Batavia Prosperindo Securities : RALS
• Good 9M11 result but FY11F sales revised down
The company (RALS) booked 9M11 sales of Rp 5.2 trillions or up by 8% yoy primarily due to SSG of about 5% in Java and 3.5% in outside Java. RALS is expected to open only 3 out of 6-8 planned new stores in this year due to government permit issue and limited infrastructure in the new locations.
This resulted in the company’s downward revision of its 2011 sales forecast from around Rp 6.85 trillions to around Rp 6.6 trillions. In the bottom line, net profit increased 8% yoy to Rp 343 billions. It accounts for 85% of our 2011 estimate or 83% of 2011 Bloomberg estimate. Due to seasonality whereby sales was usually much higher during Moslem holiday in 3Q11, we view this achievement is in-line with both estimates.
• Expected to open a least 5 new stores in 2012
The company plans to open 5-10 new stores next year, of which 5 stores have the highest chances of completion and are scheduled to open in 1H12. We view that, internally, the company has the capacity to grow, given its high cash and zero debt amount, besides its long experience and good track record. We are optimistic that sales will continue to rise propelled by domestic demand as the country’s GDP growth remains strong.
• Recommend Buy with TP of Rp 850
With dividend payout ratio of around 50% historically and 60% for FY2010, this can be a good dividend play stock. For valuation, we use discounted cashflow method with WACC of 11.0% and terminal growth of 2.5%, resulting in target price of Rp 850 per share or at 2012F PE of 12.9x. It reflects 44% of potential upside.