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Danareksa Equity Snapshot - RALS 15 Mei 2018
May 15, 2018 09:32

Ramayana Lestari Sentosa(RALS IJ)

Benefitting from supermarket downsizing



RALS has posted 4M18 gross revenues of IDR2.1tn, only up +2.0%, supported by fashion sales despite the lagging supermarket business. SSSG in 4M18 was relatively weaker compared to 1Q18 and also last year. Positively, in April 2018, RALS opened 2 new stores in Cibubur and Bekasi.  Going forward, we foresee EBITDA margins expansion from the downsizing of its loss-making supermarket business, despite the expectation of mid-single digit top line growth this year. Maintain BUY.


4M18 gross revenues grew by only +2.0% yoy driven by the fashion business. Gross revenues reached IDR580.5bn, +10.4% mom and +0.8% yoy, culminating in 4M18 gross revenues of IDR2.1tn (+2.0% yoy) or reaching 24.4% of our full year estimate - i.e. in-line. Fashion revenues were up an impressive +12.3% yoy in 4M18 while supermarket revenues slumped by 20.9% yoy. Overall, direct purchases (DP) rose by +9.6% yoy in 4M18 and consignment goods increased by +14.8% yoy. 37.9% of the gross revenues in 4M18 were generated in regions outside Java, Greater Jakarta contributed 36.6% and the rest of Java 25.5%.


4M18 SSSG was relatively weak. RALS posted relatively weak SSSG YTD in 4M18 of only -0.8% nationwide (1Q18: 0.3%; 4M17: 4.4%), weaker compared to 1Q18 and last year. Outside Java SSSG was the lowest at -1.8% YTD (1Q18: -1.5%; 4M17: 1.9%), followed by Greater Jakarta at -0.5% YTD (1Q18: 3.2%; 4M17: 7.6%) and the rest of Java at 0.4% YTD (1Q18: -0.6%; 4M17: 3.7%).


New stores opened in April 2018. Additional gross retail space reached 10,004sqm in April 2018. This came from the opening of two new stores in Greater Jakarta: one in Cibubur (5,836sqm) and the other in Bekasi (4,168sqm). As a result, RALS’ total gross retail space as of 4M18 reached 993,759sqm. 39.2% of the total gross retail space is located in outside Java areas, followed by Greater Jakarta (34.1%) and rest of Java areas (26.7%).


Outlook: anticipating margins expansion after supermarket downsizing. We expect revenues growth in 2018F to be in the mid-single digits after taking into account a potentially better Lebaran season in 2Q18. In addition, we also expect the operating margins expansion in 1Q18 to continue in 2Q18, partially thanks to the recent downsizing of RALS’ loss-making supermarket business.


Maintain BUY with a TP of IDR1,500. We maintain our forecast and BUY recommendation on the stock with an unchanged TP of IDR1,500, implying 22.6x P/E 2018F, about +1std based on the 2012-2017 historical. The main risks to our call include: 1) lower-than-expected GDP growth and 2) higher-than-expected inflation.


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