PT Mitra Adiperkasa Tbk do a stock split with a 1:10 ratio

Retailer PT Mitra Adiperkasa Tbk (MAPI) sure will do a stock split with a 1:10 ratio. This corporate action was just waiting for the approval of the general meeting of shareholders (EGM) next on June 18.

"Stock split action will change the value of the company's stock that is currently Rp 500 per share to Rp 50 per share," said Fetty Kwartati, Mitra Adiperkasa Corporate Secretary, in a written statement on Wednesday (06/12/2013).

The company had previously announced it would conduct additional capital through the issuance of new shares without pre-emptive rights (ER) by 10% of the total paid up capital.
In trading on Wednesday (12/06/2013), MAPI share price rose Rp 250 or 3.36% to Rp 7.700 and form a market capitalization of Rp 12,78 trillion.

for Indonesia Market Summaries 13 June 2013

Mitra Adiperkasa EPS dilution from the non-preemptive rights issuance

Mitra Adiperkasa: 5.3-0.7% EPS dilution from the non-preemptive rights issuance (Rp8,450, Neutral, TP: Rp7,950)

On a disclosure to IDX, Mitra Adiperkasa (MAPI) detailed its non-preemptive rights issuance plan. Total number issuance of new shares would be as much as 10% of the current outstanding shares, or amounting to 166mn of shares. The minimum exercise price is at Rp8,300/share, calculated by referring to the requirement for using the average closing prices in the last 25 trading days as the floor. MAPI would seek shareholders approval at the upcoming June 18 EGM. Execution of the rights can be done at one time or within a maximum two years period after the June 18 EGM.

Usage of proceeds. Assuming Rp8,300/share exercise price for 166mn shares, MAPI could potentially get Rp1.4tn of new capital. The official statement revealed that the money would be used to strengthen capital structure and improve trading liquidity. Given its high net gearing at 87.9% in 1Q13 (which worsen from 66.8% in 4Q12 and 46.2% in 4Q11), we think that majority of the proceeds would be used for debt repayment.

How much EPS dilution? Issuing 166mn of new shares would dilute EPS by 9.1%. In this case, PT Satya Mulia Gemilang’s stakes would be diluted from 56.0% to 50.9% and current public stakes from 44.0% to 40.0%. Assuming that all the Rp1.4tn proceeds would be used to immediately pay down debt in July 2013, we estimate interest expense savings of Rp56bn in FY13F and Rp112bn in FY14F. Net of tax, this would increase FY13F-14F NPAT by 4.1-9.2%, thus lowering EPS dilution to only 5.3% in FY13F and 0.7% in FY14F.

Maintain Neutral. We currently have a Neutral call on MAPI, given competition and costs pressures concerns. Our FY13F-14F NPAT are 2-4% lower than the street. Strengthening balance sheet position is nevertheless a positive point for MAPI, given its high 88% net gearing as of 1Q13.

for Indonesia Market Summaries 4 June 2013

Mitra Adiperkasa No surprises in 4Q12

Mitra Adiperkasa: No surprises in 4Q12 (MAPI, Rp9,100, Neutral, TP: Rp6,300)

We donot expect any surprises in 2013 earnings growth. Sector valuation rerating has recently driven MAPI as the laggard, weighing down costs pressures concern. We do not see much upside from this level. We keep our Neutral stance, while adjusting up our TP to Rp7,950.

FY12 sales formed 100% of our estimate and 103% of consensus, while NPAT formed 100% of our and 97% of consensus. Decline in margin was within our expectation, though consensus was a bit too upbeat.

MAPI guided for 25% sales growth with 8-10% SSSG and 100k sqm expansion in FY13. Top-line target is above the street, but not for the bottom-line. Amidst costs pressures and competition, the company guided for 30-40bps reduction in FY13 operating margin, lower than our initially conservative forecast. We have revised down our FY13F EBIT to incorporate higher costs pressures, especially from the wages as FY13 expansion will remain aggressive at 100k sqm.

We incorporated FY12 results into our model and fine-tuned FY13F and FY14F EPS by -6.3% and +0.1%. Higher wages were the main drag in our assumptions. For more detailed assumptions, please refer to Figure 10.

Sector re-rating has triggered a P/E re-rating in MAPI as a laggard, weighing down concerns over its margin pressures. We revised up our TP to Rp7,950 pegging MAPI with higher FY13F P/E multiple at 25x. We stay Neutral at this juncture, on costs pressures concern.

Mitra Adiperkasa FY12 in-line with our and consensus

Mitra Adiperkasa: FY12 in-line with our and consensus (MAPI, Rp8,250, Neutral, TP: Rp6.300)

FY12 NPAT of Rp433bn (+20.1%yoy) came in-line with our (100%) and consensus (97%) estimates. Net, gross, operating, and pretax profit were also within our and consensus’ estimates. Stripping-out FX gains/loss effect, core net profit came at Rp466bn (+21.7%yoy), accounting for 99% of our estimates.

FY12 NPAT showed a 20.1%yoy growth, as net sales rose 28.8%yoy. Bottom-line growth was milder as gross margin edged up lower to 50.9% (versus 51.7% in FY11). Operating costs increase (+28.0%yoy) was manageable as compared to the net sales growth (+28.8%yoy).

4Q12 NPAT of Rp150bn showed a 12.6%yoy and 29.2%qoq growth. The strong QoQ increase translated down from the 8.2%qoq increase in sales, which is normal as 4Q has always been the best quarter for MAPI amidst year-end holidays. On YoY basis, 4Q12 NPAT growth was also strong at 12.6%yoy, but was much milder than the 27.8%yoy net sales growth as effective tax rate in 4Q11 was low at 22.4% versus 26.4% in FY12.

MAPI opened 339 new stores in FY12 (versus 190 stores in FY11), adding a total selling space of 105,113 sqm or 23% of its existing space. This achievement is 40% higher than our 75,000 sqm assumption, due to loads of new space supplies in 4Q12 (i.e. Kota Kasablanka). FY12 SSSG came as expected at 14%, broken down as follow: 13% for department stores, 17% for specialty stores, and 9% for F&B.

This year, MAPI guided for a 25% top-line growth target with 100k sqm new selling space and 8-10% SSSG, still in-line with our current assumptions of 22% sales growth, 70k sqm new selling space, and 11.5% SSSG. Challenges are on margin maintenance (i.e. labor, electricity, and rental costs) and competition.

We will review our financial model to incorporate FY12 results, pending the release of full-notes financial statement. We currently have a Neutral call with Rp6,300/share target price. MAPI currently trades at 24.3x FY13F PE.