Catur Sentosa Adiprana Company Focus

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1 July 03, 014 Catur Sentosa Adiprana Company Focus Paula Ruth Growing Modern Retail for Building Materials To double its Mitra10 retail stores within 10 years CSAP is a distribution (around 7% of revenue) and modern retail (around 4% of revenue) company. The distribution segment distributes building material, consumer goods, and chemicals. CSAP s modern retail stores named Mitra10 (building materials and home improvement) with 0 stores and Atria (home furnishing) with 10 showrooms. The company plans to double the number of their Mitra10 stores (adding 0 new stores) with a pace of 1- store per year. Mitra10 contributes around 3% to total revenue. Consolidated margin expansion We expect CSAP to achieve EPS growth of.1% CAGR in 014E-17E (vs. 0.% CAGR in ). The growth is driven by retail s 4.7% and distribution s 15.0% revenue CAGR during that period. Mitra10 posted strong SSSG in 0113 of 0.9.4%. Moreover, as the retail has higher gross margin (FY %) compared to distribution (FY %), we expect the higher sales growth from higher gross margin business (retail) would improve the consolidated core profit of 0.8% in 013 to 1.4% in 017E. CSAP s has segments: Distribution and modern retail. The distribution segment distributes building material, consumer goods, and chemicals. The modern retail consists of Mitra10 (building materials & home improvement) and Atria (home furnishing). BUY Company Update Share Price Sector Price Target Rp530 Rp434 Retail Rp530(%) CSAP s Retail comparison with ACES (Risk vs. Potential Growth) We think ACES (105 outlets up to Jun 014) has less competition risk compared to CSAP, but the retail segment of CSAP (only 0 Mitra10 stores and 10 Atria showrooms), might be able to experience higher growth compared to ACES. FY013 revenue for: ACES Rp3.9tr (+0.9% YoY) vs. CSAP s retail segment Rp1.5tr (+33.8%YoY). Our 014E15E core ROAE is %, compared to WACC of 9.4%. Valuation: DCF-based target price of Rp530 (.1% upside) The DCF valuation of Rp530 implies.1% upside. Target price implies 19.0x 014PE. EPS CAGR is.1% (014E-17E). Stock Data Reuters Code CSAP.JK Bloomberg Code CSAP.IJ Issued Shares (m),895 Mkt Cap (Rpbn) 1,5 Average Daily TO (m) Wk range Rp45 Rp150 Major Shareholders PT Buanatata Adisentosa 31.3% NTAsian Discovery Master Fund 1.0% Public 47.7% Companies Data Year end Dec F 015F 01F Sales 4,93,31 7,93 8,3 10,144 Net Profit EPS (Rp) EPS Growth (%) (14.4) Core Profit Core EPS (Rp) Core EPS Growth (%) (5.) DPS (Rp) BVPS (Rp) PE (x) Core PE (x) Div Yield (%) Consensus EPS 14F 15F Consensus (Rp) na na TRIM vs Cons. (%) na na Stock Price Volume Price ,000,000 0,000,000 50,000,000 40,000,000 30,000,000 0,000,000 10,000,000 - PT Trimegah Securities Tbk - COMPANY FOCUS 1

