Insights Tiptoeing Through A Recovery PDF

Indonesia Industry Focus
Indonesia Consumer
Refer to important disclosures at the end of this report
DBS Group Research . Equity 9 Feb 2017
Tiptoeing through a recovery JCI : 5,361.10

 Commodity price and lagged impact of policy Analyst
loosening to sustain recovery traction in 2017 Tiesha PUTRI +6221 30034931
tiesha.narandha@id.dbsvickers.com
 We see downside risk to staples’ earnings as raw
material price increases Andy SIM CFA +65 6682 3718
andysim@dbs.com
 Retailers’ PE discount to staples at historical low;
STOCKS
time for bargain hunting?
 Maintain INDF as top pick; upgrade MAPI to BUY
12-mth
On the path of gradual recovery. Demand recovery has Price Mkt Cap Target Price Performance (%)
remained nascent to date but with commodity prices having Rp US$m Rp 3 mth 12 mth Rating
turned the corner, the purchasing power of consumers,
particularly those residing outside Java, should improve. In Unilever Indonesia 41,725 23,874 36,200 (6.0) 2.8 FV
addition, we think the impact from the policy loosening Indofood CBP Sukses
8,500 7,434 9,000 (10.1) 2.4 HOLD
measures in 2016 is likely to be seen this year. Two key Makmur
Indofood Sukses
themes that we highlight in this report are: 1) rising soft 7,950 5,235 9,100 (3.1) 20.9 BUY
Makmur
commodity prices and the impact on consumer staples Mayora Indah 1,825 3,060 1,700 21.7 69.0 HOLD
companies, and 2) retailers’ valuation which appears to have Matahari Department
15,325 3,353 16,200 (8.2) (12.9) HOLD
priced in the current economic cycle and risk of structural shift Store
from one retail channel to another. Matahari Putra Prima 1,365 551 1,060 (20.2) (25.2) FV
Mitra Adiperkasa 5,425 675 6,600 (1.8) 50.7 BUY
Rising soft commodity prices pose downside risk to Source: DBS Vickers, DBS Bank, Bloomberg Finance L.P.
consumer staples’ earnings. Consumer staples’ margin will Closing price as of 8 Feb 2017
likely shrink as raw material prices have started to rise. We
expect the sector’s earnings growth to decelerate this year, Unilever Indonesia : PT Unilever Indonesia Tbk manufactures soaps,
detergents, margarine, oil, and dairy based foods, tea based
hence, we advise investors to avoid companies that trade at a beverages, ice cream, and cosmetics.
lofty valuation such as UNVR. We prefer cheaper names with Indofood CBP Sukses Makmur : ICBP is a leading branded consumer
dominant market share in key products, which should products company in Indonesia with products comprising noodles,
translate to a better flexibility in passing on higher raw dairy, snack foods, food seasonings, nutrition & special foods,
biscuits, and beverages.
material costs to consumers. For this reason, we maintain Indofood Sukses Makmur : Indofood Sukses Makmur is a Total Food
INDF as our top pick. Solutions company with operations spanning from the production of
raw materials and their processing, to consumer products.
Mayora Indah : PT Mayora Indah Tbk manufactures candies and
Retailers trade near historical low multiples; focus on cookies, as well as food, coffee powder, instant coffee, and cocoa
company-specific factors. Retailers’ current valuation appears beans.
to have priced in the weak economy, trading at a significant PE Matahari Department Store : PT Matahari Department Store Tbk
engages in the retail business for several types of products such as
discount to staples companies. However, as discretionary
clothes, accessories, bags, shoes, cosmetics, and household
spending has yet to show signs of bottoming, we advise appliances.
investors to put more focus on company-specific drivers. We Matahari Putra Prima : Matahari Putra Prima Tbk is a mass grocery
upgrade MAPI to BUY as we believe the company will continue retail store operator in Indonesia. Its store formats include hypermarts
under the name "Hypermart", medium-sized stores under the name
to reap rewards from its restructuring efforts that started three "Foodmart", as well as a health and beauty store concept under the
years ago. This upper-middle retailer also benefits from a name
weaker euro as 24% of its COGS are linked to the euro. We Mitra Adiperkasa : Mitra Adiperkasa operates department stores and
specialty stores selling a broad range of goods including clothing,
maintain our FULLY VALUED call on MPPA as we believe the
toys, food, and other merchandises.
market’s earnings expectation for the company is too high. It
now trades at a high multiple of 39x PE FY17F vs. regional
supermarkets which trade at 22x PE FY17F on average, making
it prone to a de-rating if the company fails to deliver.
ed-CK / sa- MA, PY Page 1

Industry Focus
Indonesia Consumer
On a slow path of recovery Minimarket’s average daily sales per store

16 10%
As we have expected, consumption recovery has come very 14 8%
gradually to date. We have seen an encouraging improvement 12
6%
in staples’ sales volume in 2Q16-3Q16 (we merged the two 10
quarters to eliminate the impact of a shift of Lebaran season), 4%
8
nevertheless consumers appear to spend only for primary needs. 13. 0 12. 9 13. 4 2%
6 11. 1 12. 1
Minimarket’s average daily sales per store saw a strong pick-up 0%
4
in 1Q16, but the pace of growth somewhat slowed in 2Q16-
2 -2%
3Q16, suggesting a nascent recovery. Discretionary spending
has remained muted with retail sales growth still hovering at 0 -4%
1Q15 2Q15 + 3Q15 4Q15 1Q16 2Q16 + 3Q16
single-digit levels in Oct-Nov 2016. Listed retailers’ latest
Avg. daily sales per store (Rp mn)* Growth y-o-y
reported SSSG is mostly lower than that recorded in 1Q16.
*Based on Indomaret and Alfamart’s sales and store number
These data points are all reflected in GDP numbers. Household Source: Companies, DBS Vickers, DBS Bank
consumption growth was stable at c.5%. Nonetheless,
discretionary spending has yet to show sign of bottoming, as Retailers’ YTD SSSG trend
shown in the subsequent chart. 30%
25%
Discretionary household consumption 20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
MPPA LPPF MAPI RALS ACES Parkson*
*Fiscal year ended in June

Source: Companies, DBS Vickers, DBS Bank
Ramayana (RALS) and Matahari Putra Prima’s (MPPA)

SSSG was slower in 4Q16; Ace Hardware’s (ACES) SSSG
Source: Central Bureau of Statistics, DBS Vickers, DBS Bank has improved
Consumer companies’ sales growth trend 8.0% 7.1%

6.3%
14% 6.0%
12% 4.0%
12.1%
10% 8.9% 11.6% 2.0% 1.4%
0.7%
8% 7.1% 0.0%
6.2% 6.3%
MPPA RALS ACES
6% -2.0%
4.6%
6.0% -4.0% -2.9%
4% 5.5%
-6.0% -4.5%
2%
2.1%
0% 9M16 SSSG 12M16 SSSG
1Q15 2Q15 + 3Q15 4Q15 1Q16 2Q16 + 3Q16
Staples* Retailers
*UNVR, ICBP and MYOR’s domestic sales

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Industry Focus
Indonesia Consumer
Consumer tracker: data points reaffirm our view that 5-year average through 4Q16. In Dec 2016, the CCI slid slightly
recovery momentum will sustain in 2017 to 115.4 from 115.9 in Nov 2016. Interestingly, the decline was
mostly seen among low-income consumers with monthly
Key commodity prices have reversed their downward trend. The expenditure of Rp1m-3m, while the confidence index of
low commodity prices in the past years have eroded consumer’s consumers with an income range of Rp3m-5m continued to
purchasing power, particularly those residing outside Java. We improve.
note that 33% and 7% of workforce are employed in the
agriculture and construction sectors respectively. Rising soft Bank Indonesia’s consumer confidence index
commodity prices, particularly rubber, CPO, coffee and cocoa, 125 20.0
along with an increase in infrastructure spending would help to
120
raise household income, spur consumption and sustain the 15.0
115
demand recovery momentum in 2017. Our recent check with 10.0
110
plantation companies suggests that the key players are planning
105
to hire more workers in 2017. 5.0
100
0.0
Regional elections should also serve as a short-term boost to 95
consumption. Three months campaign period will precede the 90 -5.0
voting day, which is scheduled to take place in mid-Feb 2017.
Employment by sector CCI 5-year avg. CCI AdministeredCPI y-o-y
Source: Bank Indonesia
Others But this has yet to be reflected in retail sales. The stronger
23%
Agriculture
consumer confidence has yet to translate to strong growth in
33% the retail sales index (RSI). RSI growth moderated from the low-
teens level (since Nov 2015) to 8%-10% in Oct-Dec 2016, in
line with nominal GDP growth.
Trade
23% Retail sales index
Industrial Mining
13% 1%
250 30%
Construction
200 25%
7%
20%
Source: Central Bureau of Statistics 150
15%
100
Indonesia’s key export commodities 10%
2011 = 100 50 5%
140 0 0%
120
100
80 RSI index (2010=100) Growth y-o-y (RHS)
60
Source: Bank Indonesia
40
20
Vehicle sales – positive read-through from motorcycle sales
- data. Motorcycle sales in 11M16 were still 8% lower y-o-y,
Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
while car sales held up relatively well with 4% growth y-o-y.
CPO Coffee Cocoa Rubber
However, we are encouraged to see a pick-up in monthly
Source: Bloomberg Finance L.P., DBS Vickers, DBS Bank motorcycle sales in November which showed a positive growth
of 7% y-o-y for the first time since Mar 2016, indicating that
consumers have started to spend on bigger-ticket items.
Consumers turning more upbeat with confidence index above
historical mean. Consumers have turned more upbeat with the
consumer confidence index (CCI) consistently staying above its
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Industry Focus
Indonesia Consumer
Motorcycle and car monthly sales growth Fiscal policy: less short-term boost to household’s spending but
80%
productive spending will continue to rise
60%
Meanwhile, the 2017 state budget appears to be non-
40%
expansionary as the government keeps the expenditure budget
20% flattish (-0.1%) compared to the 2016 revised state budget.
0% However, it is worth noting that the actual spending in 2016
-20%
only reached 89% of the expenditure budget. Assuming 96%
expenditure budget absorption rate – the highest in the past five
-40%
years – and no further cuts to the 2017 budget, 2017
expenditure budget implies 7% growth in government spending
this year.
Motorcycle sales yoy Car sales yoy
Source: Gaikindo On the other hand, subsidy allocations such as electricity and
gas which have more direct and immediate impact on
Inflation creeps up but still within BI’s comfortable range. Our consumption were cut. In the 2017 State Budget, the
economist expects headline inflation to rise and average 4.5% government only allocates Rp77.3tr for energy subsidy, an 18%
in 2017. Headline inflation has consistently picked up since Sep decrease to that allocated in the 2016 Revised State Budget.
2016.We expect higher oil prices to push housing, transport and
food inflation components higher in 2017. These combined In 2017, the government is gradually cutting electricity subsidy
three components make up 80% of the CPI basket. for subscribers in the 900 VA group. These subscribers represent
Nevertheless, we expect inflation to remain manageable and 36% of PLN’s total subscribers. The tariff will be raised by 32%
within the BI’s (Bank Indonesia) comfortable range. Downside every two months up to May 2017 with the first increase taking
risk to our view would emerge if energy cost rise higher than place in early January 2017.
our expectation, given the limited energy subsidy budget.
Electricity tariff increases in 2017 (for subscribers in 900
Headline, food and administered CPI trend VA group)
20.0 Rp/KWh
1,600
1,352
15.0 1,400
1,200
10.0 1,023
1,000
774
5.0 800
585
600
-
Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 400
(5.0) 200
-
Food CPI y-o-y CPI y-o-y AdministeredCPI y-o-y 2016 1-Jan-17 1-Mar-17 1-May-17
Source: Central Bureau of Statistics Source: Various media
Infrastructure remains high on the government’s agenda with

the 2017 state infrastructure budget being raised by 22% y-o-y.
We believe the higher infrastructure spending would continue
to support job creation in Indonesia and would serve as a more
sustainable consumption growth driver in the longer term. We
also note that land acquisition activities will likely intensify in
2017, as a number of land-intensive toll road projects move into
execution phase. The government has allocated Rp21.65tr
budget to acquire land for infrastructure projects. This will
eventually result in more cash being transferred from
government to land owners.
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Industry Focus
Indonesia Consumer
Moderate increase in minimum wage aggressively raise selling prices and will take a gradual
approach instead. We project a slower earnings growth of
More regions comply with the minimum wage formula 6% y-o-y in FY17F vs. 11% y-o-y in FY16F, with revenue
stipulated by Government Regulation No. 78/2015 in 2017. growth holding steady at 10% y-o-y in FY17F.
The implication is a slower minimum wage increase in 2017
compared to that in the past years, as the regulation pegs the Key soft commodity prices trend (quarterly avg. price)
minimum wage growth to inflation and GDP growth rate. Skim
USDIDR Wheat CPO Milk Coffee Cocoa Sugar
Powder
On average, the minimum wage in 34 provinces could rise by y-o-y
only 9% in 2017 vs. a 12% increase each in 2015 and 2016. 1Q16 6% -11% 9% -31% -22% 1% 2%
Labour-intensive companies, including retailers, are set to 2Q16 1% -7% 19% -17% -5% 0% 37%
benefit from this moderate wage inflation as labour costs 3Q16 -5% -21% 26% 21% 18% -8% 79%
4Q16 -4% -18% 32% 18% 25% -23% 42%
typically account for 10-15% of revenue. We nonetheless
q-o-q
acknowledge that this could also mean a more muted boost 1Q16 -2% -5% 11% -11% -1% -10% -2%
to consumers’ purchasing power in 2017. 2Q16 -1% 1% 5% -2% 6% 4% 18%
3Q16 -1% -14% 1% 17% 14% -2% 19%
Minimum wage trend 4Q16 1% -1% 12% 15% 4% -16% 3%
2.50 25% Source: Bloomberg Finance L.P., Global Dairy Trade, DBS Vickers, DBS
2.08 Bank
19% 1.91
2.00 20%
16% 1.69
1.51 Consumer staples’ gross margin trend
1.50 1.30 12% 15%
12%
35% 60%
9%
1.00 10% 50%
30%
0.50 5% 40%
25%
30%
- 0% 20%
2013 2014 2015 2016 2017 20%
Avg. minimum wage, Rp mn (LHS) Growth y-o-y (RHS) 15% 10%
Source: Central Bureau of Statistics, DBS Vickers, DBS Bank 10% 0%

1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
Consumer staples – watch out for cost inflation
ICBP INDF MYOR UNVR (RHS) Aggregate ex-INDF
In 2015, communal price increases occurred in most of Source: DBS Vickers, DBS Bank, Bloomberg Finance L.P.
FMCG’s categories, as producers passed on input cost
inflation to consumers. This to some extent has impacted
consumers’ purse string negatively in the past one year. Not
long after a series of selling price hikes, soft commodity prices
have receded. Given the sticky nature of consumer goods’
pricing, consumer companies have enjoyed earnings growth
boost in 2016 on a combination of higher selling prices and
input costs tailwinds.
Key commodity prices have reversed their downward trend in

mid-2016. Factoring in inventory lag, we expect higher raw
material costs to start impacting consumer staples companies
in 4Q16-1Q17. Among staples companies that we cover, only
MYOR reported a sequential contraction in gross margin in
3Q16.
For FY17, we assume an EBIT margin decline of 20-100bps for

UNVR, MYOR and ICBP. Given the still-soft demand
environment, we do not expect consumer companies to
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Industry Focus
Indonesia Consumer
Consumer staples sector’s forward PE band expanding aggressively. Both companies on average opened
50 eight new minimarkets per day in the past three years. In
2017, Indomaret and Alfamart have announced its plan to
45 +2sd
open 1,600 and 1,400 new stores respectively. The combined
40
+1sd store opening target of 3,000 is a tad higher than last year’s
target of 2,990 stores.
35
Avg.
30
‐1sd
Excluding MPPA, we think the downside risks to retailers’
25
earnings and share price are lower compared to those of
‐2sd staples. It is worth highlighting that over the past one year,
20
retailers have coped well with the economic slowdown.
Inventory trend has remained healthy with no sign of a build-
Source: DBS Vickers, DBS Bank, Bloomberg Finance L.P. up despite the slowing sales growth (refer to the subsequent
chart). Should the pace of demand recovery remain slow in
Consumer staples companies’ PE valuation range in the 2017, the healthy inventory level would keep the risk of
past five years margin compression low, in our view.
95
85 Retailers’ revenue and inventory growth trend*
75 60% 6,000
65
50%
55 5,000
45 40%
4,000
35 30%
25 20% 3,000
15 10%
5 2,000
0%
ICBP INDF UNVR MYOR Staples
4Q11 2Q12 4Q12 2Q13 4Q13 2Q14 4Q14 2Q15 4Q15 2Q16 1,000
-10%
Source: DBS Vickers, DBS Bank, Bloomberg Finance L.P.
-20% -
Inventory, Rp bn (RHS) T12M revenue growth y-o-y (LHS)

Retailers – is it time for bargain-hunting? Inventory growth y-o-y (LHS)
*LPPF and MAPI. We excluded MPPA as the company changed its

We believe the retail sector warrants a re-look as some names
inventory measurement method in 3Q16.
trade below their historical mean valuation. Broad-based
sector re-rating is possible if we see signs of firmer demand
recovery. Retailers’ PE discount over staples has widened in Retailers’ gross margin trend (trailing 12-month)
the past two years, reflecting where we are in the economic
70% 18%
cycle.
65% 18%
On top of the cyclicality factor, the risk of structural shifts 60% 17%
from one retail channel to another – from brick and mortar to 55% 17%
e-commerce retailing and from supermarkets or hypermarkets 50% 16%
to minimarkets – has also contributed to the sector de-rating. 45% 16%
Among our coverage, LPPF now trades at 2.5SD below its
40% 15%
historical mean PE. We believe this is partly due to concerns
35% 15%
over potential higher capex in the future as the company
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
works its way to be a leading omni-channel retailer in

Indonesia. LPPF (LHS) MAPI (LHS) Aggregate (LHS) MPPA (RHS)

Meanwhile, MPPA saw its sales slowing down on the back of
a slow demand environment, which prompted its customers
to cut down spending on discretionary items such as
electronics and clothes. Tightening competition among retail
channels has also impacted MPPA’s sales negatively.
Competition risk has yet to abate as the two largest
minimarket chains, Indomaret and Alfamart (AMRT), are still
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Industry Focus
Indonesia Consumer
Retailers’ PE valuation range in the past five years Staples – DBS’ net profit forecast relative to consensus
305 1.03
255 1.01 1.01
205 0.98
0.98
0.97
155 0.96 0.95
105
0.92
0.92
55
5
MAPI LPPF MPPA Retailers

INDF ICBP UNVR MYOR Staples
Net profit FY16F Net profit FY17F

Retailers’ PE relative to consumer staples companies
65 Source: Bloomberg Finance L.P., DBS Vickers, DBS Bank
+2sd
55
Retailers – DBS’ net profit forecast relative to consensus
45 +1sd
0.98 0.96 1.00 0.98 0.94 0.98 0.96

35 Avg. 0.94
0.86
0.74
25
‐1sd
15
‐2sd
5

LPPF MAPI MPPA Retailers Retailers ex-
MPPA
What consensus is expecting? Net profit FY16F Net profit FY17F
For staples (ICBP, UNVR, MYOR), consensus is expecting 13% Source: Bloomberg Finance L.P., DBS Vickers, DBS Bank
and 12% y-o-y net profit growth in FY16 and FY17,
respectively, vs. 12% y-o-y growth in FY15A. Expectation Staples – consensus’ earnings revision in the past three
months
appears to be high for staples. With no growth slowdown
3.0%
expected in 2017, the numbers suggest that consensus has 2.5%
2.5%
assumed either one of these scenarios or the combination of 2.0%

the two to play out in FY17: 1.5%
1.0%
0.5% -0.3%
a) costs are going to be stable or some cost efficiency 0.0%
-0.2% 0.0% -0.3% -0.1%
measures would be rolled out to offset the impact of -0.5% UNVR ICBP INDF MYOR Staples*
-0.8% -0.5%
-1.0%
commodity prices or imported inflation; or, -0.7%
-1.5%
-2.0%
-2.0%
b) consumer staples companies would be able to successfully -2.5%
pass through cost inflation through price increases. The FY16F net profit FY17F net profit
inability to fully pass on cost inflation through price hikes Source: Bloomberg Finance L.P., DBS Vickers, DBS Bank
presents downside risk to our and consensus’ earnings
forecasts.
Meanwhile, retailers are expected to see a strong pick-up in

earnings growth in 2016 and 2017. Consensus currently
expects 21% y-o-y net profit growth in FY16 and 25% y-o-y
in FY17 – an upturn after a 2% decline in net profit in FY15A.
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Industry Focus
Indonesia Consumer
Retailers – consensus’ earnings revision in the past three Stock picks

months
10%
5.6%
For staples, we believe pricing power is key to cope with the
5% -2.9% rising input cost environment 2017. We advise investors to
-0.7% -0.5% 0.5% -1.4%
0% stick with companies which have dominant market share. This
LPPF MPPA MAPI Retailers
-5% -2.7% should translate to a better flexibility in passing on higher raw
-10% material costs to consumers and preserving margins. INDF
-15% remains our top pick in the sector. The company, through its
-20% subsidiary ICBP, controls 71%-72% market share in the
-25% domestic noodle market. INDF now trades at 15x FY17F PE
-24.5%
-30% (0.6SD below five-year mean PE) and 23% discount to SOP
FY16F net profit FY17F net profit valuation (vs. an average discount of 16% in the past five
year).
Source: Bloomberg Finance L.P., DBS Vickers, DBS Bank
In the retail space, the impact from the policy loosening

What could surprise on the upside?
measures in 2016 is likely to be seen this year and support
retailer’s top-line performance, particularly for those catering
One third of Indonesia’s labour force works in the agriculture
to the upper-middle segment. The risk-reward ratio looks
sector. If soft commodity prices continue to increase, there
more attractive as some names now trade near their historical
could be some boost to consumers’ discretionary income,
low multiples. However, given the still nascent demand
especially those residing outside Java. A better demand
recovery, we advise investors to focus on company-specific
environment would allow consumer staples producers to pass
positive drivers. For these reasons, we like MAPI as we believe
on any cost inflation to consumers in a more aggressive
its ongoing store rationalisation and selective expansion in
manner without compromising volume or market share.
F&B business would continue to drive profitability
Hence, companies can maintain its profitability.
improvement in 2017.
As for retailers, higher household income should spur

