first middle class customer
Sale revenue from second middle class customer
Projected sale revenue per segment until 2022
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Assumed that capital expenditure is made on 2012 withamount Rp120 B, 2013 Rp60 B, 2014 Rp60 B. After 10 yearswe can reuse it by investing additional 60% of investmentvalue for next additional 10 years
Calculation of relevant cash flow of project
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Incremental Cash in
Flow (Net)0 0 2 9 22 43 77 136 234 397 674
Capital Expenditure 120 60 60 -96
Free Cash Flow -120 -60 -58 9 22 43 77 136 234 397 770
Discount Factor 1 0.89 0.80 0.71 0.64 0.57 0.51 0.45 0.40 0.36 0.32
NPV of Free Cash
Flow-120 -54 -46 6 14 24 39 61 95 144 249
Total NPV of Free
Cash Flow412
Total NPV
Incremental CashFlow
603
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Risk Free* : 5.7% Risk Premium* : 12.07%
Beta* : 1.2
Cost of Equity : 13%
Cost of Debt : 9%
Tax : 25%
WACC : 11.9%
Relevant time frame for investment
is 10 years
The investment can be reutilized
for additional 10 years by investing
60% of initial investment value
Key assumptions for justification of pro-formafinancial performance
Relevant market base in 2011 isRp99,774 Billions and grows 10.5%annually
The middle class pocket share of totaldemand is about 48.9% in 2011 andincrease about 2.5% annually
Green awareness among middle classincrease from 8.9% in 2011 to 31.3% in2022
The growth of sale after project
implementation is about 56% annually
There will be 2% save of COGS and 5%of Operating Expense
Source: Pelindo equity and index valuation Estimates, Statistic Indonesia, Bloomberg, Roy Morgan database, and Nielsen report
Noted: *at March 6th, 2012
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Where are our middle class market?
0
2
4
6
8
10
Jawa & Bali Sumatera Kalimantan Sulawesi East
Indonesia
Numbers of population
Fashion consumption rate
Where they do fashion shopping?
Supermarket
Middle Boutique
Small Boutique
Traditional Market
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Television
Newspaper
Magazine
Colleague reference
Internet
Media used for buying preference
Source: Roy Morgan Database and Nielsen Report
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How to tackle any unexpected risk?
Shortage of
Suppliers
Volatile
Customers
Direct Channel of
Suppliers
Strengthen BACKSTAGE Win FRONTLINE battle
UNEXPECTED RISK
Maintain strong suppliers
relationship by providingattractive business model for
them
Diversify and set certain supply
rate for each supplier
Use famous designer to push
product brand
Push digital expansion to
capture Y generation market
Build brand value of product
Prepare excellent supply chain
Give solution, not just fashion
trend
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P r o u d t o b e g r e e n