2 Indonesia s Homeowners Supported by MAC Growth and Urbanization Population in Indonesia reached 48mn in 01 with expected population in 00 of 7.mn. Looking deeper into Indonesia s demographic statistics, two major trends have emerged: 1) the middle-class and affluent consumers (MAC) growth of 91% from 01 to 00E (source: BCG), ) increasing urbanization rate from 5.1% in 01E to.7% in 017E (source: EIU). BCG categorized the MAC in Indonesia as the consumers with household expenditure at least Rpmn per month. It forecasts that the number of people categorized as MAC s is expected to grow by 8% CAGR in 01-0E and MACs would be 53% of the country s population in 00E (vs. 30% in 01). With higher urbanization rate and expected disposable income growth of 11.8% CAGR for 01E-17E (source: EIU), the current and future Indonesian MACs are predicted to seek products and shopping experience that gives higher level of convenience and comfort, than just fulfilling their basic needs. Hence, modern retail, which provide selling area and facilities that is modern, clean, air-conditioned, and other aspects that provides convenience to their customers, have the opportunity to grow along with the rising population of MACs. Figure 1. Indonesia s Consumer Categories Consumer Categoris Monthly household Expenditure (Rpmn) Population CAGR E 00E Growth 01- (in mn) % of total (in mn) % of total 00E Elite Rp7.5m and more.5 1%.9 3% 17% 14% Affluent Rp5 - less than 7.5m. 3% 1.5 % 150% 1% Upper middle Rp3 - less than 5m 3. 9% % 113% 10% Middle Rp - less than 3m % 8. 5% 4% % Middle class and affluent Rp and more % % 91% 8% Emerging middle Rp1.5 - less than m % % 14% % Aspirant Rp1.0 - less than 1.5m 5.4 % % -7% -4% Poor less than Rp1.0m 4.5 % % -5% -10% Total population All % % 8% 1% Source: BCG Figure. Urbanization Rate and Disposable Income Urbanization Rate Disposable Income 4%.7% 00 % 0% 58% 5% 54% 5.1% 57.4% 58.% 0.0% 1.3% (USD bn) n b D S U % % 01E 013E 014E 015E 01E 017E 0 01E 013E 014E 015E 01E 017E Source: EIU PT Trimegah Securities Tbk - COMPANY FOCUS

3 From total of.mn of Indonesian households in 01, 7.4% households are home owners (source: Euromonitor). Based on statistics provided by Bank Indonesia (BI), house and apartment ownership (outstanding) credits grew.4% CAGR in and 0.8%YoY in April 014. The growing number of homeowners in Indonesia is expected to support the increase consumption for building materials, home improvement, and furnishings. Existing homeowner could also purchase those products to improve and renovate their homes. Considering the growing population of MACs and their purchasing behavior, MACs who are homeowners might purchase products that could make their homes more comfortable. Figure 3. Number of Households by Tenure 01 in Indonesia ) s n ilio M n ii ( (in mn) Home owners, with mortgage Home owners, without mortgage Rented Others Source: Euromonitor Figure 4. Indonesia: House and Apartment Ownership Credits r ) t p R ( (Rptr) House and Apartment Ownership Credits Outstanding r ) t p 150 R ( (Rptr) 100 House and Apartment Ownership Credits Outstanding Apr 013 Apr 014 Source: Bank Indonesia Distribution vs. Modern Retail CSAP s revenue comes from business segments, which are distribution (around 7%) and modern retail (around 4%). The modern retail segment grew 9.3% of CAGR for , higher than distribution segment of.% CAGR for CSAP was able to charge higher gross margin to its modern retail, compared to the distribution segment. For , the gross margin was % for retail, which is above the PT Trimegah Securities Tbk - COMPANY FOCUS 3

