FOCUS | XXX

Company Update | XX XXXXX 2013

FOCUS | Matahari Department Store
Company Update | 01 November 2016

Mandiri Sekuritas Analyst

3Q16: Within our expectation, but weak
Laura Taslim
+6221 5296 9450 LPPF’s 9M16 earnings came below consensus, but in-line with our expectation. The
laura.taslim@mandirisek.co.id
management revised down their SSSG target to 5%-6.5%, in-line with our 5.0%
Adrian Joezer assumption, from 7%-7.5% amidst weak demand in our opinion. We maintain our
+6221 5296 9415 Buy rating as LPPF still trades at an attractive valuation, while investment on
adrian.joezer@mandirisek.co.id
MatahariMall.com still poses the biggest risk for the stock.

Sector : Retail Mixed performance. 3Q16 SSSG came in group’s ecommerce venture. This new
at -22.2% YoY, below the initial guidance valuation is three times above the current
of -18% to -20% YoY. Weak 9M16 SSSG of value of the company and we estimate
6% was contributed by the drop in that LPPF needs to spend up to Rp360bn
BUY Jakarta's/Java's SSSG to 3.5%/8.3% from to retain its current 9.47% stakes. With
Current Price Rp18,025 5.8%/11.1% in 9M15 due to demand annual operating cash flow generation at
Price Target Rp21,000 (+16.5%) weakness in our opinion. Ex-Java region is >Rp1,500bn, we think the company has
52-wk range Rp22,575 - Rp14,500 the only exception, with SSSG improved the capacity to do so, but the competition
from 3.2% in 9M15 to 5.8% in 9M16. in e-commerce industry among the big
Besides the low-base, we think the strong players poses the biggest risk to this
Stock Data rally in commodities prices also helps the investment, in our view.
Bloomberg Code LPPF IJ strong demand, aligned with what
Mkt.Cap (Rp bn/US$ mn) 52,595 / 4,031 Ramayana experiences on its SSSG trend. Maintain Buy. We trim slightly our long
Issued Shares (mn) 2,918 term SSSG forecast to take into account
Avg. Daily T/O (Rp bn/US$ mn) 95.7/7.3 Cash outflow risk. Management is willing the weak demand, thus we introduce our
to avoid the dilution on its investment on lower DCF-based TP of Rp21,000 from
MatahariMall.com following the Mitsui Rp22,900 previously. We still keep our Buy
Major shareholder
US$100mn capital injection. Even though rating on the stock, given undemanding
Multipolar 17.5% the proceeds will be done in tranches over valuation, 1.6s.d. below the historical
Public 82.5% a 12-month period, Mitsui’s investment average. Upside could come from demand
will eventually translate into 20% of equity recovery and higher dividend payout ratio.
stakes in MatahariMall.com, implying a
EPS consensus new valuation of US$500mn for the

Mansek Cons Diff

2016F 713.5 757.4 (5.8) FINANCIAL SUMMARY
2017F 807.3 872.0 (7.4)
2018F 947.3 975.4 (2.9)
YE Dec (Rp Bn) 2014A 2015A 2016F 2017F 2018F
EBITDA 2,339 2,564 2,842 3,203 3,734
Net Profit 1,419 1,781 2,082 2,355 2,764
Share price performance Fully-diluted EPS (Rp) 486 610 713 807 947
Fully-diluted EPS growth (%) 23.4 25.5 16.9 13.1 17.3
3m 6m 12m P/E Ratio (x) 37.1 29.5 25.3 22.3 19.0
Absolute (%) (9.5) (5.1) 8.7
EV/EBITDA (x) 22.4 20.1 18.0 15.8 13.4
Relative to JCI (%) (13.5) (17.2) (13.0)
P/B Ratio (x) 330.2 47.5 27.1 21.7 17.1
Dividend Yield (%) 0.9 1.6 2.4 3.6 4.0
ROAE (%) (456.2) 281.5 136.6 107.9 100.7
Source: Company (2014-2015), Mandiri Sekuritas (2016-2018)

