The Lannisters (16/12/2016)

International Conference
The 16th ICMSS
Investment Analysis
(The Lannisters)
( President University)

(PT Matahari Department Store Tbk)

The Lannisters (16/12/2016)
The Lannisters
Analysts :
Consumer Discretionary Sector, Retailing Industry
Antonius Adi Prasetya Jakarta Stock Exchange
Aktivani Naza Khoirunnisa
Nico PT. Matahari Department Store
Date: 15-Dec-2016 Industry: Retailing Tbk
Recommendation: SELL
Ticker: LPPF.IJ Price(15/12/16): 14,400 Price Target : 11,421

Market Profile
Executive Summary
Closing Price PT. Matahari Department Store Tbk, is an Indonesian retailer, providing
14,100
(16/12/2016) fashion, accesorries, beauty and homeware. The company has 142 stores
52-week price 13,325.00 - in 66 cities throughout Indonesia.
range 22,575.00
Volume Investment Recommendation
6,716,500
(16/12/2016) Here we initiate coverage on Matahari with a SELL recommendation with
Shares O/S (B) 2,918 a twelve-month target price of 11,421 with potential downside of 20.7%.
Our target price is calculated by using Discounted Cash Flow valuation
Market Cap (T
42.018 with Free Cash Flow to Equity. Our recommendation is driven by:
IDR)
Current P/E Investment Thesis and Outline
20.92x
(TTM)
Although the market seems to benefit the company, the intrinsic value of
Price/Sales (TTM) 4.32
the company is far below its current price so we believe that Matahari is
Dividend Gross overvalued, and with the assumption that the market is efficient meaning
2.97%
Yield the stock price will eventually go back to its intrinsic value. We issue a
SELL recommendation.
Financial
Data
2013 2014 2015  Business Outlook
Rev. The shifting of offline shopping into online shopping, will eventually
20.25% 17.34% 13.64% cut the company market share.
Growth
Gross
Margin
64.60% 63.69% 62.97%  Industry Outlook
Op. Profit Based on the changing lifestyle of current teens and adult who prefer
26.87% 26.29% 25.95%
Margin premium brand and an open risk of foreign retailers who have captured
ROE -145% 891% 161% a chance in Indonesia market may possess a significant risk for LPPF.
 Valuation
ROA 39.12% 41.58% 45.79% Based on our DCF model valuation, we arrived at 11,421 thus we
Interest believe that the market price is absolutely overvalued.
5.87 8.14 18.9
Coverage  Investment Risk
Debt/Equity -471% 2043% 252% Our investment risk including business and operational risk, market
and other risk which causes investor to concern.
The Lannisters (16/12/2016)

Business Description

The company is Indonesia’s foremost retailer of affordable fashion,

accessories, beauty and homeware. Matahari is market-leader by 42.8%
share of the market in Indonesia. As Indonesia’s preferred department
store is underpinned by its range of exclusive brands. The exclusive
brands sold in the Company’s outlets are the consignment products that
have consistently been ranked among Indonesia’s top brands.
Matahari has been a fixture on Indonesia’s retail scene for almost six
decades and already had 142 stores in 66 cities in Indonesia. There is a
growing appetite among Indonesia consumers, particularly those in the
Figure 1 low to middle-income segment, for exclusive brands, which are typically
sold by leading grocery and department store retailers. The SSSG (same
stores sales growth) is 6.8% and CAGR for gross sales was 14.7% from
2012 up to 2015. MCC (Matahari Club Card) is growing by 12.2% into
3.26 million members.
Matahari provides employment for over 50,000 people in Indonesia and
sources over 80% of its direct purchases and consignment products from
approximately 850 local suppliers. The products from suppliers consist of
35.5% direct purchase and 64.5% consignment in 2015 while the direct
purchase is 34% and consignment is 66% in 2016. In 2015, 64.5% of the
Source: Company Data Company’s Merchandise Sales was CV Sales and 35.5% was DP Sales.
Other revenue comes from the logistics service for its consignor to deliver
the consignment products (Figure 1).
PT. GEI
Realising the potential of e-commerce to significantly expand the
Company’s business throughout the country, on 11 August 2015, the
Company exercised an option to purchase 2,631,580 (two million six
hundred and thirty one thousand five hundred eighty) shares in GEI,
representing 2.5% of the total shares of GEI. As at 29 January 2016, the
Company owns 10% of the GEI’s total shares. GEI (Global E-commerce
Indonesia) by its subsidiaries sells apparel online.

Source: Company Data Shareholder Base

Matahari has triple class of share but no different rights among them. The
portion of shareholders is PT. Multipolar Tbk 20.48% and Public 79.52%
(each less than 5%). The dividend policy recommend a dividend payment
Figure 2 is subject to a number of factors which include, among others, the
Company’s net profits, availability of reserves, contractual restrictions,
working capital requirements and capital expenditure requirements for the
applicable period and future prospects. The dividend in 2014 and 2015
was 60% and 70% of net profit while the policy asks the maximum rate
is 15%.