4 distribution segment s margin of %. Margin in distribution segment also depends on the negotiation or agreement between CSAP and its principals, which might cause lag in the ability to maintain margin when there s cost increase (e.g. increase in minimum wage). Retail and distribution contributed ~38% and ~% to FY013 gross margin respectively. Figure 5. CSAP s Revenue and Gross Profit Breakdown Revenue Gross Profit Retail revenue 4% Retail 38% Distribution revenue 7% Distribution % Source: Company Distribution Major Revenue Contributor with Low Gross Margin CSAP distributes building material, consumer goods, and chemical with contribution of around 0%, 10%, and 4% respectively to the company s total revenue. Building material distribution is supported by 48 branches in 39 cities across Indonesia. This sub-segment supplied more than 15,000 SKUs with main principals mostly supply ceramic tiles and paints, such as Arwana ceramic tiles (manufactured by ARNA), ICI Paints, Propan, Mowilex, Mulia Ceramic. Customers of CSAP s building material distribution are retail customers or traditional building material shops. It also distributes consumer goods, such as P&G, Frisian Flag, and Dua Kelinci. This year, the company plans to add branch offices at Aceh and Madiun (+4.% to 48 branches) to support building material distribution. It will also build 1 new warehouse at Tegal. CSAP has closed 1 chemical distribution branch (Medan) on Dec 013. The closure would not significantly affect the overall chemical distribution segment contribution because sales volume in Medan area is not significant. We expect the distribution revenue to grow 14.0% in 014E and 15.0% revenue CAGR for E. 1Q14 distribution revenue grew 7.7% (1Q13 0.3% YoY; 1Q1 18.%YoY), while FY013 sales reached Rp4.9tr which grew 5.7% (.% CAGR ). Lower 1Q14 revenue growth was mostly caused by lower sales of ceramic tiles to building material stores compared to previous period. This might be happened due to the national election in July 014 that caused the end users of building materials received less construction andor renovation projects. Sales of ceramic tiles were 38.8% of total revenue in FY013 and 1Q14. Distribution segment has 10.7% of gross margin in FY013. Gross margin was 1.1% in 1Q14, higher than 10.% in 1Q13, which is driven by improvement of margin from principal of product ( Arwana ceramic tiles). Arwana is one of the major contributors to distribution segment s revenue. In 013, inventories purchased (net) from ARNA s subsidiary was 3.% of CSAP s cost of sales. We estimate gross margin to increase to 11.5% in 014E. PT Trimegah Securities Tbk - COMPANY FOCUS 4

5 Figure. CSAP s Distribution Sales and Gross Margin 1,000 Net Revenue Gross Margin 14.0% 10, % 10.4% 10.7% 11.5% 11.5% 11.5% 11.5% 1.0% ) n b p ( R (Rpbm) 8,000,000 4,000, % 8.0%.0% 4.0%.0% E 015E 01E 017E 0.0% Source: Company, TRIM Research Modern Retail Expansion Doubling Mitra10 Stores CSAP s retail business has two sub-segments: Mitra10 and Atria. Mitra10 sells building material and home improvement products. It has more than 5,000 SKUs with main principals for granite tiles, ceramic tiles and paint products, such as Roman ceramic tiles and ICI Paints. Its target market is middle class customers and 90-95% of the customers are homeowners. Atria sells furniture and furnishing products with more than,000 SKUs. Mitra10 has 14 stores in Jabodetabek, stores in East Java, stores in Bali, and stores in Sumatra. Those 0 existing stores consist of 15 Superstores and 5 Express Stores. The existing Superstore has selling area per store between 1,300-3,00sqm, whereas Express Store is smaller, around 300-1,000sqm. Mitra10 has no new store in 013 and, according to the management, there s no plan for new store in 014E. For E, the company said that it has focused on improving its existing stores by adding more fast-moving and new products, remodeling, improving inventory management, and developing people. Starting 015E, Mitra10 plans to add another 0 Superstore-type outlets with target of new stores in 015E continued with a pace of 1- stores each year. We assume Mitra10 to add 1 store per year during 015-1E continued by stores per year in 017-5E assuming size 3,000sqm per store. Currently, Mitra10 total selling area was 40,55sqm. Assuming no change on total existing stores area, we estimate that the new stores would add 148.1% (0,000sqm) of Mitra10 selling area to total selling area of 100,55sqm by the end of 05E. Atria has 10 showrooms (13,385sqm) with 0% of the showrooms are located inside Mitra10 store, which could facilitate one-stop-shopping experience for Mitra10 and Atria customers. Atria plans to add 1 showroom (around,800sqm) in Bali in 4Q014E (vs. and 3 new showrooms in 01 and 013). We estimate 1 showroom to be opened every two years during 015-5E. The retail segment s revenue mostly comes from Mitra10. Historically, Mitra10 was able to achieve SSSG of 0.9.4% in 0113, followed by % in 1Q14 (31% in 1Q13). Assuming that new store s sales in 1st year of opening would be similar to the minimum target (Rpmnsqmmonth) adjusted with inflation assumption of %, we estimate Mitra10 to grow 5.3% revenue CAGR in E. Our expectation on 014E Mitra10 sales growth is 3.0%, based on Mitra10 s plan to increase ASP by 7% and sales growth in existing stores as no new store planned for this year. We expect Mitra10 SSSG to be.5.0% in 0151E and then decreasing each year to.0% in 05E considering higher base (1- new stores per year in 015-5E) and possibility of sales cannibalization from new stores opened near to other stores. Assuming % growth of average revenue per Atria showroom, we estimate Atria to grow 11.8% revenue CAGR. We expect CSAP retail segment revenue to grow 4.7% CAGR in E (9.3% CAGR in ). PT Trimegah Securities Tbk - COMPANY FOCUS 5