Please see important disclosure at the back of this report Page 1 of 6

FOCUS | Matahari Department Store
Company Update | 01 November 2016

LPPF - At a Glance
FIGURE 1. SALES BREAKDOWN – CUMULATIVE FIGURES FIGURE 2. GROSS PROFIT BREAKDOWN PER DIVISION
100%
90% 44.0%
80% 42.0%
70% 40.0%
60%
50% 38.0%
40% 36.0%
30% 34.0%
20%
10% 32.0%
0% 30.0%
6M10

6M11

6M12

6M13

6M14

6M15

6M16

6M10

6M11

6M12

6M13

6M14

6M15

6M16
12M09

12M10

12M11

12M12

12M13

12M14

12M15

12M09

12M10

12M11

12M12

12M13

12M14

12M15
Direct Purchase Consignment sales DP gross margin CV gross margin

Source: Company, Mandiri Sekuritas estimates Source: Company, Mandiri Sekuritas estimates

FIGURE 3. EARNINGS SEASONALITY FIGURE 4. SSSG GROWTH PER REGION

100% 35.0%
90% 30.0%
80%
25.0%
70%
60% 20.0%
50% 15.0%
40%
10.0%
30%
5.0%
20%
10% 0.0%
3M13

6M13

9M13

3M14

6M14

9M14

3M15

6M15

9M15

3M16

6M16

9M16
12M13

12M14

12M15
0%
2012 2013 2014 2015 2016

1Q 2Q 3Q 4Q Greater Jakarta Java ex Jakarta Ex-Java

Source: Company, Mandiri Sekuritas estimates Source: Company, Mandiri Sekuritas estimates

FIGURE 5. EPS GROWTH TREND FIGURE 6. LEVERAGE TREND

(Rp) (%) (%) (x)
1,400 70 0 25
1,200 60 (20) 20
1,000 50
(40)
800 40 15
(60)
600 30 10
(80)
400 20
(100) 5
200 10
0 0 (120) 0
Dec-12

Dec-13

Dec-14

Dec-15

Dec-16

Dec-17

Dec-18

Dec-19

Dec-20

Dec-11

Dec-12

Dec-13

Dec-14

Dec-15

Dec-16

Dec-17

Dec-18

Dec-19

Dec-20

EPS EPS Growth [RHS] Net Debt/Equity (NDE) Interest Cover [RHS]

Source: Company, Mandiri Sekuritas estimates Source: Company, Mandiri Sekuritas estimates

Please see important disclosure at the back of this report Page 2 of 6

FOCUS | Matahari Department Store
Company Update | 01 November 2016

FIGURE 7. LPPF’S 9M16 RESULT COMPARISON

% % of Consen Seasonal
Rp bn 3Q16 2Q16 %qoq 3Q15 %yoy 9M16 9M15 %yoy Mansek
Mansek Cons sus ity
Gross Sales 4,196 5,792 -28% 5,268 -20% 13,280 12,231 9% 72% 18,396 76%
Net Sales 2,343 3,318 -29% 2,892 -19% 7,522 6,813 10% 73% 72% 10,284 10,419 76%
Gross Profit 1,468 2,122 -31% 1,812 -19% 4,752 4,293 11% 74% 72% 6,454 6,593 76%
Operating Profit 560 1,155 -52% 925 -39% 2,021 1,783 13% 79% 75% 2,565 2,678 79%
EBITDA 560 1,155 -52% 925 -39% 2,053 1,812 13% 72% 68% 2,842 3,000 79%
Pretax Profit 565 1,148 -51% 914 -38% 2,022 1,741 16% 78% 73% 2,602 2,781
Net Profit 453 913 -50% 736 -38% 1,610 1,384 16% 77% 73% 2,082 2,204 78%
Core Profit 453 917 -51% 734 -38% 1,612 1,382 17% 77% 73% 2,082 2,205 78%

bps bps bps

change change change
Gross margin 35.0% 36.6% (163.8) 34.4% 60.2 35.8% 35.1% 68.5 35.1%
DP margin 41.5% 44.9% (339.5) 40.2% 132.7 43.1% 41.6% 153.9 41.7%
CV margin 31.1% 31.3% (12.0) 31.2% (8.5) 31.2% 31.2% (5.8) 31.1%
Operating margin 13.3% 19.9% (659.6) 17.6% (421.1) 15.2% 14.6% 64.3 13.9%
EBITDA margin 13.3% 19.9% (659.6) 17.6% (421.1) 15.5% 14.8% 64.7 15.5%
Pretax margin 13.5% 19.8% (637.5) 17.3% (389.1) 15.2% 14.2% 99.2 14.1%
Net margin 10.8% 15.8% (497.3) 14.0% (317.9) 12.1% 11.3% 80.9 11.3%
Core margin 10.8% 15.8% (504.6) 13.9% (314.1) 12.1% 11.3% 84.2 11.3%
Source: Company, Mandiri Sekuritas estimates, Bloomberg

