Supra Boga Lestari: Ministop acquisition is long-term positive (RANC, Rp1,040, Buy, TP: Rp980)
- · On an announcement submitted to the IDX last Friday, we learned that RANC has concluded the injection of Ministop convenience store by signing a share subscription agreement on May 16 to acquire 70% stakes at PT Bahagia Niaga Lestari (BNL) for Rp28bn. The 70% acquisition would be facilitated through the issuance of 28,000 new shares at BNL, thus the injected money would remain inside the company, which would be used to finance its initial stores expansion capex.
- · If we recall, Ministop had earlier stated that it aims to open a minimum 300 stores in Indonesia within 2013-2018. As per capita income rises and middle class population doubles, we believe that the strong growth of convenience stores in Indonesia will continue to prevail. Competition is rising in Jakarta, but consumers’ lifestyles are changing and convenience store’s penetration rate remains attractive, we believe. The side-by-side operations of Alfamart and Indomaret minimarket stores are a strong proof of this solid demand.
- · For this year, RANC reportedly aims to open 10 Ministop stores, with the first store being opened in mid-June in Bintaro, South Jakarta. To differentiate itself, Ministop would target slightly higher target market than 7-Eleven and focus on its core expertise at fresh food business. As we know, RANC’s management has extensive know-how in the fresh food and groceries retailing business. The shareholders of RANC are also the owner of Hoka Hoka Bento, the biggest local Japanese fast-food chain in Indonesia.
- · earning from the experience of 7-Eleven Indonesia, the company achieved its first operating profit in two years after operation, while net profit will turn positive in three years after operation (end-2012). Looking at the infrastructures synergy, better suppliers’ bargaining power (combined with Ranch Market and Farmers Market), and the speed of stores opening (60 stores per year); it is possible that Ministop may do better under RANC. Based on the management’s projection, RANC would be better off with the Ministop consolidation as its future gross,
- · We currently have a Buy call on RANC. The counter now trades at 33.1-24.1x FY13F-14F PE, versus MDRN at 44-28x PE.