Mitra Adiperkasa (MAPI IJ, Rp3,500 BUY) Beating expectations - Danareksa

Earnings upgrade
MAPI is continuing to perform very well with growth beating our expectations. Our FY11F earnings estimates are consequently upgraded reflecting: 1) a higher same-store growth assumption and 2) more aggressive expansion in the second half. Our new Target Price of Rp3,950 implies 21x-16.7x PE 11-12F and offers 12% upside from the current share price. BUY maintained.

Sales up till May grow 21% with 10% same-store growth
Sales surged 21% yoy in the year till May to Rp 2.8tn, with same-store growth of 10%. Specialty stores and F&B continued to drive growth, accounting for 46% and 9%, respectively, of MAPI’s total sales. The sales results were a very impressive 50% above our forecast. Assuming 10% same-store growth and 40,000sqm of additional gross retail space, we raise our 2011 sales target to Rp5.7tn (translating into 21% growth), with the Idul Fitri celebrations and aggressive expansion in the second half of the year underpinning sales.

As for margins, we expect a firm 37.4% gross margin thanks to a higher proportion of higher-margin specialty store sales and F&B sales. Coupled with the closing of less profitable stores and an expected further change in the sales mix, we foresee an operating margin of 7.3% by the year end.

Busy period ahead
MAPI has ambitious expansion plans. This month, 3 Burger King Outlets will be opened. In the year until May, MAPI has opened 60 new retail outlets - yet only 1/5 of their full year 2011 target of 300 new outlets. In the second half, the management has pledged to take a more aggressive stance in regard to the expansion with capex maintained at Rp350bn-400bn. MAPI will focus on its existing proven brands and bring in more brands into its portfolio to strengthen its position in the market aimed at middle income consumers. Pandora (a global jewellery company founded in Denmark) is one of the new brands added, as is a new travelogue outlet concept.

Paying Out More Dividends
At the Annual General Shareholders’ Meeting, it was agreed that MAPI would pay out dividends of 16.5% of net profits - up from 15% last year - on 22 July. In total, the dividends paid out will reach Rp 312bn or Rp20 per share, offering a 0.6% dividend yield based on the current share price. The cum and ex-dividend dates are 8 and 9 July. Furthermore, MAPI will repay around Rp 80bn of debts in June and December. This will help to reduce the company’s interest expenses by 1.6% in FY11.