FIGURE 8. EARNINGS REVISION SUMMARY

Previous New %changes
2016 2017 2018 2016 2017 2018 2016 2017 2018
Outrigth sales 6,569.65 7,329.54 8,334.05 6,569.65 7,294.81 8,255.24 0% 0% -1%
Consignment - net 3,657.15 4,080.17 4,639.35 3,657.15 4,060.83 4,595.48 0% 0% -1%
Gross Sales 18,396.48 20,524.36 23,337.20 18,396.48 20,427.09 23,116.51 0% 0% -1%
Net Sales 10,283.87 11,473.39 13,045.80 10,283.87 11,419.01 12,922.44 0% 0% -1%
Gross Profit 6,454.35 7,200.91 8,187.79 6,454.35 7,166.79 8,110.36 0% 0% -1%
Operating Income 2,565.12 2,918.68 3,451.57 2,565.12 2,888.36 3,382.81 0% -1% -2%
EBITDA 2,842.45 3,233.19 3,802.45 2,842.45 3,202.86 3,733.69 0% -1% -2%
Pretax Profit 2,602.26 2,974.70 3,524.82 2,602.26 2,944.37 3,455.00 0% -1% -2%
Net Income 2,081.81 2,379.76 2,819.86 2,081.81 2,355.50 2,764.00 0% -1% -2%
Core Income 2,081.81 2,379.76 2,819.86 2,081.81 2,355.50 2,764.00 0% -1% -2%

SSSG 5.0% 5.5% 5.5% 5.0% 5.0% 5.0%

Margin
Consignment margin 31.1% 31.1% 31.1% 31.1% 31.1% 31.1% 0.00 0.00 0.00
Gross margin 35.1% 35.1% 35.1% 35.1% 35.1% 35.1% 0.00 0.00 0.00
EBIT margin 13.9% 14.2% 14.8% 13.9% 14.1% 14.6% 0.00 -8.08 -15.63
EBITDA margin 15.5% 15.8% 16.3% 15.5% 15.7% 16.2% 0.00 -7.35 -14.19
Pretax margin 14.1% 14.5% 15.1% 14.1% 14.4% 14.9% 0.00 -7.95 -15.78
Net margin 11.3% 11.6% 12.1% 11.3% 11.5% 12.0% 0.00 -6.36 -12.63
Core margin 11.3% 11.6% 12.1% 11.3% 11.5% 12.0% 0.00 -6.36 -12.63
Source: Mandiri Sekuritas estimates

Please see important disclosure at the back of this report Page 3 of 6

FOCUS | Matahari Department Store
Company Update | 01 November 2016

FIGURE 9. 3-STAGES DCF VALUATION

DCF Valuation 2016 2017 2018 2019 2020 2021
Revenue 18,396 20,427 23,117 25,742 28,416 31,723
Operating profit 2,565 2,888 3,383 3,839 4,283 4,781
Income tax (520) (589) (691) (787) (881) (956)
Depreciation 277 315 351 388 431 481
Change in working capital: (198) 57 75 73 75 32
Capital expenditure (442) (450) (440) (444) (524) (698)
Free cash flow to firm 1,682 2,221 2,678 3,068 3,382 3,640
PV of FCF 1,682 1,992 2,154 2,213 2,188 2,112

Revenue growth 11.0% 13.2% 11.4% 10.4% 11.6%

EBIT margin 14.1% 14.6% 14.9% 15.1% 15.1%
Tax rates to EBIT 20.4% 20.4% 20.5% 20.6% 20.0%
Working capital/sales 0.3% 0.3% 0.3% 0.3% 0.1%
Capex/sales -2.2% -1.9% -1.7% -1.8% -2.2%
Depreciation/sales 1.5% 1.5% 1.5% 1.5% 1.5%