Management Strategy
Extending MMC (Matahari Club Card)
Source: Company Data In 2015, extending “big data” analysis on the MCC database to tailor the
offerings and communications more precisely to customers’ tastes, needs
The Lannisters (16/12/2016)
and aspirations. Through MCC which already has 3.26 millions members’
database, it could generate more than 40% of LPPF’s revenue in 2015.
Acquisitioning GEI
Shareholder (as of 22 % Ownership
Responding the growth rapidly of technology and population in
Jan '16) Before After
Indonesia, LPPF believes that it’s right to enter the prospective market
PT Matahari
5.16 10.33 for online retail. This big potential is realized by acquiring PT GEI for
Department Store
10% to have any chance for the customers to buy some exclusive brands
PT Matahari Putra to various regions. This partnership will allow the Company to build
1.93 1.83
Prima
expertise in e-commerce environment while protecting the business and
PT Duta Wibisana revenue. For that LPPF plans to acquire up to 20%.
3.67 3.47
Anjaya
PT Dutamas Sinar Opening New Stores
7.34 6.94
Mustika
LPPF has already identified 54 new stores to develop. In average, the
PT Investama Digital
81.9 77.44 company can open about 8 - 10 new stores in developed cities (Figure 3).
Ventura
The management strategy is to enlarge the market into Eastern Indonesia,
Source: bareksa.com along with Indonesia’s government that planned to invest more in
infrastructure that can boost economic growth at those cities.

Figure 3
Industry Overview and Competitive Positioning
CAGR Global Retail Industry and CAGR Indonesia Retail Industry
Global retail sector is driven by rising disposable income and consumer
confidence. Retail market is affected by GDP per capita of developing
and undeveloped countries and unemployment rate in developing
countries. Retail industry in the Global region will expand at a CAGR of
6.9% will be $20 trillion in 2018. Based on CAGR, Indonesia retail
industry takes 4th place in 14% after US, China and India. Other Global
nations are expected to register a CAGR of 1% - 12%.

Source: Company Data Pride on Luxurious Brand

We have seen a plague in young, teens, and adults on how they want to
be perceived by others, and the result is they become aware and are
addicted on high luxury products. This changing of lifestyle in society is
in line with the increasing of technology literacy, especially smartphone
in Indonesia. This plague may shift customer from LPPF to other retailers
which provide high luxury products and brands.

Figure 4
Economic Growth
While estimation of GDP of other Southeast Asian countries tend to be
lowering, Indonesia’s GDP annual growth rate in 2017 is estimated to be
about 5.1% , while GDP annual growth rate in 2020 is predicted to be
stable at 5.2% (Figure 4).

Accelerated Infrastructure Program

Source: tradingeconomics.com
Indonesia government conducts tax amnesty program to elevate
liquidation in order to financing some infrastructures. The infrastructures
are expected can boost the economic growth that can provide more
accessibility. It is decided to focus in Eastern Indonesia which is in some
undeveloped cities. Take a look to historical experience, Indonesia
infrastructure program is more likely to be hang up whether pending or
canceled.
The Lannisters (16/12/2016)

Figure 5 Stable Inflation Rate and Fuel Price

The inflation rate is expected to the level of 3.8% - 4%, which still can be
controlled comparing to the GDP growth and interest rate. Inflation rate
also related to the fluctuation of fuel price that may happen in 2017.
Looking at the estimation of fuel price will be increasing in relative
amounts that affects the distribution cost becomes slightly higher for this
industry.

Source: tradingeconomics.com Young & Growing

Indonesia is the 4th most population and having about 67% of its
population as productive age. This creates a huge market for LPPF, since
Figure 6 population in productive age is more likely to be consumptive. Based on
world bank, middle-income population is growing by 3% per year or
about 7 million people. In addition the range of regional wages growth in
2005-2015 was about 10-15% that can support the consumptive
behaviour of this population growth (Figure 6).

New Retail Investment Policy in Indonesia

The implementation of new Presidential Regulation No.44/2016 which
states that foreign retail investors are permitted to enter Indonesia market
for 67% at maximum for store size 400 sqm up to 2000 sqm which prior
policy for minimum 2000 sqm. the regulation is unfavourable for local
Source: CIA Factbook
retailers and triggering the foreign investors to invest in retail business.
As a prove, the store space in the mall has been difficult to obtain by local
investors even in the district area, which had been fulfilled by foreign
investors.

Increase in Competition
Based on the estimation of retail industry growth in Indonesia, the
competition is real to happen. The indication is already existed that the
retailers from Japan, Malaysia, and Sweden are expanding their business
in Indonesia in some major countries and eager to more invest.

Porter’s Five Forces

Threat of New Entrants

Low
Market had been dominated with local company and international
Figure 7 company. To enter this industry is needed to have a large capital,
experience and a sufficient broad distribution that difficult for new entry.

Threat of Substitute Products or Services

High
Market had been dominated with the local and international company.
Moreover, the substitute is developed nowadays is retail system and
shopping via mobile phone and internet.