Changes in forecast and recommendation
discretionary spending – thus leading to improvement in
retailers’ operating leverage. As the retailers trade at
MAPI – raise earnings forecasts and TP; upgrade to BUY. We
historically low multiples, a faster-than-expected demand
raise our EBIT margin assumptions following better-than-
recovery would easily spur the re-rating of their share price, in
expected results in 3Q16. Consequently, our 16F/17F EBITDA
our view.
is now 14% higher. We now forecasts 14% and 58% y-o-y
growth in FY17F EBITDA and net profit respectively.
Rupiah is a key risk to our view
We roll over our valuation base to 2017 and assign higher
multiples to MAPI’s specialty store (retail sales) business given
We expect external factors to strongly influence the strength
the improvement in profitability. Our new TP of Rp6,600
of the rupiah in 2017. Import or USD-linked content in staples
implies 8.2x 17F EV/EBITDA, 0.7SD below its mean multiple in
companies is generally high with the portion to COGS
the past five years and 30% discount to regional peers’
reaching up to 50%. As the rupiah depreciates, import costs
average multiple of 12x.
would be more expensive – thus resulting in margin
compression and a drop in purchasing power. Our economist
MPPA – significant cut in net profit forecasts; revised down
forecasts the rupiah to average Rp13,608/USD in FY17
TP. Following the persistently weak results in 9M16, we cut
(Rp13,876/USD at end of 2017), with the base assumptions of
MPPA’s FY16/FY17F net profit forecasts by 61%/27%. While
the US Fed hiking its benchmark rate four times by 25bps
we forecast a strong earnings recovery in FY17, we believe
each and the BI hiking its benchmark rate once by 25bps in
market has set a high bar for its earnings – with consensus
2017. Among retailers, MAPI would be the most affected if
forecasting MPPA’s net profit to reach Rp279bn in FY17,
the rupiah depreciates sharply against USD as 18% of its
implying 261% y-o-y growth from our lowered FY16 net
COGS are USD-denominated.
profit forecast. Moreover, the stock now trades at a lofty
valuation of 39x PE FY17F vs. regional supermarkets which
trade at 22x PE FY17F on average. We roll over our valuation
base to FY17F. Our TP is now at Rp1,060 (pegged to MPPA’s
historical mean PE of 29x). Maintain FULLY VALUED.
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Industry Focus
Indonesia Consumer
UNVR – revised up earnings on better-than-expected Summary of recommendation changes

T arget Pric e
operational efficiency. We revise up UNVR’s FY16/FY17 net Rec ommendat ion
O ld New Change
profit forecasts by 7% for better cost control. Our FY17F net UNV R 30,700 36,200 18% Maintain F ully V alued
profit is now 8% below consensus as we assume lower MYOR 1,568 1,700 8% Maintain Hold
margin in FY17F on the back of higher raw material costs, ICBP 9,800 9,000 -8% Maintain Hold
INDF 9,900 9,100 -8% Maintain Buy
particularly palm oil. Our FULLY VALUED call is unchanged as LPPF 20,300 16,200 -20% Maintain Hold
we believe UNVR’s lofty valuation of 49x PE FY17F is not MAPI 4,150 6,600 59% Upgrade to Buy from Hold
justified by its earnings growth prospect. MPPA 1,160 1,060 -9% Maintain F ully V alued
Source: DBS Vickers, DBS Bank
Summary of earnings forecast changes
F Y 16F net prof it F Y 17F net prof it
O ld New Change Old New Change
UNV R 5,836 6,247 7% 6,138 6,564 7%
MYOR 1,264 1,305 3% 1,431 1,454 2%
ICBP 3,660 3,660 0% 3,953 3,868 -2%
INDF 3,927 3,927 0% 4,529 4,545 0%
LPPF 2,130 2,095 -2% 2,429 2,357 -3%
MAPI 180 191 6% 286 302 6%
MPPA 197 77 -61% 267 196 -27%
A ggregat e 17,194 17,502 2% 19,033 19,287 1%
Page 9
Page 9
Industry Focus
Indonesia Consumer
Indonesian consumer sector: valuation summary

Compa ny ICBP INDF M YOR UNVR M A PI LPPF M PPA
Market cap (US$m) 7,438 5,238 3,062 23,888 676 3,355 551
Share price (Rp)* 8,500 7,950 1,825 41,725 5,425 15,325 1,365
Recommendation HOLD BUY HOLD FULLY VALUED BUY HOLD FULLY VALUED
Target price 9,000 9,100 1,700 36,200 6,600 16,200 1,060
Upside (downside) 6% 14% -7% -13% 22% 6% -22%
PE ( x)
FY15A 33.0 23.5 33.4 54.4 241.2 25.1 40.1
FY16F 27.1 17.8 31.3 51.0 47.0 21.3 95.1
FY17F 25.6 15.4 28.1 48.5 29.8 19.0 37.4
FY18F 23.0 14.3 24.3 44.3 20.8 17.0 29.3
PB ( x)
FY15A 6.4 2.6 8.0 65.9 3.0 40.4 2.9
FY16F 5.7 2.4 6.8 65.8 2.9 22.9 2.9
FY17F 5.2 2.2 5.8 65.6 2.6 15.7 2.7
FY18F 4.6 2.1 5.0 65.4 2.4 11.7 2.6
EV/EBIT DA ( x)
FY15A 20.3 9.5 18.5 37.8 11.2 17.1 13.1
FY16F 17.2 9.1 16.9 35.4 8.1 14.9 14.6
FY17F 15.9 8.4 15.3 33.5 7.0 13.1 10.7
FY18F 14.3 7.5 13.5 30.5 6.0 11.4 9.0
Re ve nue growth
FY15A 5.7% 0.7% 4.6% 5.7% 8.5% 13.6% 2.5%
FY16F 9.8% 5.1% 12.3% 9.2% 10.3% 10.5% -0.4%
FY17F 8.8% 7.5% 13.9% 10.6% 12.3% 10.9% 9.4%
FY18F 9.2% 8.9% 12.9% 10.6% 12.7% 11.5% 9.0%
Ne t profit growth
FY15A 13.5% -24.7% 202.3% -1.3% -52.8% 25.5% -67.0%
FY16F 22.0% 32.3% 6.9% 6.8% 412.8% 17.6% -57.8%
FY17F 5.7% 15.7% 11.4% 5.1% 57.7% 12.5% 154.2%
FY18F 11.4% 7.7% 15.6% 9.6% 43.7% 11.6% 27.5%
Gros s ma rgin
FY15A 30.3% 26.9% 28.3% 51.1% 45.1% 35.2% 16.2%
FY16F 29.5% 26.8% 26.0% 50.5% 46.0% 35.5% 15.7%
FY17F 28.6% 26.8% 25.2% 49.6% 46.5% 35.9% 15.9%
FY18F 28.8% 26.8% 25.2% 49.4% 47.0% 36.1% 15.9%
EBIT ma rgin
FY15A 12.6% 11.5% 12.6% 21.8% 4.1% 14.4% 1.8%
FY16F 13.5% 11.8% 12.0% 21.3% 5.7% 14.8% 1.3%
FY17F 13.4% 12.0% 11.5% 20.3% 5.9% 15.2% 2.1%
FY18F 13.6% 12.5% 11.5% 20.2% 6.2% 15.4% 2.4%
Ne t ge a ring
FY15A Net cash 24% 29% 18% 51% Net cash 9%
FY16F Net cash 18% 24% 27% 49% Net cash 16%
ROA E
FY15A 19.4% 10.9% 24.0% 121.2% 1.3% 161.0% 7.3%
FY16F 21.2% 13.4% 21.8% 129.1% 6.1% 107.2% 3.0%
FY17F 20.1% 14.4% 20.7% 135.3% 8.8% 82.9% 7.3%
FY18F 20.2% 14.4% 20.5% 147.7% 11.4% 68.8% 8.8%
Source: DBS Vickers, DBS Bank, Bloomberg Finance L.P
Page 10
Page 10
Industry Focus
Indonesia Consumer
Regional peer comparison

EV/EBIT DA EV/EBIT DA EPS growth EPS growth
Compa ny PE 16F ( x) PE 17F ( x) PB 16F ( x) PB 17F ( x)
16F ( x) 17F ( x) 16F 17F
Indone s ia - Home a nd Pe rs ona l Ca re ( HPC)
Unilever Indonesia 51.0 48.5 35.4 33.5 65.6 65.4 7% 5%
Indone s ia - Food a nd Be ve ra ge
Indofood CBP Sukses Makmur 27.1 25.6 17.2 15.9 5.2 4.6 22% 6%
Indofood Sukses Makmur 17.8 15.4 9.1 8.4 2.2 2.1 32% 16%
Mayora Indah 31.3 28.1 16.9 15.3 5.8 5.0 7% 11%
Simple avg. 25.4 23.0 14.4 13.2 4.4 3.9
Indone s ia - Life s tyle Re ta ile rs
Matahari Department Store 21.3 19.0 14.9 13.1 15.7 11.7 18% 13%
Mitra Adi Perkasa 47.0 29.8 8.1 7.0 2.6 2.4 413% 58%
Ace Hardware Indonesia* 22.2 20.3 16.2 14.7 4.5 3.9 2% 9%
Ramayana Lestari Sentosa* 24.9 21.8 15.0 14.2 2.8 2.7 21% 15%
Simple avg. 28.9 22.7 13.6 12.3 6.4 5.2
Indone s ia - Groce ry Re ta ile rs
Matahari Putra Prima 95.1 37.4 14.6 10.7 2.7 2.6 -58% 154%
Indone s ia - HPC a nd S ta ple s a vg. 31. 8 29. 4 19. 7 18. 3 4. 4 3. 9
Indone s ia - Re ta ile rs a vg. 42. 1 25. 7 13. 8 11. 9 3. 2 2. 9
Re giona l - S ta ple s
S inga pore
Thai Beverage PCL 28.5 19.0 20.9 14.1 4.1 3.7 -29% 50%
Delfi Ltd 32.2 26.8 17.1 14.7 4.6 4.3 nm 20%
Super Group Ltd 30.1 29.5 14.7 14.4 2.5 2.4 1% 2%
Del Monte Pacific Ltd 9.3 13.1 10.0 10.5 1.5 1.3 nm -29%
JUMBO Group Ltd 31.0 22.4 17.3 14.3 6.4 5.5 46% 38%
Katrina Group Ltd 16.2 10.5 5.9 4.9 3.4 3.0 -16% 53%
T ha ila nd
Thai Union Group PCL 17.9 14.3 12.7 10.6 1.7 - 2% 25%
Taokaenoi Food & Marketing PCL 48.3 31.8 32.2 23.2 13.9 11.3 44% 52%
Philippine s
Universal Robina Corp 24.5 23.2 15.2 14.2 4.6 4.1 18% 6%
Jollibee Foods Corp 35.2 29.7 17.9 14.6 5.6 4.9 30% 18%
Emperador Inc 16.6 16.2 12.4 11.3 1.9 1.8 -1% 2%
Century Pacific Food Inc 21.5 19.0 15.7 12.7 3.9 3.3 39% 13%
M a la ys ia
QL Resources Bhd 29.0 26.4 16.6 14.9 3.2 2.9 0% 10%
MSM Malaysia Holdings Bhd 24.6 25.9 13.3 13.1 1.6 1.6 -53% -5%
Oldtown Bhd 16.4 14.8 8.0 7.3 2.2 2.1 9% 11%
Re giona l - S ta ple s a vg. 25. 4 21. 5 15. 3 13. 0 4. 1 3. 5
Re giona l - Re ta ile rs
S inga pore
Dairy Farm 26.0 24.0 16.1 14.6 6.6 5.9 4% 8%
Sheng Siong Group Ltd 22.0 19.8 16.5 15.2 5.6 5.4 13% 11%
Courts Asia Ltd 11.4 8.8 6.6 6.5 0.7 0.7 21% 30%
T ha ila nd
CP All PCL 33.5 27.1 19.8 17.2 11.0 9.6 19% 24%
Big C Supercenter PCL 22.4 19.7 12.6 11.0 3.0 - 15% 13%
Minor International PCL 22.9 28.0 17.9 16.6 3.8 3.4 -2% -18%
Home Product Center PCL 30.7 26.6 15.8 13.8 5.0 4.2 16% 15%
Philippine s
Robinsons Retail Holdings Inc 22.7 20.0 14.0 11.9 2.1 1.9 13% 14%
Puregold Price Club Inc 22.0 19.8 11.8 10.3 2.6 2.3 13% 11%
M a la ys ia
Padini Holdings Bhd 11.4 10.1 6.3 5.5 2.9 2.5 71% 13%
Re giona l - Re ta ile rs a vg. 22. 5 20. 4 13. 8 12. 3 4. 3 3. 6
*Not rated; forecasts based on Bloomberg consensus
Page 11
Page 11
Industry Focus
Indonesia Consumer
COMPANY GUIDES
COMPANY GUIDES
COMPANY
COMPANY GUIDES
GUIDES
COMPANY GUIDES
Page 12
Page 12
Indonesia Company Guide
Indofood CBP Sukses Makmur
Version 6 | Bloomberg: ICBP IJ | Reuters: ICBP.JK Refer to important disclosures at the end of this report
HOLD A less exciting year

Last Traded Price ( 8 Feb 2017): Rp8,500 (JCI : 5,361.10)
Price Target 12-mth: Rp9,000 (6% upside) (Prev Rp9,800) Input cost tailwind dissipates. ICBP’s share price has
underperformed the JCI by 15% since early Sep 2016, possibly
Potential Catalyst: Further drop in raw material prices, particularly owing to concerns over rising raw material prices. As mentioned
wheat, and rupiah appreciation in our previous report, we believe ICBP’s margin had peaked in
Where we differ: Broadly in line with consensus
3Q16 and would moderate going forward as the prices of its
Analyst key raw materials, namely CPO, sugar, milk powder and recently
Tiesha PUTRI +6221 30034931 tiesha.narandha@id.dbsvickers.com chilli, have risen considerably.
Andy SIM CFA +65 6682 3718 andysim@dbs.com
Pre-emptive price increase for noodles in Jan 2017. The
What’s New company raised its noodle ASP by Rp100/pack in early January
• Margin to moderate as key raw material prices 2017, translating to 4-5% hike. We believe this price hike is a
namely CPO, sugar and milk powder have rallied pre-emptive move taken to preserve its profitability in 2017.
ICBP remains the price leader in the domestic noodle market
• ICBP raised noodle prices by 4-5% in early January with a market share of 71-72% in the past five years. The
2017
noodle segment contributed to 65% and 75% of ICBP’s
• Maintain HOLD; TP cut to Rp9,000 consolidated revenue and EBIT respectively. An improving
demand environment and the strong pricing power of ICBP’s
noodle products are two things that it can leverage on to
Price Relative prevent a sharp margin contraction.
2017 outlook: expecting deceleration in earnings growth.

Looking ahead to 2017, we expect earnings to only grow by 6%
y-o-y as input cost rises. This is a deceleration from 22% y-o-y
growth that we projected for FY16. For this reason, we lower
our PE multiple to 27x PE FY17F or +1SD of ICBP’s five-year
mean PE (from +29x or +2SD above mean PE previously). Our
revised TP of Rp9,000 only provides limited upside from the last
Forecasts and Valuation closing price. Upside risks to our call would be faster-than-
FY Dec (Rp m) 2015A 2016F 2017F 2018F
expected turnaround of its loss-making beverage business and
Revenue 31,741 34,848 37,900 41,380 market share gain, particularly for its less mature segments such
EBITDA 4,691 5,473 5,864 6,451
Pre-tax Profit 4,010 4,972 5,255 5,853
as dairy.
Net Profit 3,001 3,660 3,868 4,308
Net Pft (Pre Ex.) 3,001 3,660 3,868 4,308 Valuation:
Net Pft Gth (Pre-ex) (%) 13.5 22.0 5.7 11.4 Our TP of Rp9,000 is based on 27x FY17F PE or +1SD of ICBP’s
EPS (Rp) 257 314 332 369 five-year historical mean PE.
EPS Pre Ex. (Rp) 257 314 332 369
EPS Gth Pre Ex (%) 13 22 6 11
Diluted EPS (Rp) 257 314 332 369 Key Risks to Our View:
Net DPS (Rp) 129 157 166 185 Rapid rupiah depreciation and commodity price hikes could
BV Per Share (Rp) 1,325 1,482 1,648 1,833 hurt ICBP’s margins as they directly impact input costs.
PE (X) 33.0 27.1 25.6 23.0
PE Pre Ex. (X) 33.0 27.1 25.6 23.0
At A Glance
P/Cash Flow (X) 28.4 21.7 22.3 20.3
EV/EBITDA (X) 20.3 17.2 15.9 14.3 Issued Capital (m shrs) 11,662
Net Div Yield (%) 1.5 1.8 2.0 2.2 Mkt. Cap (Rpbn/US$m) 99,126 / 7,434
P/Book Value (X) 6.4 5.7 5.2 4.6 Major Shareholders (%)
Net Debt/Equity (X) CASH CASH CASH CASH PT Indofood Sukses Makmur (%) 80.5
ROAE (%) 19.4 21.2 20.1 20.2 Free Float (%) 19.5
Earnings Rev (%): 0 (2) (1) 3m Avg. Daily Val (US$m) 2.7
Consensus EPS (Rp): 594 N/A N/A ICB Industry : Consumer Goods / Food Producers
Other Broker Recs: B: 16 S: 1 H: 12
Source of all data on this page: Company, DBS Vickers, Bloomberg
Finance L.P
ASIAN INSIGHTS VICKERS SECURITIES

Page 13
ed: CK / sa:MA, PY
Company Guide
Revenue Mix Trend and Forecasts

Rp bn
CRITICAL DATA POINTS TO WATCH 45,000
40,000
Earnings Drivers: 35,000
Noodle segment the primary earnings driver. The noodle 30,000

25,000
segment was ICBP’s primary revenue and earnings contributor
20,000
in FY15, at 66% and 89% respectively. This is also its strongest 15,000
product segment, capturing 71% market share in Indonesia to 10,000
maintain a comfortable lead over its closest competitor which 5,000
has 15% market share. The strong lead allows it to be a price- -
2013A 2014A 2015A 2016F 2017F
maker in the segment, which is an advantage during times of
rising costs and slowing demand. Instant noodles are the Noodles Dairy Snack foods Food seasonings Nutrition & SF Beverages
preferred substitute to rice by many Indonesians, hence, the

EBIT Mix Trend and Forecasts
resilient demand for the product. In an attempt to improve its
Rp bn
product mix, the company has recently become more active in 6,000
launching premium products with pricing points of more than
5,000
3x higher compared to its regular instant noodles.
4,000
Beverage segment to turn around in 2017-18. To diversify its 3,000
revenue and earnings, ICBP has expanded into the beverage 2,000
business by forming a JV with Asahi, one of the largest 1,000
beverage producers in Japan. Its products include RTD green
-
tea, RTD coffee, and bottled drinking water. It started 2013A 2014A 2015A 2016F 2017F
(1,000)
operations in 4Q13 and aims to break even at the operating
Noodles Dairy Snack foods Food seasonings Nutrition & SF Beverages
profit level in 2017-18. We remain confident that ICBP’s
expertise in consumer products, coupled with Indofood’s
CBOT Wheat Price
extensive distribution network, would help ICBP to establish its 650
presence in the under-tapped domestic RTD beverage market.
600
550
Rupiah strength and commodity prices are key margin drivers.
500
The primary ingredient for noodles is wheat flour, which ICBP
450
obtains through its sister company – Bogasari. Palm oil,
400
skimmed milk powder, potatoes and chilies are also ingredients
350
for ICBP. Most of the soft commodities such as wheat and milk
300
powder are imported, which means that their costs are affected Jan-15 Jul-15 Jan-16 Jul-16 Jan-17
by the strength of the rupiah. Hence, ICBP’s margins will be CBOT wheat (cents/bu.) Quarterly avg. price
dampened by a rapid depreciation of the rupiah, as well as
fluctuations in commodity prices. Skim Milk Powder Price
2,400
2,300
New products and markets to drive top-line growth. In
2,200
December 2014, ICBP entered into a JV with Oji Holding 2,100
Corporation, a Japanese company that produces paper diapers. 2,000
The business plans and objectives are still unclear, but this 1,900
would be another product line to drive top-line growth going 1,800

1,700
forward. We note that the sales volume of baby diapers in
1,600
Indonesia has been the most resilient among all the FMCG 1,500
categories. Jan-15 Jul-15 Jan-16 Jul-16 Jan-17
Skim milk powder (EUR/MT) Quarterly avg. price
Source: Company, DBS Vickers

Page 2 Page 14
Company Guide
Leverage & Asset Turnover (x)

Balance Sheet:
Strong cash position with a steady cash conversion cycle. As at
the end of 2015, ICBP had Rp7.66tn (US$575m) cash on its
balance sheet. This will allow the company to tap on attractive
acquisitions and/or joint ventures. Furthermore, cash conversion
cycle was strong at 33.2 days (at end-2015), and the trend has
been improving over the past four years. The company has been
paying out 50% of earnings as dividends to shareholders.
Share Price Drivers:

Soft commodity prices and rupiah. The majority of ICBP’s raw
Capital Expenditure
materials are priced in US dollars; these include wheat flour,
skimmed milk powder, potato, and palm oil. Therefore, the
strength of the rupiah and volatile commodity prices would
affect margins. During periods of bad harvests, a supply deficit
would inflate the price of the affected commodity. This would
lead to expectations of weaker margins, and pressure the share
price.
Economic recovery. When GDP growth meets market

expectations, it is normally favourable for staple food companies
like ICBP. This would raise expectations for higher sales volumes ROE (%)
and top-line growth, which could lift the share price.
Key Risks:
Rupiah depreciation and commodity price hike. ICBP is
susceptible to these because it is exposed to imported raw
materials such as wheat flour and milk powder.
Cost pressure after adjustments to fuel price. The higher fuel

price generally leads to higher costs of goods and services,
which would crimp margins if the company is unable to raise
selling prices. Forward PE Band (x)
Company Background
Indofood CBP Sukses Makmur (ICBP) is a 80.5%-subsidiary of
Indofood Sukses Makmur PT (INDF IJ). It is the Consumer
Branded Products arm of INDF, with noodles its biggest
revenue and profit contributor. In the domestic market, ICBP’s
flagship brand Indomie holds the largest market share for
instant noodles at 71%. Other segments in the company
include dairy, snack food, food seasoning, beverage, and
nutritional food.
PB Band (x)

