Matahari Department Store opened a new outlet at Lippo Plaza Jember in East Java on Wednesday (31/05). (ID Photo/David Gita Roza)
Matahari's Shares Too Cheap to Ignore: Analysts
BY :SARAH YUNIARNI
OCTOBER 27, 2017
Jakarta. Shares of Matahari Department Store are trading at half of their peak and below three standard deviations of the company's price earning ratio, leading many analysts to call one of the largest retailers in Southeast Asia as a bargain too cheap to ignore.
Matahari, which trades under the stock ticker LPPF, opened at Rp 9.025 ($0.66) apiece on Friday (26/10). The shares have dropped 40 percent so far this year and have traded at less than half of their peak, at an all time high in July last year of Rp 21,500 apiece.
Matahari's shares were traded at 11.4 times of its earning, less than three standard deviations of its five-year historical price-to-earning ratio average.
That is despite the company's profit of Rp 1.33 trillion in the first half this year, a 15.6 percent increase compared to the same period last year. Revenue was at Rp 10 trillion during the period, 10.9 percent higher compared to the corresponding period last year.
"This is a quite unique case. The retailer's balance sheet has been impressive for the past year, while the company is also actively adding products and business expansion," said Alfred Nainggolan, an analyst at Koneksi Kapital.
Binaartha Sekuritas analyst Reza Priyambada said Matahari may suffer from investors' negative perceptions of weak consumer purchasing power that dragged Indonesia's retail businesses.
Popular convenience store chain 7-Eleven closed all of its shops in July, while Matahari's rival Mitra Adi Perkasa is in the process of closing two of its chains, Lotus and Debenhams, by the end of this year.
Even Matahari decided to close two of its stores in Jakarta, citing a low number of customer visits that undermined the stores' profitability.
The shifting habit of consumers from shopping at traditional retail stores to shopping online at e-commerce markets is also to blame, Reza said, as customers turn to specialty sellers that can provide specific brands of clothes or cosmetics from abroad.
Matahari has invested millions of dollars in the e-commerce site Mataharimall.com. But Matahari's declining share prices seem to reflect investors' disapproval of the company's decision, said UOB Kay Hian analyst Stevanus Juandan, in a research note published on Sept. 21.
E-commerce platforms simply need too much investment, more than Matahari could afford, to compete with market leader Tokopedia, which is backed by Chinese e-commerce giant Alibaba.
Still, analysts are optimistic about Matahari's share price.
"Matahari is prone to get disrupted by e-commerce companies because it has a similar target market. However, if Matahari is able to exceed analyst's expectation for this year, then its share price can potentially rebound in 2018," said Christine Natasya, an analyst at Mirae Asset Sekuritas Indonesia, as quoted by Beritasatu.com.
She set a target price of Rp 12,800 apiece for a full year period. Koneksi Kapital's Alfred was more conservative, who expects Matahari to reach Rp 11,890, or 15 times of its earnings, in the next full year period.
"Matahari's valuation is far below other large retailers in Indonesia and [the stock price] is too cheap for us to be bearish. There is a possibility of a recovery in Matahari's same-store sales growth next year," said UOB Kay Hian's Stevanus, who set a Rp 12,000 target price for the share.
Matahari's same-store sales growth slowed to 8 percent in the first six months this year from 27.1 percent in the same period last year, due to weak domestic consumption trends, the company said.
"Although weak domestic consumption remains a concern, we are confident it is only a cyclical period and consumers will rebound in mid-term," said Matahari Department Store's chief executive and vice president director.
The Jakarta Globe and Matahari Department Store is affiliated to the Lippo Group