Assumptions Stage 1 Stage 2 Stage 3

Sales growth 11.6% 10.1% 8.6%
EBIT margin 15.1% 15.1% 15.1%
Tax rates 20.0% 20.0% 20.0%
Working capital/sales 0.1% 0.1% 0.1%
Capex/sales -2.2% -2.2% -2.2%
Depreciation/sales 1.5% 1.5% 1.5%

PV 2016-19E 8,547 Risk-free rate 6.5%

PV 2020-34E 30,034 ERP 5.0%
PV of terminal value 21,200 Beta 1.00
Sum of PV 59,782 Debt/equity 0%
Debt - Tax rate 20.0%
Cash 1,428 Cost of equity 11.5%
Minority interest - Cost of debt 10.9%
Equity of subsidiary - WACC 11.5%
Terminal
Equity value 61,209 3.0%
growth rate
No. of shares (m) 2,918
Equity per share (Rp/sh) 21,000
Source: Mandiri Sekuritas estimates

Please see important disclosure at the back of this report Page 4 of 6

FOCUS | Matahari Department Store
Company Update | 01 November 2016

Matahari Department Store

Profit & Loss Balance Sheet
YE Dec (Rp Bn) 2014A 2015A 2016F 2017F 2018F YE Dec (Rp Bn) 2014A 2015A 2016F 2017F 2018F

Revenue 7,926 9,007 10,284 11,419 12,922 Cash & ST Investment 786 947 1,428 1,840 2,479
Gross Profit 5,048 5,671 6,454 7,167 8,110 Acct. Receivable 45 39 45 50 56
Oper. Profit 2,111 2,330 2,565 2,888 3,383 Inventory 955 1,008 1,223 1,358 1,537
EBITDA 2,339 2,564 2,842 3,203 3,734 Others 331 279 279 279 279
Net Interest (233) (93) 37 56 72 Current Assets 2,118 2,273 2,975 3,527 4,352
Interest Expense (256) (124) 0 0 0 Investments 0 0 0 0 0
Interest Income 23 31 37 56 72 Fixed Assets 726 877 1,042 1,177 1,266
Forex Losses/Gains 0 0 0 0 0 Others 2,189 2,744 3,186 3,636 4,076
Net Other (27) 8 0 0 0 Total Assets 3,413 3,889 4,756 5,444 6,357
Pre-Tax Profit 1,851 2,245 2,602 2,944 3,455 Curr. Liabilities 2,519 2,439 2,462 2,659 2,919
Income Tax (431) (464) (520) (589) (691) Acct. Payable 1,411 1,552 1,781 1,978 2,238
Others 0 0 0 0 0 ST Borrowings 279 0 0 0 0
Minority Interests 0 0 0 0 0 Others 829 887 681 681 681
Net Profit 1,419 1,781 2,082 2,355 2,764

Long-Term Liabilities
Cash Flow
Long-Term Payable 410 0 0 0 0
YE Dec (Rp Bn) 2014A 2015A 2016F 2017F 2018F
Others 325 344 353 362 371
Operating Profit 2,111 2,330 2,565 2,888 3,383 Total Liabilities 3,254 2,783 2,815 3,021 3,290
Net Interest (233) (93) 37 56 72
Shareholder’s Equity 159 1,106 1,941 2,423 3,067
Depr & Amort 228 234 277 315 351
Other expenses/income (27) 8 0 0 0
Key Ratios
Other Gain / Loss 0 0 0 0 0
YE Dec 2014A 2015A 2016F 2017F 2018F
Tax (431) (464) (520) (589) (691)
Growth (% YoY)
Chg in Working Capital (22) 205 (198) 57 75
Sales 17.3 13.6 14.2 11.0 13.2
Other Oper. Cash Flow 80 (44) 9 9 9
Oper. Cash Flow 1,705 2,175 2,170 2,735 3,199 EBIT 18.5 10.3 10.1 12.6 17.1

Capital Expenditure (271) (379) (442) (450) (440) EBITDA 17.7 9.6 10.9 12.7 16.6

FCF (OPCF after Capex) 1,435 1,797 1,728 2,286 2,759 Net Profit 23.4 25.5 16.9 13.1 17.3