Page 15 Page 3
Company Guide
Segmental Breakdown
FY Dec 2014A 2015A 2016F 2017F 2018F
Revenues (Rpbn)
Others include nutritional
Noodles 19,916 20,996 22,903 24,312 26,080
and special foods and
Dairy 5,248 5,880 6,715 7,833 8,967 elimination
Snack Foods 2,002 1,989 2,358 2,594 2,853
Food Seasonings 1,146 1,247 1,348 1,458 1,577
Others 1,923 1,842 1,799 2,038 2,309
Total 30,023 31,741 34,848 37,900 41,380
Operating Profit (Rpbn)
Noodles 3,022 3,479 3,893 4,012 4,303
Dairy 322 569 873 956 1,094
Snack Foods 27.5 83.9 130 130 143
Food Seasonings 88.7 91.3 80.9 87.5 94.6
Others (352) (331) (288) (143) (46.2)
Total 3,185 3,992 4,714 5,068 5,615
Operating Profit Margins
Noodles 15.2 16.6 17.0 16.5 16.5
Dairy 6.1 9.7 13.0 12.2 12.2
Snack Foods 1.4 4.2 5.5 5.0 5.0
Food Seasonings 7.7 7.3 6.0 6.0 6.0
Others (18.3) (18.0) (16.0) (7.0) (2.0)
Total 10.6 12.6 13.5 13.4 13.6
Income Statement (Rpbn)

FY Dec 2014A 2015A 2016F 2017F 2018F
Revenue 30,023 31,741 34,848 37,900 41,380
Cost of Goods Sold (21,922) (22,122) (24,568) (27,053) (29,455)
Gross Profit 8,100 9,619 10,280 10,847 11,926
Other Opng (Exp)/Inc (4,915) (5,627) (5,566) (5,779) (6,311)
Operating Profit 3,185 3,992 4,714 5,068 5,615
Other Non Opg (Exp)/Inc 0.0 0.0 0.0 0.0 0.0
Associates & JV Inc (0.7) (94.1) 0.0 0.0 0.0
Net Interest (Exp)/Inc 261 175 258 187 238
Exceptional Gain/(Loss) 0.0 (63.3) 0.0 0.0 0.0
Pre-tax Profit 3,445 4,010 4,972 5,255 5,853
Tax (871) (1,087) (1,243) (1,314) (1,463)
Minority Interest 70.7 77.6 (69.1) (73.0) (81.3)
Preference Dividend 0.0 0.0 0.0 0.0 0.0
Net Profit 2,645 3,001 3,660 3,868 4,308
Net Profit before Except. 2,645 3,001 3,660 3,868 4,308
EBITDA 3,805 4,691 5,473 5,864 6,451
Growth
Revenue Gth (%) 19.6 5.7 9.8 8.8 9.2
EBITDA Gth (%) 16.0 23.3 16.7 7.2 10.0
Opg Profit Gth (%) 14.9 25.3 18.1 7.5 10.8
Net Profit Gth (Pre-ex) (%) 18.9 13.5 22.0 5.7 11.4
Margins & Ratio
Gross Margins (%) 27.0 30.3 29.5 28.6 28.8
Opg Profit Margin (%) 10.6 12.6 13.5 13.4 13.6
Net Profit Margin (%) 8.8 9.5 10.5 10.2 10.4
ROAE (%) 19.4 19.4 21.2 20.1 20.2
ROA (%) 10.6 11.3 12.7 12.4 12.8
ROCE (%) 11.5 13.3 14.8 14.7 15.0
Div Payout Ratio (%) 49.2 50.0 50.0 50.0 50.0
Net Interest Cover (x) NM NM NM NM NM

Page 4 Page 16
Company Guide
Quarterly / Interim Income Statement (Rpbn)

FY Dec 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016
Revenue 7,545 7,645 8,922 9,253 8,296

Gross Profit 2,315 2,227 2,809 2,951 2,700
Other Oper. (Exp)/Inc (1,311) (1,432) (1,477) (1,545) (1,469)
Operating Profit 1,004 796 1,332 1,406 1,232
Associates & JV Inc (41.8) (9.1) (20.7) (43.9) (20.6)
Net Interest (Exp)/Inc (71.2) 153 35.4 15.6 45.6
Exceptional Gain/(Loss) 0.0 (63.3) 0.0 0.0 0.0
Pre-tax Profit 891 876 1,346 1,378 1,257
Tax (237) (280) (348) (328) (354)
Minority Interest 50.9 (39.7) (53.9) (15.2) (50.3)
Net Profit 706 557 945 1,035 853
Net profit bef Except. 706 620 945 1,035 853
EBITDA 1,180 980 1,514 1,588 1,419
Growth
Revenue Gth (%) (12.1) 1.3 16.7 3.7 (10.3)
EBITDA Gth (%) (12.9) (17.0) 54.5 4.9 (10.6)
Opg Profit Gth (%) (15.1) (20.8) 67.4 5.6 (12.4)
Net Profit Gth (Pre-ex) (%) (25.1) (12.1) 52.4 9.5 (17.6)
Margins
Gross Margins (%) 30.7 29.1 31.5 31.9 32.5
Opg Profit Margins (%) 13.3 10.4 14.9 15.2 14.8
Net Profit Margins (%) 9.4 7.3 10.6 11.2 10.3
Balance Sheet (Rpbn)

FY Dec 2014A 2015A 2016F 2017F 2018F
Net Fixed Assets 5,810 6,556 7,298 8,001 8,665

Invts in Associates & JVs 0.0 0.0 0.0 0.0 0.0
Other LT Assets 5,598 6,044 6,044 6,044 6,044
Cash & ST Invts 7,285 7,643 8,880 9,894 11,124
Inventory 2,813 2,547 2,976 3,277 3,568
Debtors 3,103 3,513 3,412 3,703 4,046
Other Current Assets 421 258 258 258 258
Total Assets 25,030 26,561 28,868 31,177 33,705
ST Debt 1,805 1,395 1,395 1,395 1,395

Creditor 2,756 2,581 2,989 3,291 3,583
Other Current Liab 1,648 2,027 2,027 2,027 2,027
LT Debt 1,590 1,432 1,432 1,432 1,432
Other LT Liabilities 2,647 2,740 2,740 2,740 2,740
Shareholder’s Equity 13,656 15,455 17,285 19,219 21,373
Minority Interests 929 932 1,001 1,074 1,156
Total Cap. & Liab. 25,030 26,561 28,868 31,177 33,705
Non-Cash Wkg. Capital 1,933 1,711 1,631 1,921 2,262

Net Cash/(Debt) 3,891 4,817 6,054 7,068 8,298
Debtors Turn (avg days) 37.7 40.4 35.7 35.7 35.7
Creditors Turn (avg days) 47.2 44.0 45.8 45.8 45.7
Inventory Turn (avg days) 48.2 43.4 45.6 45.6 45.5
Asset Turnover (x) 1.2 1.2 1.2 1.2 1.2
Current Ratio (x) 2.2 2.3 2.4 2.6 2.7
Quick Ratio (x) 1.7 1.9 1.9 2.0 2.2
Net Debt/Equity (X) CASH CASH CASH CASH CASH
Net Debt/Equity ex MI (X) CASH CASH CASH CASH CASH
Capex to Debt (%) 34.3 49.4 53.1 53.1 53.1
Z-Score (X) 8.3 8.6 8.5 8.4 8.3

Page 17 Page 5
Company Guide
Cash Flow Statement (Rpbn)

FY Dec 2014A 2015A 2016F 2017F 2018F
Pre-Tax Profit 3,445 4,010 4,972 5,255 5,853

Dep. & Amort. 619 699 758 796 836
Tax Paid (871) (1,087) (1,243) (1,314) (1,463)
Assoc. & JV Inc/(loss) 0.70 94.1 0.0 0.0 0.0
Chg in Wkg.Cap. 298 117 80.3 (290) (342)
Other Operating CF 369 (348) 0.0 0.0 0.0
Net Operating CF 3,861 3,486 4,568 4,447 4,884
Capital Exp.(net) (1,164) (1,396) (1,500) (1,500) (1,500)
Other Invts.(net) 0.0 0.0 0.0 0.0 0.0
Invts in Assoc. & JV (218) (619) 0.0 0.0 0.0
Div from Assoc & JV 0.0 0.0 0.0 0.0 0.0
Other Investing CF (368) (32.6) 0.0 0.0 0.0
Net Investing CF (1,750) (2,047) (1,500) (1,500) (1,500)
Div Paid (1,108) (1,295) (1,830) (1,934) (2,154)
Chg in Gross Debt 686 (29.9) 0.0 0.0 0.0
Capital Issues 0.0 0.0 0.0 0.0 0.0
Other Financing CF 135 59.5 0.0 0.0 0.0
Net Financing CF (287) (1,265) (1,830) (1,934) (2,154)
Currency Adjustments 22.6 144 0.0 0.0 0.0
Chg in Cash 1,847 318 1,238 1,013 1,230
Opg CFPS (Rp) 306 289 385 406 448
Free CFPS (Rp) 231 179 263 253 290
Target Price & Ratings History
Source: DBS Vickers

Analyst: Tiesha PUTRI
Andy SIM CFA

Page 6 Page 18
Indofood Sukses Makmur
Version 8 | Bloomberg: INDF IJ | Reuters: INDF.JK Refer to important disclosures at the end of this report
BUY Attractively valued

Price Target 12-mth: Rp9,100 (14% upside) (Prev Rp9,900) Maintain BUY on attractive valuation. INDF remains our top pick
in the regional consumer sector. Our BUY call is premised on
Potential Catalyst: Stronger pick-up in domestic consumption and INDF’s attractive valuation. Based on our calculation, the
recovery in CPO price company now trades at a 22% discount to its SOP valuation vs.
an average discount of 16% in the past five years. INDF offers a
cheaper entry to invest in ICBP, trading at 15x FY17F PE (0.7SD
Analyst below 5-year mean) vs. ICBP’s 26x FY17F PE (0.7SD above 5-
Tiesha PUTRI +6221 30034931 tiesha.narandha@id.dbsvickers.com year mean).
Minzhong divestment – a done deal. INDF’s shares have been
What’s New trading at a deep discount to its SOP valuation in the past three
• Attractive valuation; trades at 22% to its SOP years, which may be mainly attributable to the company’s
valuation venture into the cultivation business through the acquisition of
• Agribusiness to support earnings growth in FY17 China Minzhong Food Corporation (CMFC) in 2013. In 2016,
• Potential valuation upgrade post Minzhong INDF has divested a 52.94% stake in CMFC to Marvellous Glory
divestment Holdings Ltd., an SPV controlled by Anthoni Salim. The company
had received the entire cash payment of SGD416m and settled
part of its debt at the end of 2016. Post transaction, INDF
maintains a minority ownership (29.9% stakes) in CMFC. We
Price Relative
believe this positive development will help to narrow INDF’s
current discount to SOP valuation.
2017 outlook: getting a green boost from agribusiness. We

expect the recent commodity price rally to support the demand
recovery momentum in 2017, which would eventually translate
to stronger sales for consumer companies, including INDF. While
we expect higher raw material prices would weigh down the
Forecasts and Valuation margin of INDF’s consumer business, a more stable palm oil
FY Dec (Rp m) 2015A 2016F 2017F 2018F prices along with the recovery in FFB yield would support
Revenue 64,062 67,329 72,389 78,861 earnings recovery in INDF’s agribusiness segment. We expect
EBITDA 10,391 10,607 11,602 13,098 INDF to register 32%/16% net profit growth in FY16F/17F.
Pre-tax Profit 4,962 6,874 7,646 8,840
Net Profit 2,968 3,927 4,545 4,894 Valuation:
Net Pft (Pre Ex.) 2,968 3,927 4,545 4,894
Net Pft Gth (Pre-ex) (%) (24.7) 32.3 15.7 7.7
We raised our SOP-based TP to Rp9,900 (implying 19x FY17F
EPS (Rp) 338 447 518 557 PE) to factor in higher DCF-based TP of INDF’s agribusiness.
EPS Pre Ex. (Rp) 338 447 518 557 ICBP and agribusiness contributes 84% and 9% to our
EPS Gth Pre Ex (%) (25) 32 16 8 valuation, respectively, before a holding discount of 15%.
Diluted EPS (Rp) 338 447 518 557
Net DPS (Rp) 169 224 259 279
BV Per Share (Rp) 3,106 3,329 3,588 3,867 Key Risks to Our View:
PE (X) 23.5 17.8 15.4 14.3 Volatile commodity prices. Fluctuations in commodity prices
PE Pre Ex. (X) 23.5 17.8 15.4 14.3 could swing costs, and consequently, margins.
P/Cash Flow (X) 16.6 9.9 8.4 7.8
EV/EBITDA (X) 9.5 9.1 8.4 7.5
At A Glance
Net Div Yield (%) 2.1 2.8 3.3 3.5
P/Book Value (X) 2.6 2.4 2.2 2.1 Issued Capital (m shrs) 8,780
Net Debt/Equity (X) 0.3 0.2 0.2 0.2 Mkt. Cap (Rpbn/US$m) 69,804 / 5,235
ROAE (%) 10.9 13.4 14.4 14.4 Major Shareholders (%)
Earnings Rev (%): 0 0 (3) CAB Holding (%) 51.5
Consensus EPS (Rp): 458 502 574 Free Float (%) 48.5
Other Broker Recs: B: 26 S: 0 H: 0 3m Avg. Daily Val (US$m) 5.2
Source of all data on this page: Company, DBS Vickers, Bloomberg ICB Industry : Consumer Goods / Food Producers
Finance L.P

Page 19
ed: CK / sa:MA, PY
Company Guide
Sum-of-parts (SOP) valuation

EV
INDF 's A dj. EV
adj, t o INDF 's
Ent it y ef f ec t iv e per share Remark s
ow nership
shareholding (Rp)
(Rp bn)
DBS target price; pegged to 26x F Y17F EPS or
ICBP 80.5% 78,787 8,973 +1SD abov e historical mean (lowered from 29x
F Y17F EPS or +2SD abov e historical mean initially )
Bogasari 100.0% 12,814 1,459 6x F Y17F EV /EBITDA
Indofood Agri Resources 62.8% 9,801 1,116 DBS target price; DCF -based
Distribution 100.0% 2,280 260 6x F Y17F EV /EBITDA
China Minzhong 29.9% 499 57 Offer price for majority stake
Net debt/ cash (9,684) (1,103)
Holding company (14,175) (1,614)
diarget pric
T ( e) 80,324 9,100
Implied PE 17F 17.6
INDF’s SOP valuation discount trend in the past five years
50% INDF acquired INDF owned

29.33% stakes INDF divested
40% 82.88% stakes
in CMFC 52.94% stakes
30% in CMFC
in CMFC
20%
10%
0%
-10% -16%
-20%
-30% -22%
-40%
-50%
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Premium (discount) to RNAV Avg. Premium (discount) to RNAV

INDF’s SOP valuation vs. CPO price
50% 4,000
40%
30% 3,500
20%
10% 3,000
0%
-10% 2,500
-20%
-30% 2,000
-40%
-50% 1,500
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Premium (discount) to RNAV CPO price (RHS)


Page 2 Page 20
Company Guide
Revenue Trend and Forecasts

80,000 16%
70,000 14%
CRITICAL DATA POINTS TO WATCH
60,000 12%
50,000 10%
Earnings Drivers:
40,000 8%
Consumer Branded Products (CBP) segment is the primary
30,000 6%
earnings driver. In 2015, Indofood’s CBP segment contributed
20,000 4%
more than 50% of INDF’s EBIT. Agribusiness and Bogasari
10,000 2%
contributed 20% and 18% respectively. Growth in the CBP
0 -
segment is predominantly driven by the noodle business which 2013A 2014A 2015A 2016F 2017F
generated c.90% of ICBP’s earnings in FY15. Also, noodles are Revenue (Rp bn) Growth y-o-y (RHS)
considered a cheap substitute to rice for many Indonesians,
which is why noodle sales are relatively resilient even in a slow Net Profit Trend and Forecasts
economy. 5,000 70%
4,500 60%
4,000 50%
Wheat price and rupiah strength. Bogasari produces wheat 3,500 40%
flour, of which 30% is used by ICBP, 65% is sold to SMEs, and 3,000 30%
2,500 20%
the rest to retail consumers. Bogasari imports its entire wheat
2,000 10%
requirements, which means it is susceptible to fluctuations in 1,500 -
global wheat prices and the strength of the rupiah. It adjusts 1,000 (10%)
average selling price according to its costs, which eventually 500 (20%)
0 (30%)
affects ICBP’s margins. The sharp depreciation of the rupiah in 2013A 2014A 2015A 2016F 2017F
2013-14 had reduced EBIT margins at the CBP segment by Net profit (Rp bn) Growth y-o-y (RHS)
about 300bps to 10.2% in 2014 from 13.1% in 2012.
Margin Trend and Forecasts
CPO price and output. The Agribusiness segment, under 14.0%
62.8%-owned subsidiary Indofood Agri Resources (IFAR SP), is 12.0%
involved in both upstream and downstream operations. Our 10.0%

plantation analyst expects a flattish CPO price in FY17F, but 8.0%
sales volume recovery should help to boost Agribusiness’ 6.0%
performance next year with EBIT projected to grow 19% y-o-y
4.0%
in FY17F after staying flat y-o-y in FY16F. The Agribusiness
2.0%
segment contributed 20% and 15% of Indofood’s FY15 and
-
9M16 EBIT respectively. 2013A 2014A 2015A 2016F 2017F
EBIT margin Net margin

Recovery in the domestic economy. We are expecting a gradual
recovery in consumption going into 2017. This, coupled with CBOT Wheat Price
favourable soft commodity prices and stabilising rupiah, should 650
support INDF’s earnings growth, particularly for its CBP and 600
Bogasari segments. As for the latter, around 65% of Bogasari’s 550
wheat flour is sold to SMEs. Improving domestic consumer 500
demand would eventually lead to more business expansion by 450
SMEs and higher demand for wheat flour. 400
350
300
Competition in FMCG industry. Indonesia’s rising consumerism Jan-15 Jul-15 Jan-16 Jul-16 Jan-17
has attracted a number of new local and foreign players to the Wheat (cents/bu.) Quarterly avg. price
Fast Moving Consumer Goods (FMCG) industry. Rising

competition would dent INDF’s pricing power and top-line CPO Price
growth for its consumer goods products. In the event of rising 3,500
3,300
input costs, weak competitive position would result in INDF not 3,100
being able to pass through the rising costs, hence a drag on 2,900
2,700
earnings. 2,500
2,300
2,100
1,900
1,700
1,500
Jan-15 Jul-15 Jan-16 Jul-16 Jan-17
CPO price (MYR/MT) Quarterly avg. price

Page 21 Page 3
Company Guide

Balance Sheet:
Cash-rich; ready for attractive ventures. Indofood Sukses
Makmur had Rp11tr cash as at end-Sep 2016. This puts the
company in a comfortable position to take on acquisitions or
joint ventures that are in line with its vision of being a Total
Food Company.
Healthy debt ratio. Indofood had a debt-equity ratio of 0.6x as

at end-Sep 2016, which is reasonable. After the planned partial
divestment of CMFC, we expect the proceeds to be used to
pare down outstanding debts, and reduce the debt-equity ratio
Capital Expenditure
to 0.2x by end-2016.

INDF is exposed to fluctuations in wheat as well as crude palm
oil (CPO) prices. An increase in wheat price (as well as a weaker
rupiah) would translate into higher wheat flour price, which will
consequently reduce margins for ICBP’s noodle segment
(assuming no adjustment to noodle ASP). Overall, that would
hurt INDF as ICBP’s noodle segment accounts for c.40% of
INDF’s operating profit. Similarly, weak CPO prices will hurt the
Agribusiness segment, and consequently, INDF. These could ROE (%)
pressure INDF’s share price.
Key Risks:
Volatile commodity prices. Fluctuations in commodity prices
could swing costs, and consequently, margins.
Suppressed CPO price. Persistently low CPO prices could hurt

Agribusiness’ revenues and earnings.
Company Background
Indofood Sukses Makmur (INDF) is the largest instant noodle Forward PE Band (x)
and wheat flour manufacturer in Indonesia, has the largest
market share in the cooking oil market, and is also involved in
oil palm cultivation (through subsidiary, Indofood Agri
Resources), and other branded food products, including snack
food, food seasoning, specialty and nutrition food, and dairy
products.
PB Band (x)

Page 4 Page 22
Company Guide
Segmental Breakdown
FY Dec 2014A 2015A 2016F 2017F 2018F
Revenues (Rpbn)
Consumer Branded 29,921 31,736 34,848 37,900 41,380
Bogasari 19,926 19,177 18,381 19,124 19,896
Agribusiness 14,947 13,803 14,766 16,081 17,635
Distribution 4,865 4,978 5,065 5,446 6,601
Others (6,064) (5,632) (5,731) (6,162) (6,651)
Total 63,594 64,062 67,329 72,389 78,861
Consumer Branded 3,096 3,856 4,714 5,068 5,615
Bogasari 1,457 1,341 1,581 1,626 1,592
Agribusiness 2,235 1,506 1,486 1,762 2,396
Distribution 197 172 187 202 244
Others 532 533 0.0 0.0 0.0
Total 7,517 7,410 7,971 8,659 9,850
Consumer Branded 10.3 12.2 13.5 13.4 13.6
Bogasari 7.3 7.0 8.6 8.5 8.0
Agribusiness 15.0 10.9 10.1 11.0 13.6
Distribution 4.0 3.5 3.7 3.7 3.7
Others (8.8) (9.5) 0.0 0.0 0.0
Total 11.8 11.6 11.8 12.0 12.5

FY Dec 2014A 2015A 2016F 2017F 2018F
Revenue 63,595 64,062 67,329 72,389 78,861
Gross Profit 17,050 17,258 18,044 19,400 21,135
Other Non Opg (Exp)/Inc (51.1) (1,132) 0.0 0.0 0.0
Associates & JV Inc (119) (334) (162) (162) (162)
Net Interest (Exp)/Inc (809) (935) (935) (851) (848)
Exceptional Gain/(Loss) 0.0 0.0 0.0 0.0 0.0
Pre-tax Profit 6,340 4,962 6,874 7,646 8,840
Tax (1,856) (1,730) (1,994) (2,217) (2,564)
Minority Interest (543) (264) (954) (884) (1,382)
Net Profit 3,942 2,968 3,927 4,545 4,894
EBITDA 10,286 10,391 10,607 11,602 13,098
Growth
Revenue Gth (%) 14.3 0.7 5.1 7.5 8.9
EBITDA Gth (%) 17.9 1.0 2.1 9.4 12.9
Opg Profit Gth (%) 19.8 0.6 8.3 8.6 13.8
Net Profit Gth (Pre-ex) (%) 57.4 (24.7) 32.3 15.7 7.7
Margins & Ratio
Gross Margins (%) 26.8 26.9 26.8 26.8 26.8
ROAE (%) 15.7 10.9 13.4 14.4 14.4
ROA (%) 4.6 3.2 4.3 4.8 4.9
ROCE (%) 7.0 6.2 7.4 7.7 8.4
Div Payout Ratio (%) 50.0 50.0 50.0 50.0 50.0
Net Interest Cover (x) 9.0 7.9 8.5 10.2 11.6

