by CIMB Securities
July sales were Rp697bn, +19% yoy, with SSG at 15.4%. Sales had exceeded its internal target by 6%, with strong rebounds noted for all regions, Java in particular. During our recent visits to four stores, two during their grand openings, we saw throngs of shoppers. Ramayana has also introduced its version of convenience/fast-food outlet, called Orange Mart, to exploit rising disposable income. No change to our earnings estimates, OUTPERFORM rating and target price of Rp1,100, on par with our market P/E target of 14x and in line with its past three years’ trading band. Key catalyst should be strong sales, with the key risk being an economic slowdown.
Strong July. July sales were Rp697bn, paced by SSG of 15.4%. 7M11 sales grew 10.9% to Rp3.3tr, forming 50% of our FY11 estimate. 7M11 SSG rebounded to 5.3% from 2.9% in 6M11, ahead of our 5% forecast for the year. Margins have been picking up with seasonality. We understand that new inventories have helped. Ramayana has added 28k sq m of space YTD (+3.4%), inclusive of 18k sq m new space in Kediri (East Java) and Garut (West Java), opened in Jul/Aug11. It now operates 849k sq m of space.
Shoppers aplenty. We attended the grand openings in Kediri and Garut, visiting two other stores along the way, where the crowds were equally overwhelming. These mid-low-end consumers remain relevant in the smaller cities (70% of the population). We also visited one of Ramayana’s convenience/fast-food outlets, which are fast gaining popularity given rising disposable income. While not as sleek as its foreign peers’ formats, it might just work well enough for its target market.