6 Figure 7. CSAP Modern Retail Locations Source: Company Figure 8. Mitra10 Revenue Drivers and Estimates E 015E 01E 017E 018E 019E 00E 01E Revenue drivers Number of stores New stores built in the year Average Revenue per store Revenue per existing store Revenue per new store Revenue Revenue growth (%) 3.0% 4.% 5.4% 5.9% 5.8% 3.1% 0.% 18.% Source: Company, TRIM Research PT Trimegah Securities Tbk - COMPANY FOCUS

7 Figure 9. CSAP s Modern Retail Sales and Gross Margin Net Revenue Gross Margin (Rpbm) 4,500 4,000 3,500 3,000 ) n,500 b p R,000 ( 1, % 0.4% 0.9% 1.4% 1.8% 1.8% 1.8% 3.0%.0% 1.0% 0.0% 19.0% 18.0% 1, % % E 015E 01E 017E 15.0% Source: Company, TRIM Research Gross margin of retail segment in was %. We assume gross margin in to be % from selling items with higher margin. This is slightly lower than 1Q14 gross margin of.4%. Expected Higher Modern Retail Contribution Higher Consolidated Margin We expect higher contribution from retail segment and lower contribution from distribution segment to total revenue in 014E-5E. This is supported by our expectation for higher revenue growth on retail (3.% CAGR), compared to distribution (15.0% CAGR) in E. We estimate retail to contribute 5.7% in 014E to 30.5% in 017E (FY013 4.%) to total revenue. 1Q14 company s revenue grew 11.%YoY, driven by revenue growth of 3.4%YoY for retail and 7.7%YoY for distribution. We estimate 014E total revenue to grow by 15.0% (retail.%; distribution 14%), which is lower than management target of 3%. We expect CSAP to achieve 17.% revenue CAGR in E. Figure 10. CSAP s Segment Revenue and Consolidated Gross Margin 1 14 Distribution revenue Retail revenue Gross Margin 14.% 14.4% 14.% 14.8% 15.0% 14.5% (Rp tr) % 1.8% 13.% 14.0% 13.5% 13.0% 1.5% 1.0% E 015E 01E 017E 11.5% Source: Company, TRIM Research We estimate consolidated gross margin to improve from 13.% in 013 to 14.8% in 017E, supported by expansion of gross margin for retail (FY %; 017E 1.8%) and distribution (FY %; 017E 11.5%) along with higher retail revenue contribution. We expect core EPS to grow.1% CAGR for E. Our estimated core ROAE is 1.0% in 014E to 1.% in 017E, higher than 8.5% in FY013. PT Trimegah Securities Tbk - COMPANY FOCUS 7

