Matahari Department Store - DBS Bank

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Indonesia Company Guide

Matahari Department Store Refer to important disclosures at the end of this report

Version 4 | Bloomberg: LPPF IJ | Reuters: LPPF.JK

DBS Group Research . Equity

28 Jul 2016

HOLD Downgrade from BUY

Winter is coming

Last Traded Price: Rp21,500 (JCI JCI : 5,274.36) Price Target : Rp20,300 (-6% downside) (Prev Rp20,600)

Downgrade to HOLD as current valuation has ran ahead of fundamentals. We downgrade our recommendation on LPPF to HOLD as we believe that its share price upside is limited at the current trading level (29x/25x FY16F/17F PE). LPPF has been one of our favourites for the year and its share price has climbed by c.24% to date. However, with Lebaran behind us and in light of the 2Q16 results, we note that consumer sentiment and demand have not improved much structurally. We think that 2H16 could see slower y-o-y growth vs. what was seen in 1H16, thus not providing enough upside potential for us to maintain our BUY call.

Potential Catalyst: Recovery in structural demand Where we differ: Conservative call amid the bulls Analyst Edwin Lioe +6221 3003 4936 [email protected] Edward Tanuwijaya +62 2130034932 [email protected]

What’s New •

Stellar earnings in 2Q16 but mostly because of the shift in Lebaran period



Structural demand seems to remain wobbly; 2H16 could prove to be challenging



Downgrade to HOLD with TP of Rp20,300 as current valuation has ran ahead of fundamentals

Price Relative Rp

Relative Index

22,250.0

686 586

17,250.0

486 12,250.0

386 286

7,250.0 186 2,250.0 Jul-12

Jul-13

Jul-14

Matahari Department Store (LHS)

Forecasts and Valuation FY Dec (Rp m) Revenue EBITDA Pre-tax Profit Net Profit Net Pft (Pre Ex.) Net Pft Gth (Pre-ex) (%) EPS (Rp) EPS Pre Ex. (Rp) EPS Gth Pre Ex (%) Diluted EPS (Rp) Net DPS (Rp) BV Per Share (Rp) PE (X) PE Pre Ex. (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) ROAE (%)

Jul-15

86 Jul-16

Relative JCI INDEX (RHS)

2015A 2015A 9,007 2,564 2,245 1,781 1,781 25.5 610 610 25 610 427 379 35.2 35.2 27.7 24.1 2.0 56.7 CASH 161.0

Earnings Rev (%): Consensus EPS (Rp Rp): Rp : Other Broker Recs:

2016F 2016F 10,057 2,936 2,686 2,131 2,131 19.6 730 730 20 730 511 598 29.4 29.4 26.5 20.9 2.4 35.9 CASH 122.1

2017F 2017F 11,286 3,327 3,061 2,429 2,429 14.0 832 832 14 832 583 848 25.8 25.8 22.5 18.2 2.7 25.4 CASH 98.2

2018F 2018F 12,779 3,809 3,533 2,803 2,803 15.4 961 961 15 961 672 1,136 22.4 22.4 20.3 15.6 3.1 18.9 CASH 84.6

(1) 747 B: 23

(2) 867 S: 1

(3) 973 H: 3

Source of all data: Company, DBS Vickers, Bloomberg Finance L.P

ASIAN INSIGHTS ed:CK / sa:MA

2Q16 results. With the shift in Lebaran period, LPPF grew its 2Q16 net income by c.97% y-o-y, bringing its 1H16 earnings to Rp1.16tr (+79% y-o-y), forming 54%/53% of our/ consensus’ full-year estimates. 2Q16 SSSG was also stellar at 40% y-o-y (i.e. volume growth of 8% and average unit retail growth of 29%), thus providing the impetus for 2Q16 revenue to grow 44% y-o-y, and 1H16 revenue to grow 32% y-o-y. But structural demand remains wobbly. Despite the striking headline numbers in 2Q16, recall that Lebaran has moved ahead by ten days this year compared to 2015. For an appleto-apple comparison, management shared that in the Lebaran period (defined by management as the 44 days prior to Hari Raya), SSSG was at c.7.5% y-o-y in 2016, vs. c.6.5% in 2015. In our view, this implies that structural demand is still wobbly and has not recovered much. Management forewarned that 3Q16 SSSG could come in at -18% to -20% (due to lower sales volume), and FY16 SSSG is guided at 7% to 7.5%, in line with our assumption of 7.6%, a tad better than 6.8% in FY15. Valuation: We value LPPF at Rp20,300, based on 26x the average of FY16F/17F earnings (about +1SD of its five-year average). In our view, LPPF deserves to trade at a premium to peers, given its strong leadership position in a growing market segment and sustainable business model. Key Risks to Our View: Slower--thanSlower than-expected economic growth. growth. LPPF’s target segment makes up c.60% of the country’s population. A further slowdown in the economy would impact this segment’s revenue growth, which would hurt its earnings. At A Glance Issued Capital (m shrs) Mkt. Cap (Rpbn/US$m) Major Shareholders (%) Multipolar Free Float (%) 3m Avg. Daily Val (US$m) ICB Industry : Consumer Services / General Retailers