Source: Team Estimate Bargaining Power of Suppliers

Low
Interdependence between supplier and retailer. The supplier should meet
the quantity and quality of product requirement from the retailer, while
the retailer should meet the quality of business prospects to sustain the
 The Lannisters (16/12/2016)
Figure 8: Same Store Sales Growth
Source: Company Data
Figure 9: CAGR of Online Retail Sales
Source: bareksa.com
continuity. Supplier growth is expected to become high due to the free
trade was implemented. It leads the retailer won’t depend on single
supplier and seek for the alternatives. Retailer may stop having businesses
with the supplier and changing to one another.
Bargaining Power of Buyers
High
The customers are usually changing its shopping habits as their desires
change that makes the customer’s loyalty is low. To keep the relationship
between retailer with its customers, Matahari created MCC Matahari club
card to give more facility and more value for customer. In addition, The
customer is growing up, especially the growth of women who have a
disposable income and the growth of men who started concern on fashion.
Purchasing power becomes high as long as the improvement of economic
growth.
Rivalry on Existing Firms
High
Stable macroeconomics and population growth may attract the new entry
to invest in Indonesia. Competition in retail industry is marked by the
existing of variance of new retail format. The new retail formats are
factory outlet, specialty store and retail online. The number of retailer is
already big that consists of local and international retailer that creates
high competition among them. Modern retail is growing
Investment Summary
We issue a SELL recommendation on Matahari with a twelve-month
target price of 11,421. We derived our target price by using Discounted
Cash Flow, with Free Cash Flow to Equity.
Investment Drivers
Management Conservatism
Management plan to only concern on expanding its stores to eastern
Indonesia without concerning more on Same Store Sales Growth
(SSSG) seems too conservative, to recall Matahari has squeezing
SSSG from 12.1% in 2013 to 6.8% in 2015 (Figure 8). And the risk
of poor execution of the new stores, added by the uncertainties of
demand in secondary cities will be a significant risk to the
company.
Cannibalism Opportunity
The change in business model from offline to online is a great threat for
the company, with CAGR of 79.52% of development of e-commerce in
Indonesia from 2008-2014 and still expected to grow for the following
years (Figure 9). Company action to invest in PT. GEI also becomes a
risk as it incurred a loss of IDR 59 Billion as of July 2015, a cutthroat
pricing amongst e-commerce also causes investor to worry, and
MatahariMall.com is still too small to contribute to LPPF and further risk
is that MatahariMall.com will eventually capture all market share of
Matahari which results in decreasing LPPF operating profit.
The Lannisters (16/12/2016)
Company Efficiency
Revenue of the company grew at a rate of CAGR 17% from 2012-2015,
Figures 10: Revenue and Operating yet the growth of operating income was indeed decreasing from 28.21%
to 25.9% as the proportion of direct purchase sales growing at a rate
Profit Growth
higher than consignment sales (Figures 10). This indicate that even if the
company capture more sales in next years, the company will have a
decreasing operating profit as the company has been in its peak in terms
of efficiency.
Unfavorable Goverment Regulation
Presidential Regulation no. 44, 2016 clearly becomes a threat as the
regulation permitted that now foreign retailers may open its stores ranging
from 400 sqm up to 2,000 sqm, compared to the previous regulation that
only permitted from 2,000 sqm. And foreign retailers are able to acquire
department store for max 67%.
The Changes in Young and Adults Lifestyle
Operating Profit
Teens and adults are now more preferable to buy luxurious brands to show
29.00% them who they are. This changing lifestyle has been a plague in society
28.00% and as target market of the company is middle income and the brands sold
27.00% are not premium brands, the company seems to be harmed by this
26.00% changing lifestyle.
25.00%
24.00%
2012 2013 2014 2015 Valuation
Source: Company Data DCF Model
We used Discounted Cash Flow model to get the present value of
Matahari’s future projected cash flow, with using FCFE as the free cash
flow to equity investor. We have put into consideration about indutry
analysis, macroeconomic, and management plan to arrive at the projected
cash flow.

Table 1: Cost of Equity Cost of Equity

Risk free
As we used FCFE, thus we used cost of equity as the discount factor. In
calculating cost of equity we used CAPM model. First, we assume that
there is no risk free entity, so we subtract government bonds
(http://www.bi.go.id/en/iru/market-data/bond-yields/Default.aspx) with
default spread from Moody’s rating.
Beta & ERP
We computed beta by dividing coveriance of Matahari relative to JCI with
variance of JCI by weekly closing prices taken from yahoo finance from
January 2014 up to now, arriving at 0.9046. For ERP we used US mature
Source: Team Estimate market premium as the base, as much as 6.25%
(http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/ctrypr
em.html)
The Lannisters (16/12/2016)
Country Risk
We believe that country risk is non-diversifiable risk, and indeed it can
command a premium. So we put into consideration of country risk as an
addition to cost of equity, country risk is taken from Damodaran pages.

Terminal Value
For terminal value we used going concern approach stating that as a firm
grows, it gets difficult to maintain high growth and it will eventually grow
at a rate less than or equal to economic growth, and sustain in perpetuity.
We used 5.5% rate of stable growth. At the terminal year we asssume that
the company reinvestment needs lowering to 20%. Thus we get the
terminal value of IDR 29,555,562 mn.
As the result we get a twelve month target price of 11,421 and we issue a
SELL recommendation on LPPF.

