Small Cap Screen favours MDRN IJ - JP Morgan

Small Cap Screen: Modern Photo (MDRN IJ)
CEO Henri Honoris told Bisnis Indonesia reporter that he has budgeted Rp150bn to open 36 new 7-Eleven outlets, vs its current outlets of 31, all of which are in Jakarta. For FY11, 7-Eleven may contribute Rp400bn sales or 40% of consolidated profit sales of Rp1trn. In FY10, 7-Eleven’s actual sales contribution was Rp73bn, or 10% of consolidated sales of Rp733bn. (Bisnis Indo).

My take – Maria Lapiz, JPM consumer analyst in Thailand, covers CPALL TB that runs the 7-Eleven franchise in Thailand. They started early with the franchise; the first store was opened in 1989. As of 1Q11, they had 5,962 branches, including the 875 located in the PTT petro stations (market leader). If MDRN can be anywhere near as successful as CPALL, then obviously there is significant upside potential to MDRN with start-up market cap of just US$163mn (and 31 outlets currently). 7-Eleven franchise is the major sales and profit driver for CPALL, with US$6.88bn market cap. CPALL trades on 24.5x P/E for FY11 with 18-19% EPS growth estimate for FY11-13. Key risk for MDRN is being a late comer, with Alfamart (AMRT) and Salim's Indomaret already run thousands of outlets all-over Indonesia.

NEWSFLOW
* Perusahaan Gas Negara (PGAS) – raising acquisition budget for oil & gas assets from US$250mn to US$350mn. The fund will be sourced from internal cash, as the company’s cash balance stands at US$1.2bn according to the CEO Mr. Hendi. (Kontan).

* Indika Energi (INDY) – Vice President Director Mr. Wishnu Wardhana told the reporter that the company’s subsidiary Petrosea (PTRO) is looking to pay Rp1,195/share dividend, split its stocks by 10x, and then re-floating 20-30% of outstanding shares to the public. PTRO is budgeting US$100mn capex for heavy equipment, sourced from internal cash. (Kontan).

* Pembangunan Perumahan (PTPP) – Signed MOU with Lippo Karawaci (LPKR) to construct St Moritz The New Royal Suite. The scope of work is to construct the structure of the building, with a contract worth Rp80bn. (Investor Daily).

* Dynaplast (DYNA) – tender offer for 33.25% stake in the company at Rp4500/share. Tender period 26 May to 27 June, payment date 7 July. (Bisnis Indo).