Other Investing CF 0 0 0 0 0
CF From Investing (269) (463) (442) (450) (440) Profitability (%)

Net Chg in Debts (988) (700) 0 0 0 Gross Profit Margin 63.7 63.0 62.8 62.8 62.8

Equity Funds Raised 0 0 0 0 0 Oper. Margin 26.6 25.9 24.9 25.3 26.2

Dividend (460) (851) (1,247) (1,874) (2,120) EBITDA Margin 29.5 28.5 27.6 28.0 28.9

Other Financing CF 26 0 0 0 0 Net Margin 17.9 19.8 20.2 20.6 21.4

CF From Financing (1,423) (1,551) (1,247) (1,874) (2,120) ROAA 44.7 48.8 48.2 46.2 46.8

Non-Recur. Inc (Exp) 0 0 0 0 0 ROAE (456.2) 281.5 136.6 107.9 100.7

Extraord. Inc(Exp) 0 0 0 0 0
Net Change in Cash 14 161 481 412 639 Leverage
Cash at beginning 772 786 947 1,428 1,840 Net Debt / Equity (%) (60.7) (85.6) (73.5) (75.9) (80.8)
Cash at End 786 947 1,428 1,840 2,479 EBITDA/Gross Int. (x) 9.1 20.7 n.m n.m n.m

Valuation
Per Share Data (Rp)
YE Dec 2014A 2015A 2016F 2017F 2018F EPS 486 610 713 807 947
PER (x) 37.1 29.5 25.3 22.3 19.0 CFPS 584 746 744 937 1,096
EV/EBITDA (x) 22.4 20.1 18.0 15.8 13.4 BVPS 55 379 665 830 1,051
P/BV (x) 330.2 47.5 27.1 21.7 17.1 DPS 157.7 291.8 427.2 642.1 726.5
P/CF (x) 30.8 24.2 24.2 19.2 16.4
Dividend Yield (%) 0.9 1.6 2.4 3.6 4.0

Source: Company, Mandiri Sekuritas estimates

Please see important disclosure at the back of this report Page 5 of 6

 Mandiri Sekuritas A subsidiary of PT Bank Mandiri (Persero) Tbk
Plaza Mandiri 28th Floor, Jl. Jend. Gatot Subroto Kav. 36 - 38, Jakarta 12190, Indonesia
General: +62 21 526 3445, Fax : +62 21 527 5374 (Equity Sales)

RESEARCH
Tjandra Lienandjaja Banking tjandra.lienandjaja@mandirisek.co.id +6221 5296 9617
Liliana S Bambang Property, Building Material liliana.bambang@mandirisek.co.id +6221 5296 9465
Adrian Joezer Consumer adrian.joezer@mandirisek.co.id +6221 5296 9415
Ariyanto Kurniawan Telecom, Coal, Metal, Automotive ariyanto.kurniawan@mandirisek.co.id +6221 5296 9682
Bob Setiadi Construction, Toll Road bob.setiadi@mandirisek.co.id +6221 5296 9543
Francis Lim Quant, Health Care, Hospital francis.lim@mandirisek.co.id +6221 5296 9522
Yudha Gautama Mining, Plantation yudha.gautama@mandirisek.co.id +6221 5296 9623
Laura Taslim Retail laura.taslim@mandirisek.co.id +6221 5296 9450
Priscilla Thany Banking priscilla.thany@mandirisek.co.id +6221 5296 9569
Ferdy Wan Building Material, Industrial Est., Media ferdy.wan@mandirisek.co.id +6221 5296 9572
Lakshmi Rowter Research Assistant lakshmi.rowter@mandirisek.co.id +6221 5296 9549
Gerry Harlan Research Assistant gerry.harlan@mandirisek.co.id +6221 5296 9488
Leo Putera Rinaldy Chief Economist leo.rinaldy@mandirisek.co.id +6221 5296 9406
Wisnu Trihatmojo Economist wisnu.trihatmojo@mandirisek.co.id +6221 5296 9544
Aziza Nabila Amani Research Assistant aziza.amani@mandirisek.co.id +6221 5296 9688