Financial Analysis
The forecasted financial statements are derived from these applied
assumptions:
 Compounded Annual Growth Rate over the last for year (2012-2015) was
Table 2: Forecasted Ratios 17%. Considering the impacts of Indonesia’s GDP growth and other
external factors which have been discussed previously, the CAGR of
forecasted years is expected to be at 18%.
 Zero long-term debt: LPPF is expected to use its internal financing, since
there is increasing power in its Retained Earning. Over three forecasted
years from 2016-2018, LPPF is expected to only use its revolving credit
facilities from PT CIMB Niaga and will not raise capital through long
term bank loan.
Source: Team Estimate  In 2018, LPPF is expected to maximize its investment in opening new
stores (long-term leases) and acquiring new fixed assets to anticipate the
final phase of infrastructure development program in Indonesia.
 The amount of dividend paid during the respective year is expected to be
70% of prior year’s net income.
 Some assumptions which are applied in forecasting the financial
statements are:
- Average Assets Turnover Ratio (2.5) is expected to be constant in the
future
- Working Capital is expected to be positive in the future
- Long Term Assets to Net Revenue is expected to be constantly at 18%
in the future (Table 2).

Investment Risk

Business and Operational Risk

[B 1] The Entrance of Foreign Competitor (Moderate Likelihood, High
Impact)
Indonesia, by Global Retail Development Index, is ranked as the 5th place
based on its potential to grow and by its young and growing population makes
Indonesia a great place for retailing companies, foreign retailers are not an
exception. They are more likely to expand their businesses in Indonesia,
The Lannisters (16/12/2016)
namely Uniqlo from Japan, Lotte from South Korea, H&M from Swedish.
This foreign movement can result in lost market share for Matahari.

[B 2] Offline to Online Business (Moderate Likelihood, Moderate

Impact)
As the rapid growing of online shopping experiences provided by, such as
Lazada, Zalora, BukaLapak.com, and supported by the increasing technology
literacy in society, those may cause customers to have less preference of going
directly to the stores, and the less customers going to the store, the less sales
will be. This shifting from offline to online business is a risk Matahari should
Risk Matrix anticipate to face further market lost.
[B 3] Opening Stores of Matahari Exclusive Brands (Low Likelihood,
High Impact)
Another risk captured is the risk of exclusive brands in matahari opening their
own stand/store, as it can distract customer by offering lower prices and more
complete collection. This can be a challenge to Matahari to slice and dice their
strategy to keep the deal fruitful with its consignment partners.

Market Risk
[M 1] Delaying Government Infrastructure Program (Moderate
Likelihood, Moderate Impact)

Source: Team Estimate Infrastructure program is now currently a priority for government, ranging
from western Indonesia to Eastern Indonesia. However company’s plan to
expand its business by building new stores especially to eastern Indonesia can
be a risk, recall from previous government’s execution on infrastructure was
disappointing, a lot of delayed and cancelled program. Also government’s
plan to ask private company to take a part in this program can be challenging,
which adds up to the success of infrastructure program which requires
additional IDR 4,000 T funds.
[M 2] Inflation Risk (High Likelihood, High Impact)
Demand driver is from the growth of Disposable Income, and it is much
affected by the growth of GDP and inflation level. Disregard government’s
ability to maintain inflation at roughly 3-4%, the future is still exposed to a
spiking inflation if Indonesia’s accelerating economic growth can’t balance
the inflation growth.

Other Risk
[O 1] Fire Loss (Low Likelihood, Low Impact)
Recall from 2014 and 2015, there were 2 stores was down due to fire namely
store in King Plaza Bandung in 2014, and Ambon Plaza in 2015. The risk of
fire is always there but the company is registering its stores to insurance
company to prevent further losses due to fire.
The Lannisters (16/12/2016)
Appendix 1: Income Statement (in million)

Income Statement (in million) 2013A 2014A 2015A 2016F 2017F 2018F

Revenue
Retail Sales IDR 4,043,639 IDR 4,898,745 IDR 5,729,126 IDR 6,874,951 IDR 8,249,941 IDR 9,899,930
Consignment Sales -Net IDR 2,673,621 IDR 2,981,424 IDR 3,227,559 IDR 3,711,693 IDR 4,268,447 IDR 4,908,714
Service fees IDR 37,066 IDR 45,378 IDR 50,208 IDR 60,250 IDR 72,300 IDR 86,759
Net Revenue IDR 6,754,326 IDR 7,925,547 IDR 9,006,893 IDR 10,646,894 IDR 12,590,688 IDR 14,895,403
Cost of Revenue IDR (2,391,274) IDR (2,877,507) IDR (3,335,638) IDR (3,953,064) IDR (4,743,677) IDR (5,692,413)
Gross Profit IDR 4,363,052 IDR 5,048,040 IDR 5,671,255 IDR 6,693,829 IDR 7,847,010 IDR 9,202,990
Operating Expenses IDR (2,581,920) IDR (2,937,013) IDR (3,341,741) IDR (3,939,351) IDR (4,658,554) IDR (5,511,299)
Other gains/(losses)-net IDR 33,736 IDR (27,115) IDR 8,134 IDR 21,294 IDR 25,181 IDR 29,791
Total Operating Expense IDR (2,548,184) IDR (2,964,128) IDR (3,333,607) IDR (3,918,057) IDR (4,633,373) IDR (5,481,508)
Operating Profit IDR 1,814,868 IDR 2,083,912 IDR 2,337,648 IDR 2,775,772 IDR 3,213,637 IDR 3,721,482
Finance income IDR 17,928 IDR 22,583 IDR 30,833 IDR 41,758 IDR 56,554 IDR 76,592
Finance costs IDR (309,174) IDR (255,951) IDR (123,660) IDR (21,281) IDR (19,576) IDR (18,756)
Finance costs - net IDR (291,246) IDR (233,368) IDR (92,827) IDR 20,477 IDR 36,978 IDR 57,836
Profit before income tax IDR 1,523,622 IDR 1,850,544 IDR 2,244,821 IDR 2,796,249 IDR 3,250,615 IDR 3,779,318
Income tax expense IDR (373,462) IDR (431,426) IDR (463,973) IDR (699,062) IDR (812,654) IDR (944,829)
Profit for the year IDR 1,150,160 IDR 1,419,118 IDR 1,780,848 IDR 2,097,187 IDR 2,437,961 IDR 2,834,488