Page 23 Page 5
Company Guide

FY Dec 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016
Revenue 14,929 16,498 16,516 17,568 15,782

Gross Profit 3,915 4,391 4,614 5,186 4,762
Other Non Opg (Exp)/Inc (1,125) 710 0.0 0.0 0.0
Associates & JV Inc (109) (50.6) (78.4) (116) 7.40
Net Interest (Exp)/Inc (286) (258) (69.8) (161) (56.8)
Exceptional Gain/(Loss) 29.9 55.7 101 82.6 86.2
Pre-tax Profit 83.6 2,395 1,832 1,941 1,955
Tax (97.0) (793) (468) (547) (613)
Minority Interest (34.0) (318) (278) (249) (333)
Net Profit (47.3) 1,284 1,086 1,146 1,009
Net profit bef Except. (77.2) 1,229 985 1,063 923
EBITDA 2,227 2,539 2,487 3,391 3,917
Growth
Revenue Gth (%) (15.2) 10.5 0.1 6.4 (10.2)
EBITDA Gth (%) (16.6) 14.0 (2.0) 36.3 15.5
Opg Profit Gth (%) (25.1) 23.1 (3.1) 13.6 (10.2)
Net Profit Gth (Pre-ex) (%) nm nm (19.9) 7.9 (13.2)
Margins
Gross Margins (%) 26.2 26.6 27.9 29.5 30.2
Net Profit Margins (%) (0.3) 7.8 6.6 6.5 6.4

FY Dec 2014A 2015A 2016F 2017F 2018F
Net Fixed Assets 30,575 34,184 33,644 36,701 39,452

Other LT Assets 14,488 14,831 14,669 14,507 14,345
Cash & ST Invts 14,823 14,167 13,272 13,351 13,843
Inventory 8,446 7,627 8,463 9,099 9,912
Debtors 4,358 5,117 5,350 5,318 5,794
Other Current Assets 13,386 15,906 15,906 15,906 15,906
Total Assets 86,077 91,832 91,303 94,882 99,253
ST Debt 10,096 10,712 10,712 10,712 10,712

Creditor 5,093 5,174 5,632 6,055 6,597
LT Debt 16,838 16,894 12,990 12,990 12,990
Other LT Liabilities 6,306 6,708 6,708 6,708 6,708
Minority Interests 15,170 15,852 16,806 17,689 19,072
Total Cap. & Liab. 86,077 91,832 91,303 94,882 99,253

Net Cash/(Debt) (12,110) (13,439) (10,430) (10,351) (9,859)
Asset Turnover (x) 0.7 0.7 0.7 0.8 0.8
Current Ratio (x) 1.8 1.7 1.7 1.7 1.7
Quick Ratio (x) 0.8 0.8 0.7 0.7 0.7
Net Debt/Equity (X) 0.3 0.3 0.2 0.2 0.2
Net Debt/Equity ex MI (X) 0.5 0.5 0.4 0.3 0.3
Capex to Debt (%) 17.5 12.8 25.3 25.3 25.3
Z-Score (X) 2.5 2.4 2.6 2.6 2.7

Page 6 Page 24
Company Guide

FY Dec 2014A 2015A 2016F 2017F 2018F
Pre-Tax Profit 6,340 4,962 6,874 7,646 8,840

Dep. & Amort. 2,467 2,448 2,637 2,943 3,249
Tax Paid (1,856) (1,730) (1,994) (2,217) (2,564)
Assoc. & JV Inc/(loss) 119 334 162 162 162
Chg in Wkg.Cap. (6,078) (501) (610) (181) (748)
Other Operating CF 8,277 (1,299) 0.0 0.0 0.0
Net Operating CF 9,269 4,214 7,069 8,352 8,940
Capital Exp.(net) (4,707) (3,525) (6,000) (6,000) (6,000)
Other Invts.(net) (3,937) 396 0.0 0.0 0.0
Invts in Assoc. & JV (461) (2,050) 3,904 0.0 0.0
Div from Assoc & JV 0.0 346 0.0 0.0 0.0
Other Investing CF (1,058) (833) 0.0 0.0 0.0
Net Investing CF (10,163) (5,666) (2,096) (6,000) (6,000)
Div Paid (1,247) (1,932) (1,964) (2,273) (2,447)
Chg in Gross Debt 3,109 2,162 (3,904) 0.0 0.0
Capital Issues 0.0 0.0 0.0 0.0 0.0
Other Financing CF (460) (371) 0.0 0.0 0.0
Net Financing CF 1,403 (141) (5,868) (2,273) (2,447)
Currency Adjustments 130 515 0.0 0.0 0.0
Chg in Cash 639 (1,078) (895) 79.2 492
Opg CFPS (Rp) 1,748 537 875 972 1,103
Free CFPS (Rp) 520 78.5 122 268 335
Source: DBS Vickers

Andy SIM CFA

Page 25 Page 7
Matahari Department Store
Version 5 | Bloomberg: LPPF IJ | Reuters: LPPF.JK Refer to important disclosures at the end of this report
HOLD No ray of hope yet

Price Target 12-mth: Rp16,200 (6% upside) (Prev Rp20,300) Cut TP to Rp16,200; HOLD call unchanged. LPPF’s share price
has de-rated sharply to near its record low PE since 2013 due to
the concerns of slower SSSG and rising capex after the company
Potential Catalyst: Strong pick-up in same-store sales growth
announced its plan to increase stakes in MatahariMall.com. It
Where we differ: Generally in line with consensus
now trades at 19x FY17F PE, -2.5SD below its historical mean PE
of 25x. Nevertheless, we see limited catalysts for the share price,
Analyst
Tiesha PUTRI +6221 30034931 tiesha.narandha@id.dbsvickers.com with household discretionary spending yet to show signs of
Andy SIM CFA +65 6682 3718 andysim@dbs.com bottoming.
Recovering SSSG to double-digit level would be a challenging
task. Excluding the impact of Lebaran seasonality shift in 1H16,
What’s New cumulative SSSG has consistently hovered at single-digit levels
• Lowering SSSG and earnings forecasts; maintain over the past one year. Management reiterated that the decline
HOLD with a lower TP of Rp16,200
in SSSG has nothing to do with competition, while the
• Share price has de-rated sharply; our DDM deterioration in 3Q16 was caused by the inventory assortment
valuation analysis suggests that it is fairly valued issue that management failed to address surrounding the
• Lack of catalysts, with discretionary spending yet Lebaran peak season. It is confident that this assortment issue
to show signs of bottoming has been addressed. However, we have yet to see a strong
recovery in discretionary spending. We expect LPPF’s SSSG to
only improve slightly to 7.1% in FY17F from 6.1% in FY16F.
Price Relative E-commerce foray – a long game. Following recent equity
raising for MatahariMall.com led by Mitsui & Co, LPPF is going
to inject Rp590bn cash into MatahariMall.com to avoid
ownership dilution. E-commerce in Indonesia only represents
c.2% of total retail sales but has grown at a spectacular pace.
The intensifying competition has caused customer acquisition
costs to remain elevated, hence funding is crucial to stay in the
game. A question remains on what step LPPF is going to take if
MatahariMall.com requires further equity injection in the future
to remain in the game. While management has announced the
Forecasts and Valuation plan to maintain its stakes in MatahariMall.com below 20%, the
FY Dec (Rp m) 2015A 2016F 2017F 2018F risk of LPPF having to inject more cash to avoid or limit
Revenue 9,007 9,949 11,033 12,304 ownership dilution still prevails should MatahariMall.com carry
EBITDA 2,564 2,906 3,286 3,682 out further capital raising in the future.
Pre-tax Profit 2,245 2,641 2,971 3,317
Net Pft (Pre Ex.) 1,781 2,095 2,357 2,631
Net Pft Gth (Pre-ex) (%) 25.5 17.6 12.5 11.6 We value LPPF at Rp16,200, based on 20x PE 17F (-2SD below
EPS (Rp) 610 718 808 902 its mean PE since 2013), on par with regional retailers.
EPS Pre Ex. (Rp) 610 718 808 902
EPS Gth Pre Ex (%) 25 18 13 12 Key Risks to Our View:
Diluted EPS (Rp) 610 718 808 902
Net DPS (Rp) 427 503 565 631
Slower-than-expected economic growth. LPPF’s target
BV Per Share (Rp) 379 670 975 1,311 segment makes up c.60% of the country’s population. A
PE (X) 25.1 21.3 19.0 17.0 further slowdown in the economy would impact this
PE Pre Ex. (X) 25.1 21.3 19.0 17.0 segment’s revenue growth, which would hurt its earnings.
P/Cash Flow (X) 20.6 18.7 16.2 14.4
EV/EBITDA (X) 17.1 14.9 13.1 11.4
Net Div Yield (%) 2.8 3.3 3.7 4.1 At A Glance
Net Debt/Equity (X) CASH CASH CASH CASH Mkt. Cap (Rpbn/US$m) 44,717 / 3,353
Earnings Rev (%): (2) (3) (6) Multipolar 20.5
Consensus EPS (Rp): 735 844 941 Asia Color 2.0
Other Broker Recs: B: 27 S: 2 H: 3 Free Float (%) 79.5
Source of all data on this page: Company, DBS Vickers, Bloomberg 3m Avg. Daily Val (US$m) 7.7
Finance L.P ICB Industry : Consumer Services / General Retailers

Page 26
ed: CK / sa:MA, PY
Company Guide
WHAT’S NEW
Fairly valued; lack of substantial positive catalysts ahead
SSSG had consistently hovered at single-digit levels, reflecting MatahariMall.com, possibly at a higher price. We note that in
the economic cycle. Following weaker-than-expected SSSG in 7M16, MatahariMall.com booked a significant loss of
3Q16, management has lowered its SSSG guidance for FY16 Rp490bn.
to 5%-6.5% vs. its initial guidance of 7%-7.5%.
PE multiple has de-rated sharply to 2.5SD below historical
Management claimed that the reason behind the weak 3Q16
mean. LPPF now trades at 19x PE 17F, -2.5SD below its
sales was the misstep in inventory assortment surrounding
historical mean since April 2013. The sharp de-rating in the
the Lebaran peak season, particularly for women’s apparels,
past month has brought down LPPF’s PE multiple to a level
rather than competition from online or specialty retailers. On
that is on par with regional peers despite having the highest
top of that, discretionary spending had remained muted in
ROE. We believe most of the negatives, including the increase
3Q16, which we believe also contributed to the decline in
of investment in MatahariMall.com, are already reflected in
SSSG.
the share price.
The subsequent chart shows that LPPF’s SSSG has broadly
The company generates more than enough operating cash
moved in line with nominal household consumption growth.
flow to cover its capex annually and even if we are to assume
We expect the demand recovery momentum to continue in
an increase in inventory days by 10 days in 2017 and 2018
2017 but only at a gradual pace. While demand for
due to a persistently weak demand environment or
necessities had generally improved in 3Q16, discretionary
management’s push toward direct purchase sales, our
household spending growth has yet to show signs of
calculation shows that LPPF can still generate Rp2.4tr/Rp2.6tr
bottoming as it further eased to 4.3% y-o-y in 4Q16, still
operating cash flow in 2017F/2018F. If the company
lagging behind non-discretionary household spending. We do
maintains a dividend payout ratio of 70% in the same period
not see a strong reason to expect a surge in nominal
and double its capex budget to Rp1tr per year, it can still fund
household consumption growth in the near future, which in
the expansion using internal cash.
the past year hovered between 7% and 8%. For this reason,
restoring SSSG to double-digit levels would be a challenging Our DDM valuation analysis suggests limited downside to
task for LPPF, in our view. We now project LPPF’s same-store current share price. We ran a three-stage DDM valuation
sales to grow by 6.1% in 2016F and 7.1% in 2017F (from analysis to estimate the level of reduction in potential future
7.6%/8.4% for FY16F/FY17F initially). We therefore lower our dividends that the current share price has priced in. Currently,
net profit forecasts by 2%/3% for FY16F/FY17F. We expect LPPF maintains a dividend payout ratio of 70% despite its
LPPF net profit to grow by 18% in FY16F and 13% in FY17F. ability to raise it to 100%. Our DDM model assumes LPPF will
grow its dividend at 13% CAGR over the next 10 years on
A change in strategy? LPPF has committed Rp590bn cash to
the back of: 1) 11% net profit and dividend CAGR in the first
be injected in stages into Lippo Group’s e-commerce arm
five years, 2) 7% net profit CAGR in the subsequent five years
MatahariMall.com from the end of 2016 to 3Q17. The
and a linear increase in dividend payout ratio (DPR) from 70%
additional investment is made to avoid LPPF’s ownership
in year-5 to 100% in year-10, and 3) stable growth rate of
dilution in MatahariMall.com, which recently raised equity of
6% from year-11 onwards. We assume SSSG of 6%-7% in
USD100m – led by Japan’s Mitsui & Co. Prior to this, LPPF
our model
owned a minority stake of 9.47% in MatahariMall.com.
Based on our calculation, LPPF’s current share price range of
There appears to be a change in management’s strategy with
Rp14,800-Rp15,700 implies a scenario of 32%-37% of
regard to LPPF’s investment in MatahariMall.com as it
annual operating cash flow or roughly Rp1.2tr-Rp1.5tr being
previously guided for no further investment in
retained to fund capex or working capital needs over the next
MatahariMall.com. Looking ahead, the company aims to
10 years. As a comparison, LPPF only allocates Rp450bn
maintain its stake in MatahariMall.com below 20%.
capex budget for FY16 (excluding investment in
In a statement release to the public, management stated that MatahariMall.com). This affirms our view that the current
it had not planned to participate in any further funding valuation has largely priced in a slowing SSSG and more
initiatives by MatahariMall.com, but the question remains on importantly the risk of significant rise in capex or investment
how far LPPF would let its stake in MatahariMall.com being as the company works to achieve its goal to become an
diluted should MatahariMall.com require further equity omnichannel retailer. Our key assumptions and sensitivity
raising after 3Q17. Not letting its stakes being diluted would analysis on the DDM valuation are presented on the
mean that LPPF has to top up its investment in subsequent page.

Page 2 Page 27
Company Guide
We see limited positive catalysts, especially since the demand Competition against online fashion retailers should not be
environment (particularly for discretionary spending) has yet overlooked. We visited some major online retailers’ websites
to show signs of an encouraging pick-up. What can surprise to get the on-the-ground perspective on how intense the
on the upside would be if LPPF manages to improve its competition is among the players. We focus our observation
profitability, be it from further opex efficiency or on key players in fashion retailing, an area where we see that
improvement in sales mix (toward more direct purchase), and LPPF has an edge over the competitors given its long
if there is further increase in its dividend payout ratio from experience in the field. We limit our observation to
the current level of 70%. blouse/shirt and t-shirt categories for both women and men.
We also visited LPPF’s first Nevada Store in Jakarta to compare
The company has continued to roll out initiatives to increase
the price offerings against online fashion retailers.
profitability, among which is to improve its sales mix. The
company recently opens its first specialty store in Jakarta, The highlights from our observation are:
called Nevada Store, to test the market. Nevada Store sells
i. Key players are crowding into middle-class apparel
LPPF’s private label apparels and shoes i.e. Nevada,
market. The Alibaba-backed Lazada, Zalora and
Connexion, Details, and Cole, which command higher
BerryBenka on average have 90% of SKU with final
margins compared to consigned merchandise. In 9M16, the
price (after discount) ranging between Rp100,000-
higher-margin direct purchase (DP) accounted for 36.7% of
300,000 (USD8-22). As a comparison, the average
LPPF’s gross sales (vs. 35.3% in 9M15). There is also room to
basket size of LPPF’s offline stores is c.USD20.
improve its sales mix if LPPF can increase sales of women’s
Increasing competition against online retailers
apparels, which command higher margins and currently only
should not be overlooked, especially since LPPF
contribute 8%-9% of total sales.
caters to the middle-class segment, which could
Indonesia’s Internet retailing landscape in brief. Indonesia’s turn increasingly price sensitive when the economy
retail landscape is still dominated by brick-and-mortar shops slows.
while Internet retailing only makes up a small fragment with a
ii. For LPPF’s private label items, discount on online
share of less than 2% of total retail sales. It nonetheless has
store nearly doubled that given on onffline stores.
grown at a spectacular pace with a CAGR of 45% in 2011-
Discounts given on MatahariMall.com are generally
2016, driven by the strong penetration of smart phones.
higher than those in Nevada Store (offline). We
Apparel and footware Internet retailing is the fastest growing
observed that a 20% promotional discount is given
category with a CAGR of 152% in 2011-2016. It represented
on apparels sold in Nevada Store. The similar items
24% of total Internet retailing revenue.
are sold at a 36% discount on MatahariMall.com. It
Indonesia’s Internet retailing is still in the early stages, which is worth noting that any promotional discount given
means gaining market share remains the main objective of for purchases made through MatahariMall.com is
the key players for the time being rather than turning the borne by LPPF. The impact of heavy online
business into a profitable venture. This keeps customer promotion is not significant for now as online sales
acquisition costs elevated given the tight competition among contribution is still small, at less than 1% of LPPF’s
existing and new players to attract traffic. Two key challenges total sales.
faced by online retailers in Indonesia are high unbanked
population (over 70% of population does not have a bank
account) and poor infrastructure.
LPPF’s SSSG vs. private consumption expenditure growth Cash flow and FCFF trend and forecasts
30.0 Rp bn
1H16 SSSG was
expectionally high due 3,500
25.0 to a shift in Lebaran 3,000
peak season.
2,500
20.0 2,000
1,500
15.0
1,000
500
10.0
0
5.0 (500) 2014A 2015A 2016F 2017F 2018F
(1,000)
(1,500)
SSSG, % (LHS) Private consumption GDP (current price), % Operating cash flow Cash flow from investing act. FCFF
Source: Company, DBS Vickers, Bloomberg Finance L.P Source: DBS Vickers

Page 28 Page 3
Company Guide
LPPF’s investment in MatahariMall.com

LPPF's
LPPF stakes in
Date investment in
GEI
GEI (Rp bn)
Feb-15 LPPF signed agreement to buy share purchase option of GEI
Aug-15 LPPF exercised option to buy 2.5% stakes 2.5% 32
Sep-15 LPPF's stakes in GEI was diluted after IDV purchased GEI's new shares 2.3% 32
Dec-15 LPPF's stakes in GEI was diluted after IDV purchased GEI's new shares 2.0% 32
Dec-15 LPPF exercised option to buy 4,404,700 shares in GEI 5.2% 85
Jan-16 LPPF exercised option to buy 7,864,075 stakes in GEI 9.5% 180
LPPF announced a plan to increase stakes to a max of 20% in GEI by
Nov-16
injecting Rp590bn in stages
LPPF issue public disclosure on its plan to acquire 7,326,495 shares in
Dec-16 GEI for Rp165bn (part of the investment plan announced in Nov-16)
before end of Jan-17
*GEI is the parent company of MatahariMall.com
Key assumptions for DDM valuation analysis Sensitivity matrix for DDM valuation
A ( ba s e ) B Risk-free rate
Cost of equity Avg. DPR in 7.5% 8.0% 8.5% 9.0%
High growth period (17F-22F) 14.5% 14.5% transition 85% 15,800 15,200 14,800 14,300
Transition period (23F-27F) 11.0% 11.0% period 100% 16,800 16,200 15,700 15,200
Stable growth period (28F onward) 6.0% 6.0%
NPV of dividends in high growth period (Rp bn) 8,235 8,235 Risk-free rate*
CAGR 11% 11% 7.5% 8.0% 8.5% 9.0%
Terminal growth*
DPR 70% 70% 4.0% 12,400 12,100 11,700 11,400

NPV of dividend in transition period (Rp bn) 7,456 8,773 4.5% 13,100 12,700 12,300 11,900
CAGR 15% 16% 5.0% 13,800 13,400 13,000 12,600
Avg. DPR 85% 100% 5.5% 14,700 14,200 13,800 13,400
NPV of dividends in stable growth period (Rp bn) 27,353 28,792 6.0% 15,800 15,200 14,800 14,300
DPR 100% 100% 6.5% 17,000 16,500 15,900 15,400
NPV ( Rp bn) 43, 044 45, 799
*Based on the assumption of 85% avg. DPR in transition period
NPV/s ha re ( Rp) 14, 800 15, 700
Source: DBS Vickers
Source: DBS Vickers
LPPF launched its first Nevada Store in Jakarta to test the market
Source: DBS Vickers

Page 4 Page 29
Company Guide
Quarterly SSSG Trend

50%
40%
Earnings Drivers:
Stable SSSG and new store openings. We assume 6.1%/7.1% 30%
SSSG, and the opening of 8/7 new stores in FY16F/17F. LPPF 20%
saw weaker SSSG in FY15 (i.e. 6.8%) because of generally 10%

weaker consumer spending and slower economy, especially in 0%
ex-Java islands such as Kalimantan where incomes have been
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
-10%
affected by low commodity prices and several closures of
-20%
commodity-related businesses. Kalimantan’s economy is
dependent on the commodity industry, such as coal-mining -30%
and oil palm cultivation. SSSG Same-store sales volume growth
Direct Purchase vs. Consignment Sales

LPPF opened 10-11 new stores annually in the past two years.
100% 37%
For 2017, we assume that LPPF will open 7seven new stores,
in line with management’s guidance. 80%
32% 34% 36% 37% 38% 39%
36%
60%
Recovery of consumer sentiment. LPPF’s target market is mid-
35%
low/middle income consumers, which make up about 60% of
40%
the country’s population. A pick-up in the consumer 68% 66% 64% 63% 62% 61%
34%
sentiment, represented by the Consumer Confidence Index, 20%
would help lift sales growth.

