Best Domestic
Equity House

16 May 2014


(Initial coverage)

Sector: Consumer discretionary (Neutral)

Michael W Setjoadi
Phone: +6221 250 5081 ext. 3613

PX: IDR740 – TP: IDR930
JCI: 4,992

Multi benefits

Holding company benefiting from MPPA’s outstanding performance
In 1975, Multipolar was established by the Lippo group as an electronic
retailer, before being listed on the IDX in 1989 as the first IT company.
Today, MLPL has been transformed into Lippo’s holding company for its retail,
multimedia, telecommunication, technology and banking businesses (exhibit
6). The main contributor to the top line is Matahari Putra Prima (80% of
MLPL’s revenue). Despite the 22% increase in minimum wages and fuel price
hike in 2013, MPPA cut its operating expenses by 16%. This resulted in the
EBIT rising by 224% y-y, and the EBIT margin increasing from 1.1% in 2012
to 3.3% in 2013. MPPA has allocated IDR1.4tn to open 20 Hypermart stores,
20 Boston branches and 4 foodmart branches in 2014. MPPA is also testing
the market for 27 foodmart express stores in Kalimantan. In 2013, MPPA had
a total number of 204 stores (exhibit 9), comprising 100 Hypermart outlets
(35% market share, exhibit 10), 30 Foodmart chains and 74 Boston
branches. In a testimony to MPPA’s strong performance, the company
distributed dividends of IDR186/share and will pay out another IDR186/share
in special dividends, paving the way for MLPL (due to its 50.23% stake in
MPPA) to be eligible for total dividends of IDR792bn.
Details on Strategic Support Agreement (SSA)
In February 2013, MLPL entered into a strategic support agreement with
Singapore’s Temasek Holdings to help Temasek buy 26.1% of MPPA’s shares
from the public for USD300mn. Both companies, prior to Temasek becoming
an ordinary shareholder, have a 5-year lock-up period under certain
conditions that must be satisfied by MPPA. Otherwise, Temasek...