Other comprehensive income

Remeasurements of Employee Obligations IDR - IDR (8,395) IDR 21,880 IDR - IDR - IDR -
Related income tax (expenses)/benefit IDR - IDR 1,679 IDR (4,376) IDR - IDR - IDR -
Total Comprehensive Income IDR - IDR (6,716) IDR 17,504 IDR - IDR - IDR -
Net Comprehensive Income IDR 1,150,160 IDR 1,412,402 IDR 1,798,352 IDR 2,097,187 IDR 2,437,961 IDR 2,834,488
Net earnings per share IDR 394 IDR 486 IDR 611 IDR 719 IDR 836 IDR 972
The Lannisters (16/12/2016)
Appendix 2: Statement of Financial Position (in million)

SOFP (in million) 2013A 2014A 2015A 2016F 2017F 2018F

ASSETS
Current Assets
Cash and Cash Equivalent IDR 772,217 IDR 785,895 IDR 946,658 IDR 1,007,709 IDR 1,172,748 IDR 1,248,380
Trade Receivabes (-third parties) IDR 32,786 IDR 45,063 IDR 39,312 IDR 25,323 IDR 16,312 IDR 10,507
Other Receivables (-third parties) IDR 15,094 IDR 17,784 IDR 30,848 IDR 32,622 IDR 44,497 IDR 47,056
Other Receivables (-related parties) IDR 15,052 IDR 46,534 IDR 5,866 IDR 6,043 IDR 6,226 IDR 6,414
Inventories IDR 723,809 IDR 955,231 IDR 1,007,811 IDR 1,138,750 IDR 1,206,343 IDR 1,451,958
Prepaid tax (-other tax) IDR 27,765 IDR 71,624 IDR 53,899 IDR 33,750 IDR 41,952 IDR 46,269
Prepaid Expenses (lease) IDR 81,625 IDR 83,124 IDR 90,361 IDR 121,939 IDR 164,552 IDR 222,057
Prepaid Expenses (others) IDR 9,341 IDR 4,183 IDR 9,551 IDR 21,339 IDR 47,675 IDR 106,516
Rental Advances IDR 12,386 IDR 81,860 IDR 64,856 IDR 40,339 IDR 45,090 IDR 48,045
Other Current Assets IDR 12,992 IDR 26,209 IDR 23,779 IDR 34,214 IDR 49,228 IDR 70,831
TOTAL CURRENTS ASSETS IDR 1,703,067 IDR 2,117,507 IDR 2,272,941 IDR 2,462,027 IDR 2,794,624 IDR 3,258,033
Non-current assets
Restricted cash and cash equivalents IDR 25,579 IDR - IDR - IDR - IDR - IDR -
Advances for purchase of fixed assets IDR 11,619 IDR 48,956 IDR 44,235 IDR 67,531 IDR 83,094 IDR 126,855
Deferred tax assets IDR 45,908 IDR 49,250 IDR 38,416 IDR 31,554 IDR 35,918 IDR 36,502
Fixed assets (net of depre) IDR 727,186 IDR 725,954 IDR 876,566 IDR 1,024,017 IDR 1,198,938 IDR 1,401,977
Long-term lease IDR 289,264 IDR 317,552 IDR 370,325 IDR 436,233 IDR 491,957 IDR 599,606
Refundable deposits IDR 108,894 IDR 129,158 IDR 133,636 IDR 153,153 IDR 195,593 IDR 254,159
Other receivables(- related parties) IDR - IDR - IDR - IDR - IDR - IDR -
Other non-current assets IDR 28,268 IDR 24,577 IDR 153,172 IDR 198,172 IDR 253,986 IDR 253,986
TOTAL NON CURRENT ASSETS IDR 1,236,718 IDR 1,295,447 IDR 1,616,350 IDR 1,910,660 IDR 2,259,487 IDR 2,673,085
TOTAL ASSETS IDR 2,939,785 IDR 3,412,954 IDR 3,889,291 IDR 4,372,687 IDR 5,054,111 IDR 5,931,118
The Lannisters (16/12/2016)