0% 33%
2013 2014 2015A 2016F 2017F 2018F
Larger share of retail sales to lift margins. LPPF operates two Consignment sales Retail sales (direct purchase)
main business segments: consignment sales and retail sales. Service fees Gross margin (RHS)
Gross margins from retail sales (or direct purchase) are higher
New Stores
than from consignment sales, at c.44% vs. c.31%. Going
forward, we expect retail sales to outpace consignment sales,
which would expand margins as the revenue mix shifts.
Expect net profit to grow at 12% CAGR (FY16F-18F). Our

earnings projection is premised on: (1) margin expansion
arising from a shift in revenue mix (we expect the higher-
margin retail sales to contribute 39% to LPPF’s gross revenue
in FY18 vs. 36% in FY15), (2) new stores openings, and (3) an
uptick in same-store sales growth as the economy recovers,
supported by a debt-free balance sheet and strong cash flow Same-Store Sales Growth (%)
generation.
Low exposure to USD/IDR volatility. More than 80% of LPPF’s

products are sourced locally, so margins are virtually
unaffected by the volatile rupiah. Currently, the rupiah is
hovering around Rp13,300 to the US dollar. Our in-house
forecast for the rupiah is Rp13,876 by the end of 2017,
implying 4% depreciation, assuming four 25bps fed rate hikes
in 2017. We like LPPF for its minimal exposure to the USD and
relatively stable earnings throughout our forecast period.

Page 30 Page 5
Company Guide

Balance Sheet:
An asset-light, debt-free company. At the end of 2015, LPPF
has paid off its outstanding debt, in line with its objective in
being debt-free by end of last year. The other positive aspect is
the company’s asset-light business model. We like that 100%
of LPPF’s stores are leased – 70% on 10-year fixed rent
contracts and 30% on revenue sharing contracts with the
space operator.
LPPF also does not rely heavily on distribution centres as its

effective supply chain allows for just-in-time inventory system;
Capital Expenditure
its goods are shipped to its stores nationwide within 48 hours
of arriving at the distribution centre. This business model has
allowed the company to improve its operating efficiency, and
its store and marketing initiatives have expanded net margins
over the past few years.

Better-than-expected same store growth. A recovery in the
domestic economy and a pick-up in consumer spending will
be reflected in better-than-expected SSSG for LPPF. In FY15,
LPPF stores recorded 6.8% SSSG, which was weak but ROE (%)
relatively better than peers’ amid the slow economy.
Key Risks:
Slower demand because of higher price of subsidised fuel
Increase in fuel price could reduce middle-low/middle income
consumers’ disposable income, subsequently reducing
discretionary spending.
Limited available space for expansion

LPPF’s store expansion could be slowed down if space
becomes more limited. This could lead to a slower-than- Forward PE Band (x)
expected revenue growth for the firm. 33
31
+2sd
29
Company Background +1sd
27
PT Matahari Department Store Tbk engages in the retail Avg.
25
business for several types of products such as clothes,
23
accessories, bags, shoes, cosmetics, and household -1sd
appliances. 21
-2sd
19
17
Apr-13 Apr-14 Apr-15 Apr-16 Apr-17
EV/EBITDA Band (x)

22.0
21.0
+2sd
20.0
19.0 +1sd
18.0
17.0 Avg.
16.0
-1sd
15.0
14.0 -2sd
13.0
12.0
Apr-13 Apr-14 Apr-15 Apr-16

Page 6 Page 31
Company Guide
Key Assumptions
FY Dec 2014A 2015A 2016F 2017F 2018F
New Stores 6.00 11.0 8.00 7.00 8.00
Same-Store Sales Growth 10.7 6.80 6.10 7.10 7.60
Segmental Breakdown
FY Dec 2014A 2015A 2016F 2017F 2018F
Gross Revenues (Rpbn)
Consignment sales 9,552 10,354 11,109 11,966 12,961
Retail sales (direct 4,899 5,729 6,420 7,219 8,159
Service fees 45.4 50.2 54.7 59.9 65.9
Total 14,496 16,133 17,584 19,246 21,185
Gross Profit (Rpbn) We forecast 9% growth
Consignment sales 2,981 3,228 3,474 3,754 4,079 in gross revenue in
Retail sales (direct 2,038 2,412 2,735 3,111 3,516 FY17F
Service fees 28.7 31.8 35.6 38.9 42.9
Total 5,048 5,671 6,245 6,905 7,638
Gross Profit Margins (%)
Consignment sales 31.2 31.2 31.3 31.4 31.5
Retail sales (direct 41.6 42.1 42.6 43.1 43.1
Service fees 63.3 63.4 65.0 65.0 65.0
Total 34.8 35.2 35.5 35.9 36.1

FY Dec 2014A 2015A 2016F 2017F 2018F
Revenue 7,926 9,007 9,949 11,033 12,304
Gross Profit 5,048 5,671 6,245 6,905 7,638
Other Non Opg (Exp)/Inc (27.1) 8.10 8.10 8.10 8.10
Associates & JV Inc 0.0 0.0 0.0 0.0 0.0
Net Interest (Exp)/Inc (233) (92.8) 23.7 34.8 44.9
Pre-tax Profit 1,851 2,245 2,641 2,971 3,317
Tax (431) (464) (546) (614) (686)
Minority Interest 0.0 0.0 0.0 0.0 0.0
Net Profit 1,419 1,781 2,095 2,357 2,631
EBITDA 2,318 2,564 2,906 3,286 3,682
Growth
Revenue Gth (%) 17.3 13.6 10.5 10.9 11.5
EBITDA Gth (%) 17.2 10.6 13.3 13.1 12.1
Opg Profit Gth (%) 18.5 10.3 12.0 12.2 11.5
Net Profit Gth (Pre-ex) (%) 23.4 25.5 17.6 12.5 11.6
Margins & Ratio
Gross Margins (%) 34.8 35.2 35.5 35.9 36.1
ROAE (%) 891.1 161.0 107.2 82.9 68.8
ROA (%) 41.6 45.8 43.4 39.9 36.9
ROCE (%) 122.9 118.4 85.9 70.4 60.5
Div Payout Ratio (%) 60.0 70.0 70.0 70.0 70.0
Net Interest Cover (x) 9.0 25.1 NM NM NM

Page 32 Page 7
Company Guide

FY Dec 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016
Revenue 2,892 2,194 1,862 3,318 2,343

Cost of Goods Sold (1,080) (816) (700) (1,196) (874)
Gross Profit 1,812 1,378 1,162 2,122 1,468
Other Oper. (Exp)/Inc (887) (832) (856) (967) (909)
Operating Profit 925 547 307 1,155 560
Other Non Opg (Exp)/Inc 2.50 5.60 1.70 (3.7) 0.40
Net Interest (Exp)/Inc (13.3) (48.5) 0.60 (2.4) 4.40
Pre-tax Profit 914 504 309 1,149 565
Tax (178) (107) (65.2) (235) (112)
Net Profit 736 397 244 913 453
Net profit bef Except. 736 397 244 913 453
EBITDA 988 615 367 1,219 627
Growth
Revenue Gth (%) 25.6 (24.1) (15.1) 78.2 (29.4)
EBITDA Gth (%) 49.7 (37.8) (40.3) 232.1 (48.5)
Opg Profit Gth (%) 53.6 (40.9) (43.9) 276.6 (51.5)
Net Profit Gth (Pre-ex) (%) 59.1 (46.1) (38.6) 274.7 (50.4)
Margins
Gross Margins (%) 34.4 35.3 35.3 36.6 35.0
Opg Profit Margins (%) 17.6 14.0 9.3 19.9 13.3 Margins based on
Net Profit Margins (%) 14.0 10.2 7.4 15.8 10.8 gross revenue

FY Dec 2014A 2015A 2016F 2017F 2018F
Net Fixed Assets 726 877 1,030 1,122 1,150

Other LT Assets 570 740 982 1,425 1,425
Cash & ST Invts 786 947 1,393 1,794 2,807
Inventory 955 1,008 1,100 1,238 1,411
Debtors 45.1 39.3 46.6 51.7 57.6
Total Assets 3,413 3,889 4,831 5,909 7,129
ST Debt 423 110 110 110 110

Creditor 1,411 1,552 1,645 1,833 2,072
Other Current Liab 685 777 777 777 777
LT Debt 410 0.0 0.0 0.0 0.0
Other LT Liabilities 325 344 344 344 344
Shareholder’s Equity 159 1,106 1,954 2,844 3,826
Minority Interests 0.0 0.0 0.0 0.0 0.0
Total Cap. & Liab. 3,413 3,889 4,831 5,909 7,129
Non-Cash Wkg. Capital (764) (1,002) (996) (1,042) (1,101)

Net Cash/(Debt) (46.8) 836 1,283 1,684 2,696
Asset Turnover (x) 2.3 2.3 2.1 1.9 1.7
Current Ratio (x) 0.8 0.9 1.1 1.2 1.5
Quick Ratio (x) 0.3 0.4 0.6 0.7 1.0
Net Debt/Equity (X) 0.3 CASH CASH CASH CASH
Net Debt/Equity ex MI (X) 0.3 CASH CASH CASH CASH
Capex to Debt (%) 32.5 343.0 407.8 407.8 404.0
Z-Score (X) 12.0 13.7 13.2 12.7 12.2

Page 8 Page 33
Company Guide

FY Dec 2014A 2015A 2016F 2017F 2018F
Pre-Tax Profit 1,851 2,245 2,641 2,971 3,317

Dep. & Amort. 207 234 297 358 418
Tax Paid (431) (464) (546) (614) (686)
Assoc. & JV Inc/(loss) 0.0 0.0 0.0 0.0 0.0
Chg in Wkg.Cap. (87.0) 240 (6.3) 46.0 58.7
Other Operating CF 167 (79.5) 0.0 0.0 0.0
Net Operating CF 1,705 2,175 2,386 2,761 3,108
Capital Exp.(net) (271) (379) (450) (450) (446)
Other Invts.(net) 0.0 0.0 0.0 0.0 0.0
Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0
Div from Assoc & JV 0.0 0.0 0.0 0.0 0.0
Other Investing CF 1.70 (84.6) (242) (443) 0.0
We have factored in
Net Investing CF (269) (463) (692) (893) (446) Rp590bn investment in
Div Paid (460) (851) (1,247) (1,467) (1,650) MatahariMall.com with
Chg in Gross Debt (988) (700) 0.0 0.0 0.0 25% of total
Capital Issues 0.0 0.0 0.0 0.0 0.0 investment being
Other Financing CF 0.0 0.0 0.0 0.0 0.0 disbursed in FY16F.
Net Financing CF (1,448) (1,551) (1,247) (1,467) (1,650)
Currency Adjustments 25.6 0.0 0.0 0.0 0.0
Chg in Cash 13.7 161 446 402 1,012
Opg CFPS (Rp) 614 663 820 930 1,045
Free CFPS (Rp) 492 616 663 792 912
Source: DBS Vickers

Andy SIM CFA

Page 34 Page 9
Matahari Putra Prima
Version 3 | Bloomberg: MPPA IJ | Reuters: MPPA.JK Refer to important disclosures at the end of this report
FULLY VALUED Facing high bar on earnings

Lowering expectations. We revise down our FY16/FY17 net
Price Target 12-mth: Rp1,060 (-22% downside) (Prev Rp1,160) profit forecasts by 61%/27%, as we cut our SSSG and margin
assumptions. Our forecasts are now 30-38% lower than
Potential Catalyst: Recovery in SSSG consensus. We expect the company to register 154% earnings
Where we differ: We assume more conservative revenue growth and growth in FY17, coming from a low base last year where it
margins suffered from a weak demand environment and intensifying
competition. Nonetheless, we believe the market has set a high
Analyst bar on earnings with consensus forecasting MPPA’s net profit to
Tiesha PUTRI +6221 30034931 tiesha.narandha@id.dbsvickers.com reach Rp265bn in FY17, implying 243% y-o-y growth from our
lowered FY16 net profit forecast. Meanwhile, the latest data has
yet to show any signs of improvement, with SSSG deteriorating
What’s New to -9.4% in 4Q16 (-4.5% in FY16) vs. -2.9% in 9M16.
• Cut FY16/FY17 earnings forecasts by 61%/27%; Plan to chip in more cash into MatahariMall.com. Following
maintain FULLY VALUED with lower TP
Rp190bn equity injection in 2015, MPPA is planning to inject
• 4Q16 SSSG deteriorated to -9.4% with ex-Java more cash into the online retailer. There are not much details
outlets yet to show signs of improvement
shared at this moment. We reserve our concern on this foray
• A plan to inject more cash into MatahariMall.com into e-commerce given the tight competition among players,
which would add to the challenge of turning the business
profitable. As a comparison, the payback period for an offline
store is 6-8 years, but cash flow typically turns positive within
Price Relative
one year. Online sales contribute less than 0.1% of MPPA’s sales
with a limited product offering (less than 10% of SKUs).
Potential change in shareholders. The media reported that
MPPA’s major shareholders, including Temasek, are planning to
sell their stakes in MPPA in a deal that could value MPPA at
USD1bn. This valuation implies a price of Rp2,500/share or 68x
FY17F PE, a significant premium to the regional average of 22x.
It was also reported that MPPA’s largest shareholder Multipolar
(MLPL) has yet to determine whether it would sell its stake.
Forecasts and Valuation MLPL has a 50.2% stake in MPPA, while Temasek, through
FY Dec (Rp m) 2015A 2016F 2017F 2018F Prime Star Investment, acquired MPPA for Rp2,050 per share
Revenue 13,929 13,866 15,165 16,534 back in 2013 and currently owns a 26.1% stake in MPPA.
EBITDA 578 534 739 859
Pre-tax Profit 233 98.0 250 319 Valuation:
Net Profit 183 77.0 196 250 We value MPPA at Rp1,060, pegged to its historical mean PE
Net Pft (Pre Ex.) 183 77.0 196 250
Net Pft Gth (Pre-ex) (%) (67.0) (57.8) 154.2 27.5
multiple of 29x.
EPS (Rp) 34.0 14.4 36.5 46.5
EPS Pre Ex. (Rp) 34.0 14.4 36.5 46.5 Key Risks to Our View:
EPS Gth Pre Ex (%) (67) (58) 154 28 Better-than-expected sales growth as well as improvement in
Diluted EPS (Rp) 34.0 14.4 36.5 46.5
operational efficiencies could lead to higher earnings.
Net DPS (Rp) 33.0 5.02 12.8 16.3
BV Per Share (Rp) 467 477 501 531 Change in shareholders. MPPA’s valuation could be supported
PE (X) 40.1 95.1 37.4 29.3 if sale by major shareholders fetches a premium price.
PE Pre Ex. (X) 40.1 95.1 37.4 29.3
P/Cash Flow (X) nm 18.6 12.3 10.4 At A Glance
EV/EBITDA (X) 13.1 14.6 10.7 9.0 Issued Capital (m shrs) 5,378
Net Div Yield (%) 2.4 0.4 0.9 1.2
Mkt. Cap (Rpbn/US$m) 7,341 / 551
P/Book Value (X) 2.9 2.9 2.7 2.6
Net Debt/Equity (X) 0.1 0.2 0.2 0.1 Major Shareholders (%)
ROAE (%) 7.3 3.0 7.3 8.8 Multipolar 50.2
Earnings Rev (%): (63) (27) (18) Prime Star Investment Pte. Ltd. 26.1
Consensus EPS (Rp): 25.2 49.9 59.1 Free Float (%) 23.7
Other Broker Recs: B: 11 S: 4 H: 5 3m Avg. Daily Val (US$m) 0.35
Source of all data on this page: Company, DBS Vickers, Bloomberg ICB Industry : Consumer Services / General Retailers
Finance L.P

ed: CK / sa:MA, PY
Company Guide
Basket price comparison among modern retailers

Hypermart
Product Brand Size Alfamidi Indomaret Transmart Giant
(MPPA IJ)
Soap bar Lux 85 gr 3,700 3,600 3,250 3,800 3,490
Detergent Rinso 900 gr 17,700 18,700 20,000 18,600 18,490
Liquid dish soap Sunlight 800 ml 14,800 14,900 15,175 14,450 13,390
Tooth paste Pepsodent 225 gr 13,200 12,500 12,575 13,150 10,590
Shampoo Clear 170 ml 24,700 24,700 17,990 20,800 19,590
Cooking oil Bimoli 1l 14,500 14,900 14,800 17,000 15,890
Margarine Blue Band 250 gr 11,400 10,900 10,690 11,250 9,990
Soy sauce Kecap Bango 135 ml 9,000 8,200 8,600 9,400 9,990
Wheat flour Bogasari Segitiga Biru 1 kg 10,500 9,900 10,910 10,900 9,290
Instant noodles Indomie Soto Mie flavour 70 gr 2,100 2,100 2,075 2,200 1,990
Sugar Private label 1 kg 15,900 15,200 15,550 17,820 15,490
Tea Sariwangi 25 pcs 5,800 5,100 5,490 6,180 4,890
Milk powder Dancow Fortigro 400 gr 43,200 43,500 42,875 43,000 40,790
Total 186,500 184,200 179,980 188,550 173,870

Rank (lowest to highest price) 4 3 2 5 1
Source: DBS Vickers
Earnings revision
2016F 2017F 2018F
Old Ne w Cha nge Old Ne w Cha nge Old Ne w Cha nge
Revenue (net) 14,629 13,866 -5% 15,874 15,165 -4% 16,656 16,534 -1%
Gross profit 2,477 2,274 -8% 2,704 2,519 -7% 2,837 2,746 -3%
EBIT 324 183 -44% 384 337 -12% 412 408 -1%
EBITDA 679 534 -21% 794 739 -7% 881 859 -2%
Net Profit 197 77 -61% 267 196 -27% 299 250 -16%
Gross margin (%) 16.9 16.4 17.0 16.6 17.0 16.6

EBIT margin (%) 2.2 1.3 2.4 2.2 2.5 2.5
EBITDA margin (%) 4.6 3.9 5.0 4.9 5.3 5.2
Net margin (%) 1.3 0.6 1.7 1.3 1.8 1.5
Source: DBS Vickers
Peers comparison
Company T ic k er M ark et c ap PE EV /EBIT DA Pric e/sales ROE (%) Net DER
(USD mn) 16F 17F 16F 17F 16F 17F 17F end of 17F
Matahari Putra Prima MPPA IJ 551 95.1 37.4 14.7 10.6 0.53 0.48 7.5 0.2
Dairy F arm DF I SP 11,415 26.0 24.0 16.0 14.5 1.00 0.96 28.9 0.4
Sheng Siong Group SSG SP 1,413 22.0 19.8 16.8 15.4 1.75 1.73 28.4 Net cash
Big C Supercenter* BIGC TB 5,064 23.7 20.6 14.0 12.6 1.53 1.46 15.7 N/A
Siam Makro* MAKRO TB 4,693 31.1 26.8 19.5 16.8 0.96 0.86 37.3 N/A
Puregold Price Club PGOLD PM 2,476 22.1 19.8 12.7 11.4 1.08 0.95 13.7 Net cash
Robinson Retail RRHI PM 2,243 22.7 20.0 14.8 12.9 1.07 0.95 11.2 Net cash
A v erage 24.6 21.9 15.6 13.9 1.23 1.15 22.5
*As at 8 Feb 2017


Page 2
Company Guide
Sales per sqm (Rp mn)

Earnings Drivers:
Sales productivity per sqm. We think that competition among
hypermarket operators in the Greater Jakarta area has been
intensifying, with operators revamping store models and
pushing promotions to boost demand. The growing number of
convenience stores also adds to the competitive pressure. We
think this could potentially impede the company’s revenue
growth going forward, as growth in sales productivity per sqm
has become harder to achieve (as evident in the last three Retail space (sqm)
years). We estimate revenue to grow at a CAGR of 6% over
FY15-18F, driven mostly by new store openings.
Significant contribution from marketing income. MPPA has a

negative marketing expense item booked under its operating
expenses. This is essentially marketing income which is earned
from advertising fees (through brochures and pamphlets) as
well as supplier rebates and discounts. We note that marketing
income contribution to operating income has been increasing,
i.e. 50% in 2013 to 143% in 2015. We view this increasing
dependency negatively as it reduces earnings visibility and Sales Breakdown by Geography
presents risks. In 9M16, marketing income accounts for 4.1% 100%
of MPPA’s gross sales. Our sensitivity analysis shows that a 90%
10bps move in marketing income/gross sales would impact 80% 42% 40%
MPPA’s bottom line by 6%. 70%

60%
50%
New Hypermart and SmartClub stores. More than 90% of 40%
28% 28%
MPPA’s revenue is derived from its hypermarket business, 30%

through Hypermart for retail customers and SmartClub for 20%
31% 32%
wholesale customers. We expect sales per sqm to remain 10%
stagnant due to tighter competition in the grocery retailing -

FY15 9M16
space. However, new store openings will likely to bring positive
Greater Jakarta Java Ex-Java
contribution to revenue for the company, and hence earnings.
Margin trend and forecasts
Economic recovery in ex-Java cities. MPPA is looking to further 20.0
strengthen its foothold in underpenetrated ex-Java cities. As at 18.0 17.3 16.9 16.4 16.6 16.6
15.9
end of Sep 2016, 144 stores or 49% of MPPA’s total stores are 16.0
located outside Java. The performance of MPPA’s ex-Java stores, 14.0
particularly in Sumatera and Kalimantan, had been weak in 12.0

10.0
2016. Given the high dependency of the ex-Java economy on
8.0
commodity prices, the recent rally on commodity prices may 6.0 4.9 5.2
3.7 4.1
help to support consumers’ purchasing power, hence leading to 4.0 2.5
1.91.3 2.2 1.8
1.3 1.5
better performance for MPPA’s ex-Java stores. 2.0 0.6
-
13A 14A 15A 16F 17F 18F
Gross margin EBIT margin Net margin

Page 3
Company Guide

Balance Sheet:
Asset-light business model. MPPA has an asset-light business
model as it does not own its establishments, but lease them
from either affiliated or third parties. As at end of Sep 2016,
MPPA’s net gearing was 0.2x. We expect net gearing ratio to
stay at this level by the end of 2017.

Recovery in consumer spending. As MPPA is in the grocery
retailing business, any signs of recovery in the domestic
economy or consumer spending (i.e. reflected in a strong
Capital Expenditure
Consumer Confidence Index) will fuel expectations of stronger
revenue and earnings growth. This would lead to more positive
investor sentiment towards MPPA, thus boosting its share price.
Key Risks:
Weakness in domestic consumption. Lower consumer
spending would naturally lower the revenue for the company.
Furthermore, consumers tend to hold off purchases of durable
goods, such as electronics and gadgets, which carry higher
margins. This could lead to margin contraction for MPPA.
ROE (%)
Delay in real estate development. MPPA relies on third-party
real estate developers for new store sites. A weak economy
and uncertain interest-rate environment could cause
developers to hold off their developments, which would
negatively impact MPPA’s store expansion plan and its growth.
Competition from foreign players. Given Indonesia’s attractive

growth potential and consumer demographics, foreign players
have sought opportunities to establish a presence here. Korean
retailer Lotte Group has set up its department store and
grocery retailer Lotte Mart in Indonesia. Recently, the Abu Forward PE Band (x)
Dhabi-based Lulu Group opened a hypermarket in Java that
sells only halal products to differentiate itself. The company
plans to open nine more hypermarkets in 2017. These
incoming competitors could erode MPPA’s market share and
profitability going forward.
Company Background
Matahari Putra Prima is a mass grocery retail store operator in
Indonesia. Its store formats include hypermarkets under the
name “Hypermart”, supermarkets under “Foodmart”, as well
as a health and beauty stores under “Boston Health & PB Band (x)
Beauty”. More than 90% of the company’s revenue is derived
from its hypermarket stores and currently, it is the second
largest hypermarket store operator in Indonesia with over 30%
market share in terms of retail value.