INSTITUTIONAL SALES
Lokman Lie Co-Head Institutional Equities lokman.lie@mandirisek.co.id +6221 527 5375
Silva Halim Co-Head Institutional Equities silva.halim@mandirisek.co.id +6221 527 5375
Aditya Sastrawinata Institutional Sales aditya.sastrawinata@mandirisek.co.id +6221 527 5375
Andrew Handaya Institutional Sales andrew.handaya@mandirisek.co.id +6221 527 5375
Cindy Amelia P. Kalangie Institutional Sales cindy.amelia@mandirisek.co.id +6221 527 5375
Feliciana Ramonda Institutional Sales feliciana.ramonda@mandirisek.co.id +6221 527 5375
Kevin Halim Institutional Sales kevin.halim@mandirisek.co.id +6221 527 5375
Mirna Santikara Salim Institutional Sales santikara.salim@mandirisek.co.id +6221 527 5375
Oos Rosadi Institutional Sales oos.rosadi@mandirisek.co.id +6221 527 5375
Zahra Aldila Niode Institutional Sales zahra.niode@mandirisek.co.id +6221 527 5375
Kusnadi Widjaja Equity Dealing kusnadi.widjaja@mandirisek.co.id +6221 527 5375
Edwin Pradana Setiadi Equity Dealing edwin.setiadi@mandirisek.co.id +6221 527 5375
Jane Theodoven Sukardi Equity Dealing jane.sukardi@mandirisek.co.id +6221 527 5375
Michael Taarea Equity Dealing michael.taarea@mandirisek.co.id +6221 527 5375

RETAIL SALES
Andreas M. Gunawidjaja Head Retail Equities andreas@mandirisek.co.id +6221 526 9693
Boy Triyono Plaza Mandiri boy.triyono@mandirisek.co.id +6221 526 5678
A. A. Damargumilang Pondok Indah Office Tower damar.gumilang@mandirisek.co.id +6221 2912 4005
Herianto Pondok Indah Prioritas herianto@mandirisek.co.id +6221 7591 8400
Hendra Riady Mangga Dua hendra.riady@mandirisek.co.id +6221 6230 2333
Indra Mas'ari Bandung indra.mas’ari@mandirisek.co.id +6222 426 5088
Yogiswara P. Yogyakarta yogiswara.perdana@mandirisek.co.id +62274 560 596
Widodo Solo widodo@mandirisek.co.id +62271 788 9290
Linawati Surabaya Linawati@mandirisek.co.id +6231 535 7218
Bambang Suwanto Malang bambang.suwanto@mandirisek.co.id +62341 336 440
Ruwie Medan ruwie@mandirisek.co.id +6261 8050 1825
Aidil Idham Palembang aidil.idham@mandirisek.co.id +62711 319 900
Yuri Ariadi Pontianak yuri.ariadi@mandirisek.co.id +62561 582 293

INVESTMENT RATINGS: Indicators of expected total return (price appreciation plus dividend yield) within the 12-month period from the date of the last
published report, are: Buy (10% or higher), Neutral (-10% to10%) and Sell (-10% or lower).

DISCLAIMER: This report is issued by PT. Mandiri Sekuritas, a member of the Indonesia Stock Exchanges (IDX) and Mandiri Sekuritas is registered and
supervised by the Financial Services Authority (OJK). Although the contents of this document may represent the opinion of PT. Mandiri Sekuritas, deriving its
judgement from materials and sources believed to be reliable, PT. Mandiri Sekuritas or any other company in the Mandiri Group cannot guarantee its
accuracy and completeness. PT. Mandiri Sekuritas or any other company in the Mandiri Group may be involved in transactions contrary to any opinion herein
to make markets, or have positions in the securities recommended herein. PT. Mandiri Sekuritas or any other company in the Mandiri Group may seek or will
seek investment banking or other business relationships with the companies in this report. For further information please contact our number
62-21-5263445 or fax 62-21-5275711.

ANALYSTS CERTIFICATION: Each contributor to this report hereby certifies that all the views expressed accurately reflect his or her views about the
companies, securities and all pertinent variables. It is also certified that the views and recommendations contained in this report are not and will not be
influenced by any part or all of his or her compensation.