LIABILITIES AND EQUITY

LIABILITIES
Current Liabilities
Trade Payables (-Third Parties) IDR 1,265,953 IDR 1,410,802 IDR 1,551,619 IDR 1,192,291 IDR 880,764 IDR 618,995
Other Payables (-Third Parties) IDR 81,492 IDR 105,780 IDR 151,179 IDR 123,240 IDR 88,974 IDR 65,575
IDR
Other Payables (-Related Parties) IDR 11,434 42,903 IDR 945 IDR 945 IDR 945 IDR 945
Taxes Payable(-Income Taxes) IDR 73,519 IDR 128,814 IDR 97,608 IDR 93,019 IDR 90,179 IDR 85,939
IDR
Taxes Payable(-Other Taxes) IDR 13,546 14,725 IDR 12,749 IDR 13,117 IDR 13,496 IDR 13,885
Accrual(-third parties) IDR 150,163 IDR 211,756 IDR 280,046 IDR 257,267 IDR 256,340 IDR 235,490
IDR
Accrual (-related parties) IDR 31,034 45,122 IDR 51,134 IDR 44,952 IDR 39,517 IDR 34,740
Short-term employee benefits obligations IDR 125,755 IDR 152,641 IDR 206,349 IDR 238,849 IDR 283,412 IDR 324,290
Deferred income IDR 108,136 IDR 127,000 IDR 87,385 IDR 87,723 IDR 87,384 IDR 87,046
Long-term bank loans IDR 29,149 IDR 278,978 IDR - IDR - IDR - IDR -
TOTAL CURRENT LIABILITIES IDR 1,890,181 IDR 2,518,521 IDR 2,439,014 IDR 2,051,402 IDR 1,741,011 IDR 1,466,904
Non-current Liabilities
Long-term bank loans IDR 1,566,531 IDR 410,191 IDR - IDR - IDR - IDR -
Long-term employee benefits obligations IDR 276,056 IDR 324,979 IDR 344,110 IDR 364,757 IDR 386,642 IDR 409,841
TOTAL NON CURRENT LIABILITIES IDR 1,842,587 IDR 735,170 IDR 344,110 IDR 364,757 IDR 386,642 IDR 409,841
TOTAL LIABILITIES IDR 3,732,768 IDR 3,253,691 IDR 2,783,124 IDR 2,416,159 IDR 2,127,653 IDR 1,876,745

EQUITY
Share Capital IDR 386,794 IDR 386,794 IDR 386,794 IDR 386,794 IDR 386,794 IDR 386,794
Additional Paid-in Capital IDR (3,571,934) IDR (3,571,934) IDR (3,571,934) IDR (3,571,934) IDR (3,571,934) IDR (3,571,934)
Difference value in Restructuring Entities under Common Control IDR - IDR - IDR - IDR - IDR - IDR -
Retained Eanings (-Appropriated) IDR 116,397 IDR 116,397 IDR 116,397 IDR 116,397 IDR 116,397 IDR 116,397
Retained Eanings (-Unappropriated) IDR 2,275,760 IDR 3,228,006 IDR 4,174,910 IDR 5,025,271 IDR 5,995,201 IDR 7,123,117
TOTAL EQUITY IDR (792,983) IDR 159,263 IDR 1,106,167 IDR 1,956,528 IDR 2,926,458 IDR 4,054,374
TOTAL LIABILITIES AND EQUITY IDR 2,939,785 IDR 3,412,954 IDR 3,889,291 IDR 4,372,687 IDR 5,054,111 IDR 5,931,118
The Lannisters (16/12/2016)
Appendix 3: Statement of Cash Flow (in million)

Cash Flow (in million) 2016 2017 2018

Cash Flow from Operating Activities
Profit from operating IDR 2,097,187 IDR 2,437,961 IDR 2,834,488
Other Gain/losses IDR (20,732) IDR (23,887) IDR (27,871)
Depreciation Expense IDR 447,711 IDR 326,099 IDR 435,786
Changes in CA IDR (189,086) IDR (332,597) IDR (463,409)
Changes in CL IDR (387,612) IDR (310,391) IDR (274,107)
Net cash flow provided from operating activities IDR 1,947,467 IDR 2,097,185 IDR 2,504,887
Cash Flow from Investing Activities
Acquisition of GEI Shares IDR (94,880) IDR - IDR -
Advanced payment for purchase of fixed assets IDR (312,099) IDR (344,270) IDR (512,724)
Acqusition of fixed assets IDR (220,433) IDR (224,922) IDR (376,492)
Proceeds from sale of fixed assets IDR 534 IDR (661) IDR 648
Net cash flow used in investing activities IDR (626,878) IDR (569,853) IDR (888,568)
Cash Flow from Financing Activities
Repayments of bank loans IDR - IDR - IDR -
Payments of loans from third party IDR - IDR - IDR -
Proceeds from bank loans - net IDR - IDR - IDR -
Payment of dividends IDR (1,246,826) IDR (1,468,031) IDR (1,706,573)
Payments of interest and bank charges IDR (12,712) IDR (20,263) IDR (19,086)
Net cash flows used in financing activities IDR (1,259,538) IDR (1,488,294) IDR (1,725,659)
Net decrease or increase in cash and cash equivalents IDR 61,051 IDR 39,039 IDR (109,339)
Cash and cash equivalents at the beginning of the year IDR 946,658 IDR 1,133,709 IDR 1,357,720
Total cash and cash equivalents at the end of the year IDR 1,007,709 IDR 1,172,748 IDR 1,248,380
Restricted cash and cash equivalents IDR - IDR - IDR -
Cash and cash equivalents at the end of the year IDR 1,007,709 IDR 1,172,748 IDR 1,248,380
The Lannisters (16/12/2016)
Appendix 4: Common-Size Income Statement

