Mitra Adiperkasa Mainly in Line - OSK Nusadana

As envisaged.
Net profits surged 22.6% y-o-y to IDR201bn in FY10, backed by a 15% y-o-y growth in revenue to IDR4.7trn. Gross margin expanded by 40bps to 50.4%, driven byMAPI’s policy of directing its new store expansion to the higher yielding segments. Some59% of the 40,595 new retail outlets added this year are specialty stores and F&B outlets.As such, almost 70% of MAPI’s revenue was contributed from these two segments, wheregross margin can reach as high as 40%-45% from specialty stores and 60%-65% fromF&B outlets, compared to 28% from department stores.

Strategic efforts pay off.
FY10 operating margin also expanded strongly to 9.5% from7.5% previously, helped by: i) the company’s astute move to collaborative its marketingstrategies with local banks, which cut down its advertising cost by 10bps to 1.2% of sales;ii) cost savings from letting go of two underperforming brands this year (Harvey Nichols
andArmani); and iii) having more stores enables the company to meet its principal’s quota,which allowed it to source for more goods and materials locally, and hence saving onfreight costs in the F&B division (for stores like Starbucks or Burger King). This will continueto bolster MAPI’s cash flow from operating activities at IDR770bn for FY10, doubling fromIDR270bn in FY09.

Expansion driven margin.
This year, MAPI will add around 40,000sq m in retail outlets. Itscapex for FY11f is estimated at IDR350-400bn as the expansion plan does not include anew department store. A third of the new stores will be outside Java and will be financed byinternal funds. If required, the company can raise more loans considering its current netgearing of 0.5x compared with at 0.7x in FY09 after bringing down its interest bearing debtsto IDR955bn by 14.7% y-o-y.

Maintain BUY, TP IDR2,925.
We remain positive on company’s future outlook, as it tapsinto the middle segment of the market, which comprises more than 50% of Indonesia’spopulation. Maintain BUY, with our target price of Rp2,925, which puts the counter at17.1x-12.9x 2011f-12f PE