Page 4
Company Guide
Key Assumptions
FY Dec 2014A 2015A 2016F 2017F 2018F
Sales per sqm (Rp mn) 20.0 20.0 19.0 19.0 20.0
Retail space (sqm) 698,763 734,862 772,740 817,237 861,735
Segmental Breakdown
FY Dec 2014A 2015A 2016F 2017F 2018F
Revenues (Rpbn)
Direct sales 13,497 13,840 13,767 15,055 16,415
Consignment sales 791 711 707 774 843
Total 13,590 13,929 13,866 15,165 16,534
(Rpbn)
Direct sales 2,261 2,267 2,175 2,409 2,626
Consignment sales 94.0 89.0 99.0 110 120
Total 2,354 2,356 2,274 2,519 2,746
Margins (%)
Direct sales 16.8 16.4 15.8 16.0 16.0
Consignment sales 11.8 12.5 14.0 14.2 14.2
Total 17.3 16.9 16.4 16.6 16.6
Income Statement (Rpbn) Net revenue figures

FY Dec 2014A 2015A 2016F 2017F 2018F
Revenue 13,590 13,929 13,866 15,165 16,534
Gross Profit 2,354 2,356 2,274 2,519 2,746
Operating Profit 712 269 183 337 408
Net Interest (Exp)/Inc 19.0 (36.0) (85.0) (88.0) (90.0)
Pre-tax Profit 731 233 98.0 250 319
Tax (177) (50.0) (21.0) (54.0) (68.0)
Net Profit 554 183 77.0 196 250
Net Profit before Except. 554 183 77.0 196 250
EBITDA 975 578 534 739 859
Growth
Revenue Gth (%) 14.1 2.5 (0.4) 9.4 9.0
EBITDA Gth (%) 23.5 (40.8) (7.6) 38.5 16.2
Opg Profit Gth (%) 20.9 (62.3) (31.8) 84.1 21.0
Net Profit Gth (Pre-ex) (%) 24.5 (67.0) (57.8) 154.2 27.5
Margins & Ratio
Gross Margins (%) 16.5 16.2 15.7 15.9 15.9
ROAE (%) 21.9 7.3 3.0 7.3 8.8
ROA (%) 10.0 3.0 1.3 3.0 3.7
ROCE (%) 19.4 6.1 4.1 7.3 8.4
Div Payout Ratio (%) 34.9 97.0 35.0 35.0 35.0
Net Interest Cover (x) NM 7.6 2.2 3.9 4.6

Page 5
Company Guide

FY Dec 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016
Revenue 3,593 3,481 3,265 3,736 3,393

Gross Profit 597 556 459 673 558
Operating Profit 105 (57.0) (110) 112 89.0
Net Interest (Exp)/Inc (16.0) (22.0) (16.0) (18.0) (21.0)
Pre-tax Profit 89.0 (79.0) (126) 94.0 68.0
Tax (19.0) 17.0 3.00 8.00 (15.0)
Net Profit 70.0 (63.0) (123) 102 53.0
Net profit bef Except. 70.0 (63.0) (123) 102 53.0
EBITDA 183 28.0 (26.0) 194 177
The company booked losses
Growth
in 4Q15 and 1Q16
Revenue Gth (%) 2.5 (3.1) (6.2) 14.4 (9.2)
EBITDA Gth (%) (6.8) (84.8) nm nm (8.8)
Opg Profit Gth (%) (14.4) nm (93.1) nm (21.0)
Net Profit Gth (Pre-ex) (%) (25.3) nm (96.4) nm (47.9)
Margins
Gross Margins (%) 16.6 16.0 14.1 18.0 16.5
Opg Profit Margins (%) 2.9 (1.6) (3.4) 3.0 2.6
Net Profit Margins (%) 2.0 (1.8) (3.8) 2.7 1.6

FY Dec 2014A 2015A 2016F 2017F 2018F
Net Fixed Assets 1,273 1,462 1,561 1,609 1,609

Other LT Assets 657 861 1,019 1,199 1,199
Cash & ST Invts 748 409 169 66.0 233
Inventory 2,355 2,498 2,604 2,772 2,947
Debtors 31.0 26.0 30.0 33.0 36.0
Total Assets 5,534 6,033 6,162 6,457 6,801
ST Debt 0.0 250 250 250 250

Creditor 1,893 1,763 1,842 2,010 2,191
LT Debt 0.0 400 400 400 400
Total Cap. & Liab. 5,534 6,033 6,162 6,457 6,801
Non-Cash Wkg. Capital 104 736 768 771 768

Net Cash/(Debt) 748 (241) (481) (584) (417)
Asset Turnover (x) 2.2 2.4 2.3 2.4 2.5
Current Ratio (x) 1.3 1.3 1.2 1.2 1.2
Quick Ratio (x) 0.3 0.2 0.1 0.0 0.1
Net Debt/Equity (X) CASH 0.1 0.2 0.2 0.1
Net Debt/Equity ex MI (X) CASH 0.1 0.2 0.2 0.1
Capex to Debt (%) N/A 65.0 69.2 69.2 69.2
Z-Score (X) 5.2 4.5 4.7 4.9 4.8

Page 6
Company Guide

FY Dec 2014A 2015A 2016F 2017F 2018F
Pre-Tax Profit 731 233 98.0 250 319

Dep. & Amort. 264 309 351 402 451
Tax Paid (177) (50.0) (21.0) (54.0) (68.0)
Assoc. & JV Inc/(loss) 0.0 0.0 0.0 0.0 0.0
Chg in Wkg.Cap. (255) (559) (32.0) (3.0) 4.00
Other Operating CF (73.0) (449) 0.0 0.0 0.0
Net Operating CF 490 (515) 395 595 705
Capital Exp.(net) (407) (422) (450) (450) (450)
Other Invts.(net) 63.0 (32.0) (158) (180) 0.0
Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0 We assumed Rp180bn
Div from Assoc & JV 0.0 0.0 0.0 0.0 0.0 investment in
Other Investing CF 474 47.0 0.0 0.0 0.0 MatahariMall.com in
Net Investing CF 130 (407) (608) (630) (450) FY17
Div Paid (1,000) (231) (27.0) (69.0) (88.0)
Chg in Gross Debt 0.0 650 0.0 0.0 0.0
Capital Issues 0.0 0.0 0.0 0.0 0.0
Other Financing CF (175) (64.0) 0.0 0.0 0.0
Net Financing CF (1,176) 355 (27.0) (69.0) (88.0)
Chg in Cash (555) (339) (240) (104) 167
Opg CFPS (Rp) 139 8.08 79.5 111 130
Free CFPS (Rp) 15.5 (174) (10.1) 27.0 47.3
Source: DBS Vickers

Andy SIM CFA

Page 7
Mayora Indah
Version 4 | Bloomberg: MYOR IJ | Reuters: MYOR.JK Refer to important disclosures at the end of this report
HOLD Anticipating costlier raw materials

Price Target 12-mth: Rp1,700 (-7% downside) (Prev Rp1,568) Maintain HOLD. Our price target for MYOR rises to Rp1,700, as
we roll over our valuation base to FY17F earnings. MYOR’s key
Potential Catalyst: Lower raw material prices input costs namely sugar, coffee and CPO have seen a strong
Where we differ: Broadly in line with consensus rally since 2Q16. Taking into account some inventory lags (3-6
months), we expect MYOR’s margin to moderate going
Analyst forward. Our TP is pegged to 26x FY17F PE, on par with
Tiesha PUTRI +6221 30034931 tiesha.narandha@id.dbsvickers.com MYOR’s mean multiple in the past five years. At this level, we
Andy SIM CFA +65 6682 3718 andysim@dbs.com believe the stock is fairly valued.
What’s New Rising input cost may pressurise margin. Rising cost pressure
• Expect margins to moderate as MYOR’s key input would be the key challenge faced by MYOR in 2017. Soft
commodity prices have mostly seen a reversal of the downward
costs have mostly reversed their downward trend
trend. Among MYOR’s five key raw materials, only cocoa and
since 2Q16 wheat prices remain favourable for the company, while sugar,
• Maintain HOLD with a higher TP of Rp1,800 as we coffee and CPO prices have risen considerably. Note that the
company does not enter into forward contracts to hedge raw
roll over valuation base to FY17
material purchases while maintaining its product price
affordability remains the company’s key strategy as it caters for
the mass-market segment. This explains the volatility of MYOR’s
Price Relative margins in the past.
Export sales provide some earnings buffer against rupiah

depreciation. We like MYOR for its highest export sales among
our coverage, providing a high degree of natural hedge against
rupiah depreciation. In 9M16, MYOR’s export sales accounted
for 44% of total sales and 70% of MYOR’s raw material costs.
Valuation:
We value MYOR at Rp1,700/share, based on 26x PE 17F (5-
Forecasts and Valuation year mean multiple).
FY Dec (Rp m) 2015A 2016F 2017F 2018F
Revenue 14,819 16,637 18,950 21,387
EBITDA 2,332 2,539 2,773 3,110
Key Risks to Our View:
Pre-tax Profit 1,641 1,697 1,891 2,184 Rapid increase in raw material prices would crimp the
Net Profit 1,220 1,305 1,454 1,680 company’s margins if it is unable to pass on the cost increases
Net Pft (Pre Ex.) 1,220 1,305 1,454 1,680 to consumers.
Net Pft Gth (Pre-ex) (%) 202.3 6.9 11.4 15.6
EPS (Rp) 54.6 58.4 65.0 75.1
At A Glance
EPS Pre Ex. (Rp) 54.6 58.4 65.0 75.1
EPS Gth Pre Ex (%) 202 7 11 16 Issued Capital (m shrs) 22,359
Diluted EPS (Rp) 54.6 58.4 65.0 75.1 Mkt. Cap (Rpbn/US$m) 40,805 / 3,060
Net DPS (Rp) 19.1 17.5 19.5 22.5 Major Shareholders (%)
BV Per Share (Rp) 227 268 313 366 Unita Branindo (%) 32.9
PE (X) 33.4 31.3 28.1 24.3 BBH Boston S/A GMO (%) 5.6
PE Pre Ex. (X) 33.4 31.3 28.1 24.3
Free Float (%) 61.5
P/Cash Flow (X) 17.5 31.8 28.6 24.2
EV/EBITDA (X) 18.5 16.9 15.3 13.5 3m Avg. Daily Val (US$m) 0.12
Net Div Yield (%) 1.0 1.0 1.1 1.2 ICB Industry : Consumer Goods / Food Producers
P/Book Value (X) 8.0 6.8 5.8 5.0
Net Debt/Equity (X) 0.4 0.3 0.2 0.1
ROAE (%) 24.0 21.8 20.7 20.5
Earnings Rev (%): 3 2 7
Consensus EPS (Rp): 57.5 69.9 81.9
Other Broker Recs: B: 9 S: 0 H: 3
Source of all data on this page: Company, DBS Vickers, Bloomberg
Finance L.P

Page 41
ed: CK / sa:MA, PY
Company Guide
Mayora Indah
Revenue Trend and Forecasts

25,000 20%
CRITICAL DATA POINTS TO WATCH 18%
20,000 16%
Earnings Drivers: 14%
15,000 12%
Economic growth in Indonesia (and other Asian countries).
10%
Mayora’s products are sold in both domestic and international 10,000 8%
markets. In FY15, exports constituted c.49% of sales, with more 6%
than 90% of exports made to China and Southeast Asian 5,000 4%
countries. We think that the health of an economy is generally 2%
0 0%
reflected in the consumption of basic necessities and staple 2009A 2010A 2011A 2012A 2013A 2014A
foods. Thus, a stronger economy in the countries where Revenue (Rp bn) Growth y-o-y (RHS)
Mayora’s products are offered would be beneficial to the
company, thus favouring sales volume. Margin Trend and Forecasts
30% 28.3%
26.0% 25.2% 25.2%
24.3%
25%
Volatility in commodity prices. More than 60% of Mayora’s 20% 17.9%
COGS is attributable to raw materials, which mostly consist of
15% 12.6%
soft commodities such as sugar, coffee, wheat flour, and palm 10.9%
12.0% 11.5% 11.5%
oil. The prices of these commodities are naturally volatile and 10%
6.3%
Mayora does not enter into futures contracts. Therefore, a 5%
8.7% 8.2% 7.8% 7.7% 7.9%
sudden spike in the prices of these commodities could adversely 2.8%
0%
hurt the company’s margins, as it would not raise ASP hastily in 2013A 2014A 2015A 2016F 2017F 2018F
order to protect market share. This was evident in 2011 and Gross margin EBIT margin Net margin
2014, with gross margins dropping by more than 5ppts as raw
material prices spiked up. Key Raw Material Price Index
180
160
Competition in the coffee and confectionery market. The 140
company has two product segments: (1) Food processing, and 120
(2) Coffee/Cacao. In terms of value share, Mayora is among the 100

top three in most of its product categories, thus proving its 80
strong foothold in the Indonesian food and beverage market. 60
However, we note that due to lack of product differentiation
and tight competition, consumer demand for the products has
higher price elasticity. Mayora has a priority to protect/gain Sugar CPO Wheat Coffee Cocoa
market share and is able to tolerate short-term volatility in

Coffee Price
margins. Hence, as Mayora gains larger market share, it will be 190
easier to raise (adjust) its selling prices. 180
170
160
150
Weakness of rupiah against the US dollar. With its high export 140
contribution to sales, Mayora enjoys a hedge towards its forex 130
exposure. Note that more than 60% of its COGS comprises soft 120
110
commodities which are denominated in the dollar. However, if 100
export contribution decreases, we could see the negative impact Jan-15 Jul-15 Jan-16 Jul-16 Jan-17
of rupiah depreciation on earnings. On the other hand, if export Arabica Coffee (cents/lb.) Quarterly avg. price
contribution increases, Mayora could have its dollar exposure

Sugar Price
completely hedged, and minimise the impact of rupiah 26
fluctuation. 24
22
20
18
16
14
12
10
Sugar (cents/lb.) Quarterly avg. price
Source: Company, DBS Vickers, Bloomberg Finance L.P

Page 2 Page 42
Company Guide
Mayora Indah

Balance Sheet:
Plenty of cash; no debt problem. In 2017, we estimate that
Mayora will have Rp2tr (US$151m) in cash and a net gearing of
0.2x. We believe this gearing level is manageable and would not
lead to debt problem for the company. Mayora uses its debt
mainly for working capital purposes.

Pick-up in economy. A sustained economic recovery or when
GDP growth meets market expectations, would be positive for
F&B companies like Mayora. This could lead to higher demand
Capital Expenditure
for F&B and FMCG products, creating positive sentiment
towards the stock.
Increase in export contribution to sales. In FY15, c.49% of sales

is contributed by exports. As the proportion of exports
increases, we think that there will be positive sentiment towards
the stock as a higher export proportion would imply a more
complete hedge in terms of forex risk. Note that Mayora is
already the consumer company with the highest export
contribution to sales.
ROE (%)
Key Risks:
Slowdown in economy. Mayora’s revenue growth will be hurt
by softening consumer demand. A slowing global economy
would also reduce purchasing power in other countries,
potentially reducing Mayora’s export sales.
Rapid increase in prices of raw materials. A spike in prices of

raw materials would crimp Mayora’s margins if it is unable to
pass on the cost increases to consumers.
Tightening competition. As competition tightens, the company Forward PE Band (x)

could lose market share and find it increasingly difficult to
adjust (raise) selling prices.
Company Background
Mayora Indah (MYOR) manufactures candies and cookies, as
well as food, coffee powder, instant coffee, and cocoa beans.
It was founded in 1977 and is one of the largest food
companies in Indonesia. It is also among the top players in
every product category that it operates in.
PB Band (x)

Page 43 Page 3
Company Guide
Mayora Indah
Segmental Breakdown
FY Dec 2014A 2015A 2016F 2017F 2018F
Revenues (Rpbn)
Food Processing 7,886 7,597 8,651 9,854 11,121
Coffee Powder / Cacao 6,284 7,222 7,986 9,096 10,266
Total 14,169 14,819 16,637 18,950 21,387
(Rpbn)
Food Processing 1,531 2,078 2,076 2,316 2,614
Coffee Powder / Cacao 1,005 2,120 2,252 2,456 2,772
Total 2,537 4,198 4,328 4,772 5,385
Margins (%)
Food Processing 19.4 27.4 24.0 23.5 23.5
Coffee Powder / Cacao 16.0 29.4 28.2 27.0 27.0
Total 17.9 28.3 26.0 25.2 25.2

FY Dec 2014A 2015A 2016F 2017F 2018F
Revenue 14,169 14,819 16,637 18,950 21,387
Gross Profit 2,535 4,198 4,328 4,772 5,385
Operating Profit 891 1,863 2,000 2,177 2,457
Other Non Opg (Exp)/Inc (35.8) 140 0.0 0.0 0.0
Pre-tax Profit 530 1,641 1,697 1,891 2,184
Tax (120) (390) (373) (415) (479)
Minority Interest (6.2) (30.2) (20.0) (21.8) (24.6)
Net Profit 404 1,220 1,305 1,454 1,680
Net Profit before Except. 404 1,220 1,305 1,454 1,680
EBITDA 1,302 2,332 2,539 2,773 3,110
Growth
Revenue Gth (%) 17.9 4.6 12.3 13.9 12.9
EBITDA Gth (%) (22.0) 79.0 8.9 9.2 12.2
Opg Profit Gth (%) (31.7) 109.0 7.4 8.8 12.9
Net Profit Gth (Pre-ex) (%) (61.3) 202.3 6.9 11.4 15.6
Margins & Ratio
Gross Margins (%) 17.9 28.3 26.0 25.2 25.2
ROAE (%) 10.1 24.0 21.8 20.7 20.5
ROA (%) 3.9 10.8 10.6 10.9 11.4
ROCE (%) 7.5 14.9 14.9 15.1 15.4
Div Payout Ratio (%) 35.5 35.0 30.0 30.0 30.0

Page 4 Page 44
Company Guide
Mayora Indah

FY Dec 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016
Revenue 3,151 4,128 4,682 4,595 4,039

Gross Profit 912 1,140 1,335 1,193 1,005
Other Non Opg (Exp)/Inc 145 (101) (106) (51.0) (26.8)
Pre-tax Profit 370 425 424 368 430
Tax (87.0) (67.1) (95.6) (89.8) (116)
Minority Interest (7.6) (7.6) (5.7) (9.9) (7.7)
Net Profit 276 351 323 269 307
Net profit bef Except. 276 351 323 269 307
EBITDA 661 1,085 740 758 928
Growth
Revenue Gth (%) (22.8) 31.0 13.4 (1.9) (12.1)
EBITDA Gth (%) (13.6) 64.2 (31.7) 2.3 22.4
Opg Profit Gth (%) (41.7) 95.3 (0.3) (18.2) 7.9
Net Profit Gth (Pre-ex) (%) (14.1) 27.2 (8.0) (16.8) 14.2
Margins
Gross Margins (%) 29.0 27.6 28.5 26.0 24.9

FY Dec 2014A 2015A 2016F 2017F 2018F
Net Fixed Assets 3,585 3,771 3,882 3,936 3,933

Other LT Assets 197 118 118 118 118
Cash & ST Invts 713 1,682 1,923 2,013 2,547
Inventory 1,967 1,763 2,162 2,490 2,810
Debtors 3,081 3,379 3,626 4,131 4,662
Total Assets 10,291 11,343 12,341 13,317 14,699
ST Debt 1,977 1,348 1,348 1,348 1,348

Creditor 955 1,163 1,227 1,414 1,595
LT Debt 2,626 2,461 2,461 2,211 2,211
Minority Interests 92.6 117 137 159 183
Total Cap. & Liab. 10,291 11,343 12,341 13,317 14,699

Net Cash/(Debt) (3,890) (2,126) (1,885) (1,546) (1,011)
Asset Turnover (x) 1.4 1.3 1.3 1.4 1.5
Current Ratio (x) 2.1 2.4 2.6 2.7 3.0
Quick Ratio (x) 1.2 1.6 1.7 1.8 2.0
Net Debt/Equity (X) 0.9 0.4 0.3 0.2 0.1
Capex to Debt (%) 18.3 14.4 17.1 18.3 18.3
Z-Score (X) 5.8 6.5 NA NA NA

Page 45 Page 5
Company Guide
Mayora Indah

FY Dec 2014A 2015A 2016F 2017F 2018F
Pre-Tax Profit 530 1,641 1,697 1,891 2,184

Dep. & Amort. 411 469 539 596 654
Tax Paid (120) (390) (373) (415) (479)
Assoc. & JV Inc/(loss) 0.0 0.0 0.0 0.0 0.0
Chg in Wkg.Cap. (1,532) 506 (581) (646) (670)
Other Operating CF (151) 112 0.0 0.0 0.0
Net Operating CF (862) 2,337 1,283 1,426 1,689
Capital Exp.(net) (841) (549) (650) (650) (650)
Other Invts.(net) 25.8 8.50 0.0 0.0 0.0
Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0
Div from Assoc & JV 0.0 0.0 0.0 0.0 0.0
Other Investing CF 0.0 0.0 0.0 0.0 0.0
Net Investing CF (816) (541) (650) (650) (650)
Div Paid (206) (149) (391) (436) (504)
Chg in Gross Debt 727 (796) 0.0 (250) 0.0
Capital Issues 0.0 0.0 0.0 0.0 0.0
Other Financing CF 0.0 0.0 0.0 0.0 0.0
Net Financing CF 522 (945) (391) (686) (504)
Chg in Cash (1,148) 969 241 89.5 535
Opg CFPS (Rp) 30.0 81.9 83.3 92.7 105
Free CFPS (Rp) (76.2) 80.0 28.3 34.7 46.5
Source: DBS Vickers

Andy SIM CFA

Page 6 Page 46
Mitra Adiperkasa
Version 6 | Bloomberg: MAPI IJ | Reuters: MAPI.JK Refer to important disclosures at the end of this report
BUY (Upgrade from HOLD) Back in vogue