Income Statement (in million) 2013A 2014A 2015A 2016F 2017F 2018F
Revenue
Retail Sales 59.87% 61.81% 63.61% 64.57% 65.52% 66.46%
Consignment Sales -Net 39.58% 37.62% 35.83% 34.86% 33.90% 32.95%
Service fees 0.55% 0.57% 0.56% 0.57% 0.57% 0.58%
Net Revenue 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of Revenue -35.40% -36.31% -37.03% -37.13% -37.68% -38.22%
Gross Profit 64.60% 63.69% 62.97% 62.87% 62.32% 61.78%
Operating Expenses -38.23% -37.06% -37.10% -37.00% -37.00% -37.00%
Other gains/(losses)-net 0.50% -0.34% 0.09% 0.20% 0.20% 0.20%
Total Operating Expense -37.73% -37.40% -37.01% -36.80% -36.80% -36.80%
Operating Profit 26.87% 26.29% 25.95% 26.07% 25.52% 24.98%
Finance income 0.27% 0.28% 0.34% 0.39% 0.45% 0.51%
Finance costs -4.58% -3.23% -1.37% -0.20% -0.16% -0.13%
Finance costs - net -4.31% -2.94% -1.03% 0.19% 0.29% 0.39%
Profit before income tax 22.56% 23.35% 24.92% 26.26% 25.82% 25.37%
Income tax expense -5.53% -5.44% -5.15% -6.57% -6.45% -6.34%
Profit for the year 17.03% 17.91% 19.77% 19.70% 19.36% 19.03%
Other comprehensive income
Remeasurements of Employee Obligations 0.00% -0.11% 0.24% 0.00% 0.00% 0.00%
Related income tax (expenses)/benefit 0.00% 0.02% -0.05% 0.00% 0.00% 0.00%
Total Comprehensive Income 0.00% -0.08% 0.19% 0.00% 0.00% 0.00%
Net Comprehensive Income 17.03% 17.82% 19.97% 19.70% 19.36% 19.03%
Net earnings per share IDR 394 IDR 486 IDR 611 IDR 719 IDR 836 IDR 972
The Lannisters (16/12/2016)
Appendix 5: Common-Size Statement of Financial Position

SOFP (in million) 2013A 2014A 2015A 2016F 2017F 2018F

ASSETS
Current Assets
Cash and Cash Equivalent 26.27% 23.03% 24.34% 23.05% 23.20% 21.05%
Trade Receivabes (-third parties) 1.12% 1.32% 1.01% 0.58% 0.32% 0.18%
Other Receivables (-third parties) 0.51% 0.52% 0.79% 0.75% 0.88% 0.79%
Other Receivables (-related parties) 0.51% 1.36% 0.15% 0.14% 0.12% 0.11%
Inventories 24.62% 27.99% 25.91% 26.04% 23.87% 24.48%
Prepaid tax (-other tax) 0.94% 2.10% 1.39% 0.77% 0.83% 0.78%
Prepaid Expenses (lease) 2.78% 2.44% 2.32% 2.79% 3.26% 3.74%
Prepaid Expenses (others) 0.32% 0.12% 0.25% 0.49% 0.94% 1.80%
Rental Advances 0.42% 2.40% 1.67% 0.92% 0.89% 0.81%
Other Current Assets 0.44% 0.77% 0.61% 0.78% 0.97% 1.19%
TOTAL CURRENTS ASSETS 57.93% 62.04% 58.44% 56.30% 55.29% 54.93%
Non-current assets
Restricted cash and cash equivalents 0.87% 0.00% 0.00% 0.00% 0.00% 0.00%
Advances for purchase of fixed assets 0.40% 1.43% 1.14% 1.54% 1.64% 2.14%
Deferred tax assets 1.56% 1.44% 0.99% 0.72% 0.71% 0.62%
Fixed assets (net of depre) 24.74% 21.27% 22.54% 23.42% 23.72% 23.64%
Long-term lease 9.84% 9.30% 9.52% 9.98% 9.73% 10.11%
Refundable deposits 3.70% 3.78% 3.44% 3.50% 3.87% 4.29%
Other receivables(- related parties) 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Other non-current assets 0.96% 0.72% 3.94% 4.53% 5.03% 4.28%
TOTAL NON CURRENT ASSETS 42.07% 37.96% 41.56% 43.70% 44.71% 45.07%
TOTAL ASSETS 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
The Lannisters (16/12/2016)