8 Figure 11. CSAP Core ROAE 18.0% 1.0% 14.4% 15.3% 1.% 14.0% 1.0% 1.0% 10.0% 8.0% 10.7%.0% 4.0%.0% 7.% 8.5% 0.0% E 015E 01E 017E Source: Company, TRIM Research Regarding cash flow from operation, the company posted negative Rp5bn in 013, compared to Rp15bn of positive cash flow in 01. CSAP experienced cash cycle of 45 days (+.3%YoY) in 013. This was mostly resulted from increase in AR days (%YoY). Majority of the AR belongs to the distribution segment as modern retail mostly accepts payment in cash. We assume cash cycle to be 45 days in 014E and 43 days in 017E. Takeaways from on the ground visits Following are our findings during the on the ground visit to Mitra10 & Atria (Serpong; May 11 and Jun 13), Depo Bangunan (Serpong; Jun 13), and traditional building material store (Southern Jakarta; Jun 1): Depo Bangunan that we visited has larger store area (,500sqm) compared to Mitra10 (3,00sqm), while the traditional store has around 300sqm of selling area. The size of aisle is varies within Mitra10 and Depo Bangunan. We estimate that aisle in Depo Bangunan and Mitra10 could reach around 1.5.m. Traditional store has less than 1m of aisle, which is the area where the store s visitors standing when making purchases (asking) the sales staffs. We feel that Depo Bangunan is almost like a warehouse-type of store with its less polished high ceiling. Compared to traditional store, Mitra10 and Depo Bangunan are more neat and clean. Mitra10 has 4 cashier counters vs. Depo Bangunan s 9 cashier counters. For traditional store, during our visit, the store has sales staffs and 1- supervisors. During our visit, Depo Bangunan has more foot traffic compared to Mitra10. This also might be due to the store location factor Depo Bangunan located near the main city road vs. Mitra10 at developer s (SMRA) area which is further from the main city road) and earlier opening of Depo Bangunan (open in 000) than Mitra10 (open in 009) in that city. The traditional store has around -4 visitors when we visited. As it has smaller aisle, it is already felt crowded in the traditional store with only -4 visitors. Depo Bangunan put its promotional program information bordering the store entrance door making it easily noticed by the time the visitors going into the store building. Mitra10 and Depo Bangunan both has in-store promotion, such as promo products near the cashiers and area where visitors walked from one aisle to other aisle. We noticed that Depo Bangunan put clearance sales items on outside the selling area (outside cashier) at the back part of the building with less foot traffic compared to inside the selling area. Traditional store does not have promo signs. The visitors have to ask the store supervisor or staff to know specific product s price. We saw sales and design consultation service area at the center of Mitra10 s store, which provide services, such as interior design consultation. We have not noticed if Depo Bangunan also provides similar service. PT Trimegah Securities Tbk - COMPANY FOCUS 8

9 Figure 1. Store Front Figure 13. Mitra10 s Aisle PT Trimegah Securities Tbk - COMPANY FOCUS 9

10 Figure 14. Depo Bangunan s Aisle Figure 15. Inside Traditional Store PT Trimegah Securities Tbk - COMPANY FOCUS 10

11 Figure 1. Mitra10 s Store Promotion Figure 17. Depo Bangunan s Store Promotion Figure 18. Mitra10 s Product Arrangement PT Trimegah Securities Tbk - COMPANY FOCUS 11

12 Figure 19. Mitra10 nd Floor with Atria (same building) Figure 0. Depo Bangunan s Product Arrangement Figure 1.Traditional Store s Product Arrangement PT Trimegah Securities Tbk - COMPANY FOCUS 1

