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Kevie ADITYA

  • MatahariMall.com (c.20% owned by LPPF) plans to shut down its marketplace business and merge it with Matahari.com (fully owned by LPPF).
  • While MatahariMall.com’s shutdown may not come as a surprise, we believe the move may spare LPPF from writing off its c.Rp770bn exposure.
  • The ensuing larger online platform may lift capex outlook which could put LPPF’s dividend payout at risk. Retain Hold; risks appear to be priced in.

MatahariMall.com to merge with Matahari.com

  • According to a local news article, MatahariMall.com plans to shut down its marketplace business and merge it with Matahari.com, which is an online platform fully owned by LPPF to promote its own branded goods.
  • Based on our channel checks, the changes have been made online as of 20 Nov 2018. MatahariMall.com remains open but sells only LPPF’s goods.
  • Throughout 2015-17, LPPF invested a total of Rp770bn (for c.20% stake) into MatahariMall.com, through PT Global Ecommerce Indonesia (GEI).
  • While MatahariMall.com’s shutdown is not unexpected given its traffic flow is down sharply since 2017, the decision to merge the two online platforms (unclear whether it will lead to financial consolidation) may spare LPPF from incurring a large impairment loss on its investment. It is possible that other costs could be incurred by the significant shrinkage of MatahariMall.com’s business scope, which we have not factored in for lack of available information.

Share price hit further by exclusion from MSCI Index

  • MSCI announced on 13 Nov 2018 that LPPF would be excluded from the MSCI Global Standard Index, although included in the MSCI Small Cap Index, effective 3 Dec 2018.
  • LPPF’s share price fell 5.0% on 14 Nov 2018.

Dividend payout at risk

With LPPF starting its shares buyback programme in Nov 2018 with an 18-month time frame, as well as its plan to build a huge distribution facility in 1H19 with an estimated capex of up to Rp500bn, we believe its 70% dividend payout in FY19F could be at risk.

Maintain Hold

We still believe that LPPF’s sales will face more challenges than its peers over the next few quarters on the back of lacklustre products offering, leading to flat earnings growth in FY18-20F. Nevertheless, its valuation has significantly declined to 6.8x 12M forward P/E currently (66% discount to its 3-year mean); as such, we maintain our Hold call and DCF-based TP of Rp5,000. Key catalyst for the stock is its attractive 10.3% dividend yield in FY19F, if it is able to maintain its 70% payout ratio.

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