Price Target 12-mth: Rp6,600 (22% upside) (Prev Rp4,150) Reaping rewards from restructuring efforts; upgrade to BUY.
MAPI’s restructuring efforts in the past three years have brought
Potential Catalyst: Profitability improvement particularly in department its inventory turnover to a level deemed ideal by the
stores management, hence allowing the company to focus on
improving profitability going forward. MAPI’s business model is
inherently capital intensive, nonetheless its strategy to team up
Analyst with strategic partners in expanding its Sports and F&B division
Tiesha PUTRI +6221 30034931 tiesha.narandha@id.dbsvickers.com is the right move, in our view, as it would enable the company
Andy SIM CFA +65 6682 3718 andysim@dbs.com to grow its business despite its highly-geared balance sheet.
18% of COGS in USD but improvement in demand and
What’s New profitability could well offset rupiah depreciation. Rupiah
movement and inventory turnover are good indicators of MAPI’s
• Upgrade to BUY from HOLD with TP of Rp6,200
future earnings and profitability. Inventory days have come
• Restructuring efforts yield positive results; down to management’s target of 157 days and is expected to
department store to be the next focus stabilise within that level, supported by improvement in demand
• Expansion curb still in place; store expansion will backdrop and supply chain management. There is a risk on
be concentrated on highly profitable brands MAPI’s profitability as 60% of MAPI’s inventory is imported, of
which 18% is linked to USD. However, if the demand
environment improves in 2017 in line with our expectation, and
Price Relative consolidation efforts in department store yield positive results,
impact of higher imported COGS could be well offset.
Furthermore, a larger portion of COGS is linked to EUR (i.e.
24%) which has been relatively more stable against rupiah.
Department store to be the next focus. MAPI will continue to
close down loss-making stores, while large store expansion
would be limited to its most profitable brands only, i.e.
Starbucks and Inditex. MAPI does not plan to add any new
brands into its portfolio in 2017. The management will focus on
the department store division next. A number of department
Forecasts and Valuation stores are still loss-making, dragging down MAPI’s overall
FY Dec (Rp m) 2015A 2016F 2017F 2018F performance with division pre-tax losses of Rp54bn in 9M16 (vs.
Revenue 12,833 14,160 15,907 17,925 MAPI’s 9M16 consolidated pre-tax profit of Rp220bn). There
EBITDA 1,086 1,478 1,687 1,918 will be ample room for margin improvements if it manages to
Pre-tax Profit 148 348 503 667 address the declining performance of this division.
Net Profit 37.3 192 302 434
Net Pft (Pre Ex.) (51.7) 192 302 434
Net Pft Gth (Pre-ex) (%) nm nm 57.7 43.7
Valuation:
EPS (Rp) 22.5 115 182 261 We revised up our SOP-based TP to Rp6,600, which implies
EPS Pre Ex. (Rp) (31.2) 115 182 261 8.2x 17F EV/EBITDA (0.7SD below historical mean valuation).
EPS Gth Pre Ex (%) nm nm 58 44
Diluted EPS (Rp) 22.5 115 182 261
Key Risks to Our View:
Net DPS (Rp) 2.25 11.5 18.2 26.1
BV Per Share (Rp) 1,792 1,896 2,060 2,295 Rupiah depreciation. More than 60% of MAPI’s COGS is
PE (X) 241.2 47.0 29.8 20.8 imported, making its margins susceptible to any rupiah
PE Pre Ex. (X) nm 47.0 29.8 20.8 weakening.
P/Cash Flow (X) 35.3 11.5 11.5 9.7
EV/EBITDA (X) 11.2 8.1 7.0 6.0
At A Glance
Net Div Yield (%) 0.0 0.2 0.3 0.5
Net Debt/Equity (X) 1.1 0.9 0.8 0.7 Mkt. Cap (Rpbn/US$m) 9,006 / 675
Earnings Rev (%): 6 6 (19) Satya Mulia Gema G 55.0
Consensus EPS (Rp): 117 196 269 Map Premier Indo (%) 6.0
Finance L.P ICB Industry : Consumer Services / General Retailers

Page 47
ed: TH / sa:MA, PY
Company Guide
Mitra Adiperkasa
WHAT’S NEW Department stores have shown a weak organic growth with
Back in vogue SSSG consistently underperforming MAPI’s consolidated SSSG
in the past six years. Store productivity and profitability have
Better supply chain management should sustain inventory
also been weaker compared to MAPI’s other segments. In
turnover at current level. In the past few years, MAPI’s main
9M16, department stores contributed only 20% of MAPI’s
focus had been on addressing its inventory build-up issue,
consolidated revenue despite occupying 47% of MAPI’s retail
which was done at the expense of profitability. The company
space. The segment booked a razor-thin EBIT margin of 0.6%
ran aggressive discounting across all brands, particularly its
with pretax losses of Rp54bn. As a comparison, MAPI booked
Active/Sports division (whose inventory days climbed up to 11
a consolidated pre-tax profit of Rp220bn in 9M16. There is
months in 2015, partly due to aggressive store rollouts in
still room for profitability improvement if MAPI manages to
second-tier cities) with discounts ranging from 50-70%. The
address the store productivity issue faced by its department
company removed the blanket discount in mid-2015 and its
stores.
gross margin has been picking up ever since. According to
management, inventory days of MAPI’s Active division have We assume Department Store’s EBIT margin would improve
come down to c.90 days currently. to 1% in FY17F. We keep our number conservative as we
believe it would take time for MAPI to close down all of its
Along with the inventory clearance programme, the company
non-performing stores given the rental commitment and
had also fixed its ordering cycle and inventory management.
ramp up sales and profits from the replacement stores. As a
A more orderly scheme on inventory clearance discount has
reference, Department Store’s EBIT margin ranged between
now been put in place, which is based on inventory’s age.
4% and 7% in 2010-2013 vs. a mere 0.6% in 9M16 and our
Unlike in the past years, MAPI now can monitor its inventory
assumption of 1% in FY17F and 1.5% in FY18F. Every 10-bp
purchase, ageing and discounting policy through an
upside to our margin assumption would lift our FY17
enhanced software. The adoption of this new system enables
EBITDA/net profit forecast by 0.2%/0.5%.
MAPI to closely monitor its inventories, hence reducing the
risk of inventory build-up and impairment in the future. Expansion curb still in place; store expansion will be
concentrated on highly-profitable brands. MAPI will keep its
Addressing profitability issue in Department Store. MAPI
expansion pace slow without any new brand addition in
owns 32 department stores under six brands, i.e. SOGO,
2017. The company aims to add 200 stores this year (which is
Debenhams, Seibu, Galeries Lafayette, Lotus and Alun Alun
still slower compared to its store expansion pace in 2012-
Indonesia, and 27 supermarkets under the brand “The
2013), but mostly for its highly-profitable brands such as
Foodhall”. The department store has the lowest profitability
Inditex and Starbucks. Starbucks is MAPI’s key segment in the
among MAPI’s four store formats but carries low inventory as
F&B division with c.240 stores and c.80% contribution to F&B
it operates under consignment model (80% of inventories are
EBIT. The brand has consistently booked a low-teen SSSG in
consigned). It is also the most space intensive as one
the past years. Partnering with General Atlantic, MAPI looks
department store occupies up to 6,000 sqm of retail space on
to add 60 Starbucks outlets p.a. equally spread among malls,
average, which is equal to 26 specialty or F&B outlets. In
rest areas, airports/terminals (mainly outside Java) and office
many cases, a department store can take up to 50% of a
buildings. In the past, MAPI typically only adds 20-30
mall’s retail space. The department store business enables
Starbucks outlets p.a.
MAPI to enjoy special lease rates from property developers
due to its status as an anchor tenant in a number of malls. Competition from online retailers still scarce in upper and
upper-middle segment. The company has tapped into the
While SOGO and Seibu are performing well, other
fast-growing e-commerce business through MAPeMALL
department store brands are still loss-making. In an attempt
where most of its key brands are sold exclusively in its
to improve the segment’s profitability, the company closed
website. The brand exclusivity and MAPI’s main target
down one loss-making Debenhams store at Lippo Kemang
markets, which are upper and upper-middle income segment,
Village Jakarta in the middle of 2016 and is reviewing the
insulate MAPI from competition against the existing online
conversion of two Debenhams stores in Senayan City (Jakarta)
retailers, in our view. We note that online fashion retailers
and Supermall Karawaci (Tangerang, West Java) into its more
cater mostly to the middle-class segments, offering apparels
successful department store formats, Seibu and SOGO. The
with pricing range of Rp100,000-300,000 (US$7–US$22)
company also operates five loss-making department stores
while MAPI’s products are typically priced above Rp300,000.
catering to the middle-income segment under the brand
“Lotus”. Two Lotus stores in East Java are scheduled to be Revised up 16F/17F net profit forecasts by 6%; upgrade to
closed in 2017, while the remaining three stores in Greater BUY. We raise our EBIT margin assumptions following better-
Jakarta will be converted into MAP Clearance Store. than-expected results in 3Q16. Consequently, our 16F/17F

Page 2 Page 48
Company Guide
Mitra Adiperkasa
EBITDA is now 14% higher. We now forecasts 14% and 58% Quarterly average IDR against USD, EUR and GBP
y-o-y growth in FY17F EBITDA and net profit respectively. USDIDR EURIDR GBPIDR
y-o-y
We roll over our valuation base to 2017 and assign higher
1Q16 6% 3% 0%
multiples on MAPI’s specialty store (retail sales) business given
2Q16 1% 4% -5%
the improvement in profitability. Our new TP of Rp6,600
3Q16 -5% -5% -20%
implies 8.2x 17F EV/EBITDA, 0.7SD below its mean multiple in
4Q16 -4% -5% -21%
the past five years and 32% discount to regional peers’
q-o-q
average multiple of 12x. 1Q16 -2% -1% -7%
MAPI’s quarterly gross margin vs. inventory days 2Q16 -1% 1% -1%
52.0 210 3Q16 -1% -2% -10%
4Q16 1% -2% -5%
50.0 50.8
200 Source: Bloomberg Finance L.P., DBS Vickers
48.0
48.2 190
47.6
46.0 46.5 46.6 46.3
45.7 45.9 180
45.1
44.0 44.8
43.7 170
42.0 43.0
40.0 160
38.0 150
4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
Gross margin, % (LHS) Inventory days (RHS)
MAPI’s consolidated vs. department store SSSG

25%
20%
15%
10%
5%
0%
2008 2009 2010 2011 2012 2013 2014 2015 9M16
-5%
Consolidated SSSG Department store's SSSG
Source: Company
MAPI’s consolidated vs. department store quarterly EBIT margin

10
8.4 8.2 8.3 8.1
8.0
8
6.3 6.1 6.4
5.8 6.0
6 5.1
4.6
4.3 4.0 4.1
3.9
4 3.5
3.0
2.2 2.2 2.3
1.9
2 1.2 1.1
0.8 0.9
0.2 0.6
0.1
0
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16
-2
-2.7
-4
Consolidated EBIT margin (%) Dept. store EBIT margin (%)

Page 49 Page 3
Company Guide
Mitra Adiperkasa
MAPI’s quarterly gross margin vs. USDIDR

55.0 15,000
53.0 14,000
52.3
51.4
51.9 51.8 52.1 52.0
50.0 50.8 50.8 51.0 50.8
50.4
49.9 49.5 49.6
49.0 48.8 48.5
13,000
48.1 48.3 48.2
47.6
45.0 46.5 46.6 46.3
45.7 45.9 12,000
45.1 44.8
43.7
43.0
11,000
40.0
39.8
38.1 10,000
37.2
35.0 36.2
9,000
30.0 8,000
Gross margin, % (LHS) Quarterly avg. USDIDR (RHS)
MAPI’s quarterly gross margin vs. EURIDR

60.0 17,000
16,000
50.0 52.3 51.9
53.0
51.8 52.1 52.0
50.4 51.4 50.8 50.8 51.0 50.8
49.9 49.5 49.6 15,000
48.1 49.0 48.3 48.8 48.5 48.2 47.6
46.5 46.6 45.7 45.9 46.3
45.1 44.8
40.0 43.0 43.7 14,000
39.8
38.1
36.2 37.2 13,000
30.0
12,000
20.0 11,000
10,000
10.0
9,000
- 8,000
Gross margin, % (LHS) Quarterly avg. EURIDR (RHS)
MAPI’s quarterly gross margin vs. GBPIDR

60.0 24,000
22,000
50.0 52.3 51.9
53.0
51.8 52.1 52.0
50.4 51.4 50.8 50.8 51.0 50.8
49.9 49.5 49.6
48.1 49.0 48.3 48.8 48.5 48.2 47.6 20,000
46.5 46.6 45.7 45.9 46.3
45.1 44.8
40.0 43.0 43.7
39.8 18,000
38.1
36.2 37.2
30.0 16,000
14,000
20.0
12,000
10.0
10,000
- 8,000
Gross margin, % (LHS) Quarterly avg. GBPIDR (RHS)

Page 4 Page 50
Company Guide
Mitra Adiperkasa
Sensitivity analysis to FY17F earnings
1% IDR
1% IDR
depreciation
Base case Change depreciation Change
against USD
against EUR
or GBP
EBITDA 1,687 1,672 -0.9% 1,667 -1.2%

Net profit 302 293 -3.0% 290 -4.1%
EBIT margin 5.92% 5.83% 5.79%
Net margin 1.90% 1.84% 1.82%
Source: DBS Vickers
Sum-of-the-parts (SOTP) valuation

MAPI's Adj. EV per
Adj. EV Value
effective share Remarks
(Rp bn) contribution
shareholding (Rp)
10x 17F EV/EBITDA;
Retail sales 100% 11,181 6,736 71.1% 20% discount to
regional avg.
Department stores 100% 1,112 670 7.1% 5x 17F EV/EBITDA
Cafe and restaurant 100% 3,312 1,995 21.1% 10x 17F EV/EBITDA
Others 100% 76 46 0.5% 5x 17F EV/EBITDA
Net cash (debt) (2,835) (1,708)
Holding company discount (10%) (1,927) (1,161)
Equity value 10,919 6,600
Implied EV/EBITDA 17F (x) 8.2
Source: DBS Vickers
Earnings revision
2016F 2017F 2018F
Old New Change Old New Change Old New Change
Revenue (net) 14,387 14,160 -2% 16,267 15,907 -2% 18,507 17,925 -3%
Gross profit 6,560 6,513 -1% 7,499 7,397 -1% 8,624 8,425 -2%
EBIT 618 801 30% 730 942 29% 867 1,105 27%
EBITDA 1,295 1,478 14% 1,475 1,687 14% 1,680 1,918 14%
Net Profit 180 191 6% 286 302 6% 536 434 -19%
Gross margin (%) 45.6 46.0 46.1 46.5 46.6 47.0

EBIT margin (%) 4.3 5.7 4.5 5.9 4.7 6.2
EBITDA margin (%) 9.0 10.4 9.1 10.6 9.1 10.7
Net margin (%) 1.3 1.4 1.8 1.9 2.9 2.4
SSSG 6.0% 5.0% 7.0% 6.0% 8.0% 7.0%

Store area (sqm) 734,082 714,082 -3% 772,082 752,082 -3% 812,082 792,082 -2%
Source: DBS Vickers

Page 51 Page 5
Company Guide
Mitra Adiperkasa
Same-store sales growth trend

14% 12%
Earnings Drivers: 12% 10%
Growth of discretionary spending. Mitra Adiperkasa leads in 9% 9%
10%
Indonesia’s retail store segment with a presence in 30-40% of 8% 6%
major shopping malls nationwide. Its stores mainly cater to the 5% 5% 5%
6% 4% 4%
mid-high/high-income earners. Demand for its products 3%
4%
normally picks up when the economy is growing and the macro
2%
front (i.e. interest rates, exchange rate, government policies) is
not clouded by uncertainties. When there are too many 0%
uncertainties, consumers tend to reduce discretionary
purchases.
COGS structure based on currency

Rupiah movement against EUR, USD and GBP. Around 60% of
MAPI’s COGS is imported, meaning a rapidly depreciating
rupiah will hurt margins and earnings. EUR, USD and GBP USD
comprise 24%, 18% and 18% of MAPI’s COGS respectively. 18%
MAPI applies a 10-15% buffer in its selling prices, on top of its IDR
40%
cost price that is based on the prevailing rupiah spot rate when
the products arrive at the ports. This measure is effective when GBP
18%
the rupiah depreciates moderately. But, in periods when it
depreciates rapidly, margins will contract. When the rupiah
depreciated by 22% against USD in the second half of 2013, EUR
24%
MAPI’s operating margin averaged 4.5% in 2014 vs 7.7% in
2013.
Net New Stores (sqm)

Limited expansion and mediocre SSSG will slow down revenue
growth. Management has guided that it will rein in store
expansion temporarily in order to maximise existing store
efficiency, manage debt, and reduce inventory levels which have
been excessively high in the past few years. MAPI plans to
expand its operating store space by 70,000 sqm in 2017. We
are assuming slower space expansion and 6.0% SSSG. Missing
these targets would mean downside to earnings.
Tapping on growth of e-commerce. The company has ventured

into the fast-growing e-commerce market in Indonesia by
Same-Store Sales Growth (%)
setting up online shop portals for some of its brands, i.e.
planetsports.net and lineashoes.com. It developed its integrated
e-commerce website, mapemall.com and made it available to
the public in 4Q15. The company aims to develop mobile apps
and in-store pick-up features to further strengthen its e-
commerce value propositions. We are positive that given MAPI’s
extensive store network and expertise in the retail space, the e-
channel could be a significant earnings contributor in the
future.

Page 6 Page 52
Company Guide
Mitra Adiperkasa

Balance Sheet:
Rp2.58tn zero-coupon bonds. MAPI issued 5-year zero-coupon
bonds with a face value of Rp1.5tn (US$115m) in 2015 and
recently issued another 5-year zero-coupon bond with a face
value of Rp1.08tn. The proceeds of the former bond were used
to pare down the company’s debts while the latter will be used
to fund the expansion of its Food and Beverage business. As at
end of September 2016, MAPI had Rp3.6tn net debt with net
gearing of 1.2x.
Inventory level has normalised. MAPI had expanded rapidly

Capital Expenditure
between 2012 and 2014, growing store space by more than
40% and almost doubling its store count. That caused inventory
level to be elevated, and MAPI took on debt to fund its
stretched cash flow, which hurt profits. MAPI also had to
discount its products heavily to reduce inventory. As inventory
reached the desired level, the company subsequently reduced
discounting and promotion activities.

Pick-up in the economy, stable rupiah. Factors that will support
MAPI’s share price include: (1) faster-than-expected economic ROE (%)
recovery (i.e. stronger GDP growth), (2) a stronger rupiah on the
back of an improving macro environment, and (3) taking on
new initiatives/brands that will lift margins.
Key Risks:
Rapid depreciation of the rupiah will crimp margins. More than
60% of MAPI’s costs are in foreign currency and it does not
hedge its foreign currency exposure. These make margins
highly susceptible to a weak rupiah. The company applies a 10-
15% buffer in its selling prices to address a moderate
depreciation of the rupiah, but would be hurt by a sudden EV/EBITDA Band (x)
weakness of the rupiah. The sharp 22% depreciation of the 16.0
rupiah against USD in 2H13 crimped margins by over 300bps
14.0 +2sd
between 2013 and 2014.
12.0 +1sd
Company Background
Mitra Adiperkasa operates department stores and specialty 10.0 Avg.
stores selling a broad range of goods including clothing, toys,
8.0 -1sd
food, and other merchandise.
6.0
-2sd
4.0
Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16
PB Band (x)

Page 53 Page 7
Company Guide
Mitra Adiperkasa
Key Assumptions
FY Dec 2014A 2015A 2016F 2017F 2018F
New Stores (sqm) 18,702 28,901 16,000 38,000 40,000
Same-Store Sales Growth 9.00 4.00 5.00 6.00 7.00
Segmental Breakdown
FY Dec 2014A 2015A 2016F 2017F 2018F
Revenues (Rpbn)
Retail sales 7,498 8,307 9,629 10,833 12,225
Department stores 2,599 2,762 2,690 2,704 2,689
Cafe and restaurant 1,547 1,557 1,718 2,248 2,891
Others 178 208 123 123 120
Total 11,822 12,833 14,160 15,907 17,925
Retail sales 498 330 616 693 782
Department stores 1.80 87.2 13.5 27.0 40.3
Cafe and restaurant 18.5 95.4 163 214 275
Others 6.00 10.0 8.10 8.10 7.90
Total 525 523 801 942 1,105
Retail sales 6.6 4.0 6.4 6.4 6.4
Department stores 0.1 3.2 0.5 1.0 1.5
Cafe and restaurant 1.2 6.1 9.5 9.5 9.5
Others 3.4 4.8 6.6 6.6 6.6
Total 4.4 4.1 5.7 5.9 6.2

FY Dec 2014A 2015A 2016F 2017F 2018F
Revenue 11,822 12,833 14,160 15,907 17,925
Gross Profit 5,470 5,783 6,513 7,397 8,425
Operating Profit 531 523 801 942 1,105
Other Non Opg (Exp)/Inc (34.8) (49.6) (20.0) (20.0) (20.0)
Associates & JV Inc 6.70 (25.9) (40.0) (35.0) (30.0)
Pre-tax Profit 178 148 348 503 667
Tax (99.5) (118) (157) (201) (234)
Net Profit 79.1 37.3 192 302 434
Net Profit before Except. 28.5 (51.7) 192 302 434
EBITDA 1,094 1,086 1,478 1,687 1,918
Growth
Revenue Gth (%) 21.4 8.5 10.3 12.3 12.7
EBITDA Gth (%) (9.9) (0.7) 36.1 14.1 13.7
Opg Profit Gth (%) (29.3) (1.6) 53.3 17.6 17.3
Net Profit Gth (Pre-ex) (%) (91.3) nm nm 57.7 43.7
Margins & Ratio
Gross Margins (%) 46.3 45.1 46.0 46.5 47.0
ROAE (%) 3.2 1.3 6.1 8.8 11.4
ROA (%) 0.9 0.4 2.0 3.1 4.2
ROCE (%) 3.6 1.5 6.0 7.8 9.4
Div Payout Ratio (%) 0.0 10.0 10.0 10.0 10.0

Page 8 Page 54
Company Guide
Mitra Adiperkasa

FY Dec 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016
Revenue 3,299 3,432 3,167 3,494 3,629