13 Quick price survey on popular items For the survey, we picked items which we considered to be popular in traditional and modern retail store (Mitra10 & Depo Bangunan) of building materials. We rank the items in range of 1 (cheapest) to 3 (most expensive). Store with the lower of sum indicates that it has most items with cheaper price. For the the items surveyed, the rank analysis shows that Depo Bangunan (10 points) sold more items with cheaper price, compared to Mitra10 (13 points) and traditional store (13 points). From our visit and interview at the traditional store, the store s supervisor mentioned that the ceramic tiles sold there are mostly plain white colors with the exception for bathroom ceramic tiles. Note that we have not confirmed whether the store would not mind to order the non-plain white ceramic tiles if there s order from customers, whether it depends on the order quantity, and how frequent the customers purchase from the store (regular customer or not). Figure. Price survey in Mitra10, Depo Bangunan, and Traditional Store (assume: Item Vinilex Super Pearly White 5kg Ftalit Gloss Pearl White 1 kg Product Category Mitra 10 In Rp In USD Rank Depo Bangu nan Traditional Store Mitra 10 Depo Bangun an Traditional Store Mitra 10 Depo Bangu nan Traditional Store Paint for Wall 18, , , Paint for Metal and Wood 48,00 47,900 49, Semen MU kg Instant Cement 130, ,800 15, No Drop 1kg Waterproofing Paint 4,700 41,700 45, No Drop 0kg Waterproofing Paint 74,700 73,00 735, Mulia Signature Glossy White KW1 Ceramic Tiles 0cm x 0 cm 50,800 51,700 53, Focusing rank analysis to the modern retail stores and added another 3 items consists of non-plain-white ceramic tiles and 1 different paint brand for specific color, we found a consistent result that Depo Bangunan (1 points) sold more cheaper items compared to Mitra10 (15 points). To be noted that this survey is performed at one location for each store, which caused the result might not reflect the overall trend. The traditional store we visited is located at southern Jakarta, while the Mitra10 and Depo Bangunan at outer Jakarta, which could have different product pricing between Jakarta and outer Jakarta. We also noticed in the modern retail store we visited that several items have promo discounted price. Normal price (purchase during other period) might be the same with price at competitor store. The survey was also done only on several items or categories. Broadening the number of items or categories might give different findings considering a store could implement different pricing strategy for different product categories or items. Figure 3. Price survey in Mitra10 and Depo Bangunan (assume: Rp1,000USD) Item Product Category PT Trimegah Securities Tbk - COMPANY FOCUS 13 In Rp Mitra Depo 10 Bangunan In USD Mitra Depo 10 Bangunan Mitra 10 Rank Depo Bangunan Vinilex Super Pearly White 5kg Paint for Wall 18, , Ftalit Gloss Pearl White 1 kg Paint for Metal and Wood 48,00 47, Semen MU kg Instant Cement 130, , No Drop 1kg Waterproofing Paint 4,700 41, No Drop 0kg Waterproofing Paint 74,700 73, Mulia Signature Glossy White KW1 Ceramic Tiles 0cm x 0 cm 50,800 51, Dulux Pentalite Bluebell White.5 ltr Paint for Wall 13,000 18, Centro Hybrid WT Cenit FS 501 Beige KWA Ceramic Tiles 5cm x 5 cm 113, , Asia Canary Basic KWA Ceramic Tiles 0cm x 5cm 50,00 50,

14 Risks Delay on Completion or Construction of New Store, Warehouse, andor Branch CSAP s revenue growth achievement could depend on whether the planned new store, branch, or warehouse is completed on time. To fulfill specific building requirement, most of these buildings were custom built by CSAP. Rental risk Most of CSAP s store is located in rented locations. The increase in rental rate would decrease margin. By the time the rental contract is expired, there is also risk if the owner of land plans to use the area for other purpose (refuse to extend the rental to CSAP). Minimum wage increase Significant rise in minimum wage would cause decrease in margin. CSAP employs 7,150 employees with 5% are permanent employees. Decreasing Purchasing Power and National Election Effect If economic condition changes or other circumstances caused decrease in purchasing power, it might negatively affect the revenue and margin of CSAP. For example, customers of retail segment could lower their purchase for building material if their purchasing power is reduced due to, for example, significant fuel increase. National election might affect CSAP s business as well, particularly to the building material distribution segment, because traditional building material stores (CSAP s distribution segment s customers), might order lower volume of building material to CSAP. This is possibly impacted from contractors receiving lower construction projects due to political uncertainty. Competition Risk Some of other competitors in modern retail of building material are Depo Bangunan, Dunia Bangunan, and Pasar Keramik (specific for ceramic tiles). Competitor for home furnishing store, includes Informa and Ikea. CSAP s distribution business is also competing with other distributors. If competitors significantly become more aggressive, it might cause lower revenue growth and margin projection. Brand Principal or Supplier Risk Most of CSAP business is in forms of distribution business. The revenue for distribution business would depend on whether the brand principals or supplier still agree to use CSAP as their product distributor when the (principal distributor) agreement period is completed. For distribution segment, CSAP has managed to maintain long term relationship with most of its principals. Margin for distribution segment depends on the negotiation or agreement between principal and CSAP. Valuation By using DCF calculation method (assuming 9.5% WACC, 5% long-term growth), we arrive at target price of Rp530 and.1% upside. Using adjusted beta of ACES (0.940) as retail (5% contribution) and EPMT (0.403) as distribution (75% contribution) segment benchmark, we calculate comparison-beta of Based on CSAP s adjusted Beta of 0.79, we assume beta of 0.80 for our DCF calculation. PT Trimegah Securities Tbk - COMPANY FOCUS 14