LIABILITIES AND EQUITY

LIABILITIES
Current Liabilities
Trade Payables (-Third Parties) 43.06% 41.34% 39.89% 27.27% 17.43% 10.44%
Other Payables (-Third Parties) 2.77% 3.10% 3.89% 2.82% 1.76% 1.11%
Other Payables (-Related Parties) 0.39% 1.26% 0.02% 0.02% 0.02% 0.02%
Taxes Payable(-Income Taxes) 2.50% 3.77% 2.51% 2.13% 1.78% 1.45%
Taxes Payable(-Other Taxes) 0.46% 0.43% 0.33% 0.30% 0.27% 0.23%
Accrual(-third parties) 5.11% 6.20% 7.20% 5.88% 5.07% 3.97%
Accrual (-related parties) 1.06% 1.32% 1.31% 1.03% 0.78% 0.59%
Short-term employee benefits obligations 4.28% 4.47% 5.31% 5.46% 5.61% 5.47%
Deferred income 3.68% 3.72% 2.25% 2.01% 1.73% 1.47%
Long-term bank loans 0.99% 8.17% 0.00% 0.00% 0.00% 0.00%
TOTAL CURRENT LIABILITIES 64.30% 73.79% 62.71% 46.91% 34.45% 24.73%
Non-current Liabilities
Long-term bank loans 53.29% 12.02% 0.00% 0.00% 0.00% 0.00%
Long-term employee benefits obligations 9.39% 9.52% 8.85% 8.34% 7.65% 6.91%
TOTAL NON CURRENT LIABILITIES 62.68% 21.54% 8.85% 8.34% 7.65% 6.91%
TOTAL LIABILITIES 126.97% 95.33% 71.56% 55.26% 42.10% 31.64%
EQUITY
Share Capital 13.16% 11.33% 9.95% 8.85% 7.65% 6.52%
Additional Paid-in Capital -121.50% -104.66% -91.84% -81.69% -70.67% -60.22%
Difference value in Restructuring Entities under Common Control 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Retained Eanings (-Appropriated) 3.96% 3.41% 2.99% 2.66% 2.30% 1.96%
Retained Eanings (-Unappropriated) 77.41% 94.58% 107.34% 114.92% 118.62% 120.10%
TOTAL EQUITY -26.97% 4.67% 28.44% 44.74% 57.90% 68.36%
TOTAL LIABILITIES AND EQUITY 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
The Lannisters (16/12/2016)
Appendix 6: Key Financial Ratios

Key Financial Ratios 2013A 2014A 2015A 2016F 2017F 2018F

Profitability
Operating Profit Margin 26.87% 26.29% 25.95% 26.07% 25.52% 24.98%
Net Profit Margin 17.03% 17.91% 19.77% 19.70% 19.36% 19.03%
ROA 39.19% 44.68% 48.78% 50.77% 51.72% 51.61%
ROE -145.04% 891.05% 160.99% 107.19% 83.31% 69.91%
Liquidity
Current Ratio 0.90 0.84 0.93 1.20 1.61 2.22
Quick Ratio 0.44 0.36 0.42 0.52 0.71 0.89
Cash Ratio 0.41 0.31 0.39 0.49 0.67 0.85
Leveraging Ratio
Debt-equity Ratio -470.72% 2042.97% 251.60% 123.49% 72.70% 46.29%
Debt-asset Ratio 126.97% 95.33% 71.56% 55.26% 42.10% 31.64%
Interest Coverage Ratio -5.93 -8.23 -19.15 -132.40 -167.05 -202.50
Activity Ratio
Inventory Turnover Ratio -3.85 -3.43 -3.40 -3.68 -4.05 -4.28
Account Payables Turnover Ratios 2.24 2.32 2.29 2.98 4.64 7.92
Days of Inventory -94.90 -106.49 -107.40 -99.10 -90.22 -85.23
Days of Payable 163.18 157.13 159.57 122.62 78.63 46.09
The Lannisters (16/12/2016)
Appendix 7: Valuation

FCFE 0 1 2 3

Net Income IDR 1,780,848 IDR 2,097,187 IDR 2,437,961 IDR 2,834,488

Capital Expenditures IDR 532,532 IDR 569,192 IDR 889,216

Depreciation IDR 447,711 IDR 326,099 IDR 435,786

- Net Capex IDR 84,821 IDR 243,093 IDR 453,430

- Change in Noncash WC IDR 515,647 IDR 477,949 IDR 661,884

+ Net New Debt Issue IDR - IDR - IDR -

FCFE IDR 1,496,718 IDR 1,716,920 IDR 1,719,174

Terminal Value of Equity IDR 29,555,562

Present Value IDR 1,317,600 IDR 1,330,568 IDR 21,336,557

Value of Equity IDR 23,984,725

Share Price IDR 11,421.30

The Lannisters (16/12/2016)
Compensation of the author(s) of this report is not based on investment banking revenue.

Position as a officer or director:

The author(s), or a member of their household, does [not] serves as an officer, director or advisory board member of the subject company.

Market making:

The author(s) does [not] act as a market maker in the subject company’s securities.

Ratings guide:
Banks rate companies as either a BUY, HOLD or SELL. A BUY rating is given when the security is expected to deliver absolute returns of 15% or greater over the next twelve month period, and recommends that investors take a position
above the security’s weight in the S&P 500, or any other relevant index. A SELL rating is given when the security is expected to deliver negative returns over the next twelve months, while a HOLD rating implies flat returns over the next
twelve months.

Disclaimer:

The information set forth herein has been obtained or derived from sources generally available to the public and believed by the author(s) to be reliable, but the author(s) does not make any representation or warranty, express or implied, as to
its accuracy or completeness. The information is published for educational purposes.