Gross Profit 1,477 1,598 1,448 1,604 1,682
Other Non Opg (Exp)/Inc (20.3) 3.60 0.30 (27.9) 4.40
Associates & JV Inc (4.7) (13.5) (10.7) (18.1) (3.7)
Net Interest (Exp)/Inc (91.8) (103) (91.0) (109) (101)
Pre-tax Profit (1.6) 106 29.6 59.0 132
Tax (4.4) (96.3) (14.2) (28.0) (57.7)
Minority Interest 7.30 (0.1) 0.0 0.0 0.0
Net Profit 1.40 10.0 15.4 30.9 74.0
Net profit bef Except. 1.40 7.80 15.4 30.9 74.0
EBITDA 266 367 282 380 431
Growth
Revenue Gth (%) 5.1 4.0 (7.7) 10.3 3.9
EBITDA Gth (%) 19.5 38.2 (23.2) 34.7 13.5
Opg Profit Gth (%) 59.7 88.7 (39.7) 63.7 8.2
Net Profit Gth (Pre-ex) (%) nm 471.6 96.6 101.4 139.2
Margins
Gross Margins (%) 44.8 46.6 45.7 45.9 46.3

FY Dec 2014A 2015A 2016F 2017F 2018F
Net Fixed Assets 2,636 2,674 2,596 2,451 2,239

Invts in Associates & JVs 93.9 187 147 112 81.5
Other LT Assets 809 927 927 927 927
Cash & ST Invts 513 504 670 475 759
Inventory 3,203 3,357 3,536 3,912 4,342
Debtors 496 568 597 684 786
Other Current Assets 950 1,268 1,268 1,268 1,268
Total Assets 8,701 9,483 9,741 9,829 10,401
ST Debt 1,567 937 937 937 937

Creditor 1,726 1,767 1,852 2,015 2,197
LT Debt 1,858 2,719 2,719 2,373 2,373
Minority Interests 69.7 0.0 (0.1) (0.3) (0.5)
Total Cap. & Liab. 8,701 9,483 9,741 9,829 10,401

Net Cash/(Debt) (2,913) (3,152) (2,986) (2,835) (2,551)
Asset Turnover (x) 1.4 1.4 1.5 1.6 1.7
Current Ratio (x) 1.3 1.7 1.8 1.8 1.9
Quick Ratio (x) 0.3 0.3 0.4 0.3 0.4
Net Debt/Equity (X) 1.2 1.1 0.9 0.8 0.7
Capex to Debt (%) 18.3 16.7 16.4 18.1 18.1
Z-Score (X) 2.8 2.8 3.0 3.3 3.5

Page 55 Page 9
Company Guide
Mitra Adiperkasa

FY Dec 2014A 2015A 2016F 2017F 2018F
Pre-Tax Profit 178 148 348 503 667

Dep. & Amort. 563 564 677 745 813
Tax Paid (99.5) (118) (157) (201) (234)
Assoc. & JV Inc/(loss) (6.7) 25.9 40.0 35.0 30.0
Chg in Wkg.Cap. (576) (438) (124) (300) (348)
Other Operating CF 135 73.3 0.0 0.0 0.0
Net Operating CF 194 255 785 781 928
Capital Exp.(net) (628) (611) (600) (600) (600)
Other Invts.(net) (5.1) 11.3 0.0 0.0 0.0
Invts in Assoc. & JV 56.8 0.0 0.0 0.0 0.0
Div from Assoc & JV 12.0 14.0 0.0 0.0 0.0
Other Investing CF (41.4) (65.0) 0.0 0.0 0.0
Net Investing CF (606) (651) (600) (600) (600)
Div Paid (33.2) 0.0 (19.1) (30.2) (43.4)
Chg in Gross Debt 645 684 0.0 (346) 0.0
Capital Issues 0.0 0.0 0.0 0.0 0.0
Other Financing CF (52.4) (145) 0.0 0.0 0.0
Net Financing CF 559 539 (19.1) (376) (43.4)
Currency Adjustments (3.0) (152) 0.0 0.0 0.0
Chg in Cash 144 (8.8) 166 (195) 285
Opg CFPS (Rp) 463 418 547 652 769
Free CFPS (Rp) (262) (214) 111 109 198
Source: DBS Vickers

Andy SIM CFA

Page 10 Page 56
Unilever Indonesia
Version 4 | Bloomberg: UNVR IJ | Reuters: UNVR.JK Refer to important disclosures at the end of this report
FULLY VALUED No bang for your buck

Price Target 12-mth: Rp36,200 (-13% downside) (Prev Maintain FULLY VALUED. We raise our FY16-FY18 net profit
Rp30,700) forecasts by 7-9% to account for better operational efficiency.
UNVR currently trades at a lofty valuation of 48x PE 17F. The
Potential Catalyst: Stronger rupiah and lower raw material prices company is facing higher cost inflation in 2017 on the back of
Where we differ: One of the lowest earnings forecasts on the street
rising commodity prices, particularly palm oil. Demand recovery
has remained nascent and with tightening competition in
Analyst selected segments, we only forecast 5% earnings growth for
Tiesha PUTRI +6221 30034931 tiesha.narandha@id.dbsvickers.com FY17. This pace of earnings growth does not justify UNVR’s lofty
Andy SIM CFA +65 6682 3718 andysim@dbs.com valuation, in our view. Our TP rises to Rp36,200, as we bump up
our earnings forecast and roll over valuation base to 2017,
What’s New though we maintain our FULLY VALUED call on the stock.
• Revise up net profit forecasts by 7-9% for better Higher cost inflation is key challenge in 2017. Palm oil and its
operating efficiency derivatives are UNVR’s key raw materials. It is also worth noting
• Facing higher cost inflation in 2017 that over half of UNVR’s raw material costs are linked to USD.
• Welcoming Wings Group as a new competitor in The recent rally in commodity prices, along with potential
ice cream market pressure on the rupiah, may crimp UNVR’s margins going
forward. We assume gross and EBIT margin contraction of
96bps in our FY17 model.
Price Relative Welcoming new competitor in ice cream market. The recent
entry of Japanese consumer goods company Glico into the
Indonesian ice cream market is something to keep an eye on, as
it could affect UNVR’s pricing power in the ice cream segment.
Glico, which has teamed up with Wings Group, launched 16
variances of ice cream in November 2016 via Alfamart and
Familymart, and will gradually expand its distribution channel to
both modern and general trade across Indonesia. We also note
that Indofood group (through ICBP) also plans to expand its ice
cream business this year. Currently, UNVR dominates the
Forecasts and Valuation Indonesian ice cream market with a market share of c.67%. We
FY Dec (Rp m) 2015A 2016F 2017F 2018F
estimate the ice cream business to contribute c.16% of UNVR’s
Revenue 36,484 39,845 44,051 48,722 consolidated revenue.
EBITDA 8,444 9,034 9,587 10,538
Pre-tax Profit 7,830 8,359 8,783 9,622
Net Pft (Pre Ex.) 5,852 6,247 6,565 7,192
Net Pft Gth (Pre-ex) (%) (1.3) 6.8 5.1 9.6 We value UNVR at Rp36,200 per share, based on 42x PE FY17F
EPS (Rp) 767 819 860 943 (five-year average PE multiple).
EPS Pre Ex. (Rp) 767 819 860 943
EPS Gth Pre Ex (%) (1) 7 5 10 Key Risks to Our View:
Diluted EPS (Rp) 767 819 860 943
Net DPS (Rp) 765 817 859 941
Recovery in domestic economy. A faster-than-expected pick-up
BV Per Share (Rp) 633 634 636 638 in Indonesia’s economy would likely translate to higher
PE (X) 54.4 51.0 48.5 44.3 revenue growth for UNVR. A stronger demand environment
PE Pre Ex. (X) 54.4 51.0 48.5 44.3 would allow UNVR to pass through higher raw material costs
P/Cash Flow (X) 50.5 46.1 44.5 40.8
EV/EBITDA (X) 37.8 35.4 33.5 30.5 without damaging sales volume.
Net Div Yield (%) 1.8 2.0 2.1 2.3
P/Book Value (X) 65.9 65.8 65.6 65.4 At A Glance
Net Debt/Equity (X) 0.2 0.4 0.5 0.7 Issued Capital (m shrs) 7,630
ROAE (%) 121.2 129.1 135.3 147.7 Mkt. Cap (Rpbn/US$m) 318,362 / 23,874
Earnings Rev (%): 7 7 9 Major Shareholders (%)
Consensus EPS (Rp): 847 942 1,066 Unilever Indonesia Holding BV 85.0
Finance L.P ICB Industry : Consumer Goods / Personal Goods

Page 57
ed: CK / sa:MA, PY
Company Guide
Unilever Indonesia
Revenue trend and forecasts

60,000 25
CRITICAL DATA POINTS TO WATCH 50,000 20

40,000
Earnings Drivers: 15
30,000
Domestic GDP growth. The health of the domestic economy is
10
generally reflected in the consumption of basic necessities as 20,000
well as Fast Moving Consumer Goods (FMCG). Our economist 10,000 5
projects the economy to grow by 5.3% in 2017, accelerating
from 5.0% in 2016. A recovery in manufacturing and 0 0
2011A 2012A 2013A 2014A 2015 2016F 2017F 2018F
commodity sectors, two sectors which had been sluggish in the
Revenue, Rp bn (LHS) Growth y-o-y, % (RHS)
past few years, would be positive for FMCG companies like
Unilever.
Strength of the rupiah against US dollar. 55% of Unilever’s 8,000 25.0

input costs are denominated in foreign currencies, which means 7,000
20.0
a weaker rupiah will hurt its margins. Currently, the rupiah is 6,000
trading at Rp13,300 to USD. Our in-house assumption for the 15.0
5,000
rupiah is Rp13,876 to the dollar by end of 2016, suggesting
4,000 10.0
some downside to earnings.
3,000
5.0
2,000
CPO price. About 80% of Unilever’s COGS are spent on raw 0.0
1,000
materials, which mostly uses palm oil and its derivatives as
0 (5.0)
ingredients. The quarterly average price of crude palm oil (CPO) 2011 2012 2013 2014 2015 2016F 2017F 2018F
rallied by 26% and 32% y-o-y in 3Q16 and 4Q16 respectively. Net profit, Rp bn (LHS) Growth y-o-y, % (RHS)
This could put upward pressure on costs, and if the rupiah
weakens simultaneously, margins could contract further.
Revenue and GDP growth trend
Earnings to grow by 7%/5% in FY16F/17F. We only project 7.0 25
single-digit earnings growth of 7% in FY16F and 5% in FY17F. 6.5

20
We expect the uptick in revenue growth in FY17F (from 9% in
6.0
FY16F to 11% in FY17F) to be partially offset by margin 15
contraction as key input cost rises. We do not expect UNVR to 5.5
aggressively raise selling prices to pass through the increasing 10
5.0
costs given the still nascent demand recovery. We assume
5
96bps contraction in UNVR’s EBIT margin in FY17F. 4.5
4.0 0
1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 3Q15 1Q16 3Q16
GDP growth y-o-y, % (LHS) UNVR revenue growth y-o-y, % (RHS)
CPO price
3,500
3,300
3,100
2,900
2,700
2,500
2,300
2,100
1,900
1,700
1,500
CPO price (MYR/MT) Quarterly avg. price

Page 2 Page 58
Company Guide
Unilever Indonesia

Balance Sheet:
Low leveraged company. Unilever has strong operating cash
flow as well as free cash flow, and has consistently pared down
bank loans at the end of its fiscal year. The loans are mainly
used to fund working capital and largely denominated in
rupiah. This eliminates foreign exchange risks associated with its
debt. And, the company’s size and healthy balance sheet have
allowed it to secure favourable lending rates. As at end of Sep
2016, its net gearing ratio stood at 0.12x and average loan
interest rate was only 6.7%.
Capital Expenditure
Recovery in economic growth. Recent macro datapoints indicate
that consumer demand remains soft. A substantial pick-up in
consumer confidence and GDP growth, which points to a firmer
demand recovery, would be positive for UNVR as a proxy for
Indonesia’s consumer sector.
Key Risks:
Slower-than-expected economic growth
A slower-than-expected economic recovery would slow
consumption further and hurt the company’s top-line and ROE (%)
bottom-line.
Weaker rupiah, higher raw material prices

These would pressure the company’s margins, and in turn, our
earnings estimates.
Difficulty in passing on cost increases to consumers

Slowing consumption and weak consumer sentiment are
causing consumers to be more selective. This would limit the
company's ability to pass on cost increases to consumers,
which means margins would be eroded eventually. Forward PE Band (x)
Company Background
PT Unilever Indonesia Tbk manufactures soaps, detergents,
margarine, oil, and dairy-based foods, tea-based beverages, ice
cream, and cosmetics.
PB Band (x)

Page 59 Page 3
Company Guide
Unilever Indonesia
Segmental Breakdown
FY Dec 2014A 2015A 2016F 2017F 2018F
Revenues (Rpbn)
Home and Personal Care 24,634 25,419 27,452 29,923 32,616
Foods and Refreshment 9,878 11,066 12,393 14,128 16,106
Total 34,512 36,484 39,845 44,051 48,722
Gross Profit (Rpbn)
Home and Personal Care 12,943 13,874 15,236 16,368 17,841
Foods and Refreshment 4,156 4,775 4,895 5,468 6,233
Total 17,099 18,649 20,131 21,835 24,074
Gross Profit Margins (%)
Home and Personal Care 52.5 54.6 55.5 54.7 54.7
Foods and Refreshment 42.1 43.1 39.5 38.7 38.7
Total 49.5 51.1 50.5 49.6 49.4

FY Dec 2014A 2015A 2016F 2017F 2018F
Revenue 34,512 36,484 39,845 44,051 48,722
Gross Profit 17,207 18,649 20,131 21,835 24,074
Net Interest (Exp)/Inc (85.6) (110) (127) (178) (212)
Pre-tax Profit 7,928 7,830 8,359 8,783 9,622
Tax (2,001) (1,978) (2,111) (2,219) (2,431)
Net Profit 5,927 5,852 6,247 6,565 7,192
EBITDA 8,388 8,444 9,034 9,587 10,538
Growth
Revenue Gth (%) 12.2 5.7 9.2 10.6 10.6
EBITDA Gth (%) 9.2 0.7 7.0 6.1 9.9
Opg Profit Gth (%) 11.8 (0.9) 6.9 5.6 9.7
Net Profit Gth (Pre-ex) (%) 10.7 (1.3) 6.8 5.1 9.6
Margins & Ratio
Gross Margins (%) 49.9 51.1 50.5 49.6 49.4
ROAE (%) 128.9 121.2 129.1 135.3 147.7
ROA (%) 41.5 37.2 37.8 36.6 37.7
ROCE (%) 89.9 81.3 82.2 79.5 82.2
Div Payout Ratio (%) 94.4 99.8 99.8 99.8 99.8

Page 4 Page 60
Company Guide
Unilever Indonesia

FY Dec 3Q2015 4Q2015 1Q2016 2Q2016 3Q2016
Revenue 8,745 8,937 9,988 10,757 9,356

Gross Profit 4,435 4,685 5,021 5,470 4,812
Pre-tax Profit 1,678 2,231 2,106 2,309 1,949
Tax (425) (562) (536) (581) (497)
Net Profit 1,253 1,669 1,570 1,728 1,452
Net profit bef Except. 1,253 1,669 1,570 1,728 1,452
EBITDA 1,859 2,424 2,274 2,598 2,404
Growth
Revenue Gth (%) (6.8) 2.2 11.8 7.7 (13.0)
EBITDA Gth (%) (4.3) 30.4 (6.2) 14.2 (7.4)
Opg Profit Gth (%) (8.2) 34.3 (6.2) 8.6 (14.3)
Net Profit Gth (Pre-ex) (%) (6.5) 33.2 (5.9) 10.1 (16.0)
Margins
Gross Margins (%) 50.7 52.4 50.3 50.9 51.4

FY Dec 2014A 2015A 2016F 2017F 2018F
Net Fixed Assets 7,348 8,321 9,173 9,946 10,443

Other LT Assets 596 786 786 786 786
Cash & ST Invts 859 628 293 190 112
Inventory 2,326 2,298 2,555 2,880 3,195
Debtors 3,052 3,602 3,634 4,017 4,443
Other Current Assets 99.8 95.2 95.2 95.2 95.2
Total Assets 14,281 15,730 16,536 17,914 19,075
ST Debt 1,250 1,700 2,100 2,800 3,300

Creditor 4,632 4,842 5,236 5,900 6,546
LT Debt 0.0 0.0 0.0 0.0 0.0
Total Cap. & Liab. 14,281 15,730 16,536 17,914 19,075
Non-Cash Wkg. Capital (2,137) (2,433) (2,537) (2,494) (2,398)

Net Cash/(Debt) (391) (1,072) (1,807) (2,610) (3,188)
Asset Turnover (x) 2.4 2.3 2.4 2.5 2.6
Current Ratio (x) 0.7 0.7 0.6 0.6 0.6
Quick Ratio (x) 0.4 0.4 0.4 0.3 0.3
Net Debt/Equity (X) 0.1 0.2 0.4 0.5 0.7
Capex to Debt (%) 80.6 84.1 66.7 50.0 36.4
Z-Score (X) 23.5 21.0 19.8 18.7 17.6

Page 61 Page 5
Company Guide
Unilever Indonesia

FY Dec 2014A 2015A 2016F 2017F 2018F
Pre-Tax Profit 7,928 7,830 8,359 8,783 9,622

Dep. & Amort. 375 505 548 627 704
Tax Paid (2,001) (1,978) (2,111) (2,219) (2,431)
Assoc. & JV Inc/(loss) 0.0 0.0 0.0 0.0 0.0
Chg in Wkg.Cap. 277 123 104 (43.4) (95.2)
Other Operating CF (116) (181) 0.0 0.0 0.0
Net Operating CF 6,463 6,299 6,900 7,148 7,800
Capital Exp.(net) (1,007) (1,429) (1,400) (1,400) (1,200)
Other Invts.(net) 0.0 0.0 0.0 0.0 0.0
Invts in Assoc. & JV 0.0 0.0 0.0 0.0 0.0
Div from Assoc & JV 0.0 0.0 0.0 0.0 0.0
Other Investing CF 0.0 0.0 0.0 0.0 0.0
Net Investing CF (1,007) (1,429) (1,400) (1,400) (1,200)
Div Paid (5,127) (5,592) (6,235) (6,551) (7,177)
Chg in Gross Debt 273 450 400 700 500
Capital Issues 0.0 0.0 0.0 0.0 0.0
Other Financing CF 0.0 0.0 0.0 0.0 0.0
Net Financing CF (4,854) (5,142) (5,835) (5,851) (6,677)
Currency Adjustments (4.3) 41.6 0.0 0.0 0.0
Chg in Cash 598 (231) (335) (103) (77.1)
Opg CFPS (Rp) 811 809 891 942 1,035
Free CFPS (Rp) 715 638 721 753 865
Source: DBS Vickers

Andy SIM CFA

Page 6 Page 62
Industry Focus
Indonesia Consumer
DBS Vickers recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
Share price appreciation + dividends
Completed Date: 9 Feb 2017 13:56:07

Dissemination Date: 9 Feb 2017 17:47:08
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Page 13
Page 63
Industry Focus
Indonesia Consumer
DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or research department,
has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past
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Makmur, Mayora Indah, Ace Hardware Indonesia, Ramayana Lestari Sentosa and Multipolar recommended in this report as of 8 Feb 2017.
Compensation for investment banking services:

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Industry Focus
Indonesia Consumer
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Indonesia Industry Focus

DBS Group Research . Equity 9 Feb 2017

Tiptoeing through a recovery JCI : 5,361.10

ed-CK / sa- MA, PY Page 1

On a slow path of recovery Minimarket’s average daily sales per store

MPPA LPPF MAPI RALS ACES Parkson*

*Fiscal year ended in June

Ramayana (RALS) and Matahari Putra Prima’s (MPPA)

Consumer companies’ sales growth trend 8.0% 7.1%

*UNVR, ICBP and MYOR’s domestic sales

consumption. Three months campaign period will precede the 90 -5.0

voting day, which is scheduled to take place in mid-Feb 2017.

Employment by sector CCI 5-year avg. CCI AdministeredCPI y-o-y

Source: Bank Indonesia

Source: Central Bureau of Statistics Source: Various media

Infrastructure remains high on the government’s agenda with

Source: Central Bureau of Statistics, DBS Vickers, DBS Bank 10% 0%

Key commodity prices have reversed their downward trend in

For FY17, we assume an EBIT margin decline of 20-100bps for

Inventory, Rp bn (RHS) T12M revenue growth y-o-y (LHS)

*LPPF and MAPI. We excluded MPPA as the company changed its

works its way to be a leading omni-channel retailer in

Source: Companies, DBS Vickers, DBS Bank

Source: DBS Vickers, DBS Bank, Bloomberg Finance L.P.

Net profit FY16F Net profit FY17F

0.98 0.96 1.00 0.98 0.94 0.98 0.96

Source: DBS Vickers, DBS Bank, Bloomberg Finance L.P.

assumed either one of these scenarios or the combination of 2.0%

Meanwhile, retailers are expected to see a strong pick-up in

Retailers – consensus’ earnings revision in the past three Stock picks

In the retail space, the impact from the policy loosening

As for retailers, higher household income should spur

UNVR – revised up earnings on better-than-expected Summary of recommendation changes

Indonesian consumer sector: valuation summary

Regional peer comparison

DBS Group Research . Equity 9 Feb 2017

HOLD A less exciting year

2017 outlook: expecting deceleration in earnings growth.

ASIAN INSIGHTS VICKERS SECURITIES

Revenue Mix Trend and Forecasts

Noodle segment the primary earnings driver. The noodle 30,000

preferred substitute to rice by many Indonesians, hence, the

Beverage segment to turn around in 2017-18. To diversify its 3,000

would be another product line to drive top-line growth going 1,800

Skim milk powder (EUR/MT) Quarterly avg. price

Source: Company, DBS Vickers

ASIAN INSIGHTS VICKERS SECURITIES

Leverage & Asset Turnover (x)

Share Price Drivers:

Economic recovery. When GDP growth meets market

Cost pressure after adjustments to fuel price. The higher fuel

Source: Company, DBS Vickers

ASIAN INSIGHTS VICKERS SECURITIES

Income Statement (Rpbn)

ASIAN INSIGHTS VICKERS SECURITIES

Quarterly / Interim Income Statement (Rpbn)

Revenue 7,545 7,645 8,922 9,253 8,296

Balance Sheet (Rpbn)

Net Fixed Assets 5,810 6,556 7,298 8,001 8,665

ST Debt 1,805 1,395 1,395 1,395 1,395

Non-Cash Wkg. Capital 1,933 1,711 1,631 1,921 2,262

ASIAN INSIGHTS VICKERS SECURITIES

Cash Flow Statement (Rpbn)