15 Figure 4. WACC and DCF Calculations Risk free rate 7.5% Market premium 5.0% Beta 0.8 Debt rate 10.7% Debt proportion 57.3% Tax rate 5.0% Equity cost of capital 11.5% Debt cost of capital 8.0% WACC 9.5% LT growth rate 5.0% Description 015E 01E 017E 018E 019E 00E 01E 0E 03E 04E 05E EBIT (1- tax) Depreciation and Amortisation Changes in non-cash Working Capital (01) (13) (195) (190) (197) (0) (0) (00) (194) (18) (170) Capex (10) (19) (54) (303) (33) (394) (433) (510) (53) (58) (7) FCFF (91) (37) (3) (31) Discounted FCFF (83) (30) (48) () ,413 Total discounted FCFF,553 Net cash (debt) (1,01) NAV 1,537 # of shares (bn).9 NAV share 531 Target price after rounding 530 CSAP s Retail Comparison to ACES ACES already opened 105 outlets until Jun 014. Thus, we think ACES has less competition risk compared to CSAP. In the other hand, the retail segment of CSAP, with only 0 Mitra10 stores and 10 Atria showrooms, might be able to experience higher growth compared to ACES. ACES revenue was Rp3.9tr (+0.9%YoY) in FY013. In 013, ACES opened 19 new Ace stores (5% of total up to 01) and 4 Toys Kingdom stores (5.0% of total up to 01). In the same year, CSAP s retail segment posted Rp1.5tr (+33.8%YoY) of revenue. Atria (around 1.4% of FY013 consolidated sales) opened 3 new showrooms that year. No new Mitra10 store in 013, but that year the company focused on improving existing stores by adding fast-moving & new products, remodeling, and other ways of improvement. FY013 gross margin of ACES, which mostly sells lifestyle and home improvement products, was 49.% (vs. CSAP s retail 0.9%) of net sales. CSAP plans to increase its gross margin by adding owned brand products, such as granite tiles (imported from China) using owned brand Sincere. Figure 5. Retail Comparison Market Cap PE Dividend Yield AVERAGE Month Ticker Price (Rpbn) F F Value (Rp) Volume ACES , , MPPA 3,15 1, , RALS 1,130 8, ,39..5 AMRT 55 19, RANC HERO,700 11,9 NA NA NA NA , , , Bloomberg PT Trimegah Securities Tbk - COMPANY FOCUS 15

16 Company background and ownership PT Catur Sentosa Adiprana was initially started in 19 as a small shop in selling paint and other building materials in Jakarta which expanded into distribution business. The family business then established as PT Catur Sentosa Adiprana in Its retail segment was started in 1997 by opening modern retail store for building materials in Indonesia using Mitra10 brand. The company added home furnishing into its retail segment by opening Atria showroom in 00. In 007, the company went public with ticker CSAP. The company already has 48 building materials distribution branches in 39 cities, 4 chemicals distribution branches, 14 consumer goods distribution areas, 0 stores of Mitra10, and 10 showrooms of Atria in Indonesia. In 013, the distribution business contributes 7.8% of revenue and the rest from its retail business. NT Asian Discovery Fund (Thailand) bought 1% of CSAP shares on May 014. Figure. CSAP Ownership Public 40% PT Buanatata Adisentosa 31% PT Buanatata Adisentosa NT Asian Discovery Fund Management Public NT Asian Discovery Fund 1% Management 8% Source: Company Figure 7. CSAP s Company Structure Source: Company PT Trimegah Securities Tbk - COMPANY FOCUS 1

