Matahari Putra Prima Getting Nimbler Post-Divestments

Company Profile
Matahari Putra (MPPA) is one of the leading modern fast-moving consumer good (FMCG) retailers in Indonesia with 82 hypermarkets in operation. It also operates 28 supermarkets and 79 pharmacies.

Highlights
Solid growth
MPPA’s strong distribution network and the compact format of its Hypermarts give it great flexibility in opening hypermarkets in Indonesia’s second-tier cities. Notably, Hypermart is now present in 48 cities, with 34% of its stores located outside Java, compared with 13% for Carrefour and 3% for Giant, its main competitors.

MPPA now runs a total of 82 hypermarkets, more than Carrefour’s 60 stores. It plans to add 20 hypermarkets annually over the next five years. Meanwhile, the Group is also closing its sales gap with Carrefour – from 3.03x sales in June 2006 to 1.02x sales in Dec 2012 – thanks to its strong 27.9% sales CAGR in the past seven years.

Lower fixed costs
By the end of last year, MPPA had divested a host of non-core assets, including properties, restaurants, and its Time Zone family entertainment centres. It is worth noting that these non-core assets incurred high fixed costs, such as depreciation and head office expenses. The Group revealed that the decline in opex following the divestments led to an EBIT margin improvement of ~300 bps in 2013.

Better GCG
One of MPPA’s new shareholders, Temasek – which is well-known for its adherence to good corporate governance (GCG) practices – has placed a representative in MPPA’s board of commissioners. It aims to elevate its GCG to international levels by strengthening its audit committee, which will enhance operational control supervision.

Company Report Card
Latest results. 1Q13 earnings soared by 157.9% y-o-y to IDR64bn.
Balance sheet/Cashflow. MPPA had a positive net cash position of IDR781bn in 1Q13 compared to its net debt of IDR895bn in 1Q12.
ROE. Improved margin and higher sales should boost ROEs to 9.9%-11.7% in FY13-14F from 4.7% in FY12.