17 CSAP acts as a holding company for the group s subsidiaries as well as an operational company with activities in the distribution of building materials and consumer goods (P&G and Frisian Flag Products) Figure 8. CSAP Distribution Business Cities with building material distribution branch Chemical distribution braches Consumer good distribuon areas Source: Company PT Trimegah Securities Tbk - COMPANY FOCUS 17

18 Income Statement (Rpbn) Year end Dec F 015F 01F Revenue 4,93,31 7,93 8,3 10,144 Growth (%) Gross Profit ,034 1,4 1,477 Opr. Profit EBITDA Growth (%) Net Int Inc(Exp) (4) (81) (100) (11) (134) Other Inc(Exp) Pre-tax Profit Tax Minority Int. () (5) (5) () (8) Extra. Items Reported Net Profit Core Net Profit growth (%) (5.) DPS growth (%) (.) Dividend payout ratio (%) Balance Sheet (Rpbn) Year end Dec F 015F 01F Cash and equivalents Other curr asset 1,91,09,498,990 3,47 Net fixed asset Other asset Total asset,51 3,108 3,47 4,101 4,748 ST debt ,030 1,174 Other curr liab 1,01 1,339 1,501 1,79,115 LT debt Other LT Liab Minority interest Total Liabilities 1,84,391,80 3,0 3,7 Shareholders Equity Net debt (cash) ,01 1,1 1,38 Total cap employed ,107 1,79 1,459 Net Working capital Debt ,05 1,59 1,43 Cash Flow Key Ratio Analysis Year end Dec F 015F 01F Year end Dec F 015F 01F Core Net Profit Depr Amort Chg in Working Cap (15) (195) (139) (01) (13) Others CF's from oprs 15 (5) (1) 51 Capex (84) (111) (10) (10) (19) Others (5) (8) CF's from investing (310) (139) (10) (10) (19) Net change in debt Others (15) (18) (17) (19) (5) CF's from financing Net cash flow 35 (9) (1) 7 8 Cash at BoY Cash at EoY Free Cashflow (15) (18) (38) (91) (37) Profitability Gross Margin (%) Opr Margin (%) EBITDA Margin (%) Core Net Margin (%) ROAE (%) ROAA (%) Stability Current ratio (x) Net Debt to Equity (x) Net Debt to EBITDA (x) Interest Coverage (x) Efficiency AP (days) AR (days) Inventory (days) Interim Results Year end Dec 1Q13 Q13 3Q13 4Q13 1Q14 Capital History Date Sales 1,437 1,590 1,518 1,775 1,04 Gross Profit Operating Profit Net Profit Gross Margins (%) Opr Margins (%) Net Margins (%) Des-07 Rp00 PT Trimegah Securities Tbk - COMPANY FOCUS 18

19 PT Trimegah Securities Tbk Gedung Artha Graha 18 th Floor Jl. Jend. Sudirman Kav Jakarta 1190, Indonesia t f DISCLAIMER This report has been prepared by PT Trimegah Securities Tbk on behalf of itself and its affiliated companies and is provided for information purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of any offer to buy. This report has been produced independently and the forecasts, opinions and expectations contained herein are entirely those of Trimegah Securities. While all reasonable care has been taken to ensure that information contained herein is not untrue or misleading at the time of publication, Trimegah Securities makes no representation as to its accuracy or completeness and it should not be relied upon as such. This report is provided solely for the information of clients of Trimegah Securities who are expected to make their own investment decisions without reliance on this report. Neither Trimegah Securities nor any officer or employee of Trimegah Securities accept any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. Trimegah Securities andor persons connected with it may have acted upon or used the information herein contained, or the research or analysis on which it is based, before publication. Trimegah Securities may in future participate in an offering of the company s equity securities.