2,918 62,735 / 4,786 20.5 79.5 7.1

VICKERS SECURITIES

Company Guide Matahari Department Store

WHAT’S NEW Limited upside; downgrade to HOLD Share price fuelled by Lebaran hopes. LPPF is currently trading at 29x/25x FY16F/17F PE, about +1SD of its five-year average valuation. We note that LPPF’s share price has gained momentum in the recent months, fuelled by expectations of strong Lebaran consumption. However, in light of the 2Q16 results, we believe that structural demand has yet to improve by much. Moreover, the post-Lebaran quarter is generally the weakest quarter, which led us to anticipate slower y-o-y growth in 2H16 vs. what was seen in 1H16. Therefore, we do not see enough upside potential to LPPF’s share price for us to maintain our BUY call on this counter.

2H16 could be more challenging. LPPF’s management also forewarned that 3Q16 could see SSSG coming in at -18% to -20% due to lower sales volume from the shift in Lebaran period. 9M16 SSSG is guided at 7-9%, while FY16 SSSG is guided at 7%-7.5%, in line with our assumption of 7.6%. Management also maintained its “cautiously optimistic” stance for this year, unchanged since the beginning of the year. New store guidance. LPPF’s management maintained its new store guidance for this year at 6-8 stores, having opened four stores to date. For 2017, management also guided for 6-8 new stores, with two of the store sites already under construction. We have factored in seven new stores in our assumptions for both this year and next year.

Lebaran spending in 2016 was not much better than last year. For an apple-to-apple comparison, management shared an interesting piece of data during its earnings call yesterday. For the 2016 Lebaran period (defined as 44 days prior to Hari Raya, which fell on 7 July), SSSG was at c.7.5% y-o-y, just slightly better than c.6.5% y-o-y seen in 2015. This gave us a better picture of how structural demand is faring, which in our view, has not improved by much.

Quarterly / Interim Income Statement (Rpbn) FY Dec Revenue

2Q2015 2Q2015

1Q2016 1Q2016

2Q2016 2Q2016

% chg yoy

% chg qoq

2,302

1,862

3,318

44.1

78.2

Cost of Goods Sold

(839)

(700)

(1,196)

42.6

71.0

Gross Profit

1,463

1,162

2,122

45.0

82.5

Other Oper. (Exp)/Inc

(861)

(856)

(967)

12.3

13.0

Operating Profit

602

307

1,155

91.8

276.6

Other Non Opg (Exp)/Inc

1.30

1.70

(3.7)

nm

nm

0.0

0.0

0.0

nm

nm

(16.6)

0.60

(2.4)

85.4

nm

0.0

0.0

0.0

nm

nm

Associates & JV Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) PrePre-tax Profit

587

309

1,149

95.8

271.8

(124)

(65.2)

(235)

89.9

260.6

Minority Interest

0.0

0.0

0.0

nm

nm

Net Profit

463

244

913

97.4

274.7

Net profit bef Except.

463

244

913

97.4

274.7

EBITDA

660

367

1,219

84.7

232.1

Gross Margins

36.1

35.3

36.6

Opg Profit Margins

14.9

9.3

19.9

Net Profit Margins

11.4

7.4

15.8

Tax

Margins (%)

Source of all data: Company, DBS Vickers

ASIAN INSIGHTS Page 2

VICKERS SECURITIES

Company Guide Matahari Department Store Sales Trend Rp bn

CRITICAL DATA POINTS TO WATCH Earnings Drivers: Stable SSSG and new store openings. We assumed 7.6%/8.4% SSSG, and the opening of 7 new stores in FY16F/17F. LPPF saw weaker SSSG in FY15 (i.e. 6.8%) because of generally weaker consumer spending and slower economy, especially in ex-Java islands such as Kalimantan where incomes have been affected by low commodity prices and several closures of commodityrelated businesses. Kalimantan’s economy is dependent on the commodity industry, such as coal-mining and oil palm cultivation.

20.0% 19.0% 18.0% 17.0% 16.0% 15.0% 14.0% 13.0% 12.0% 11.0% 10.0%

12,000 10,000 8,000 6,000 4,000 2,000 0 2014A

2015A

2016F

Total Revenue

2017F

2018F

Revenue Growth (%) (YoY)

Profitability Trend Rp bn

LPPF has opened eleven new stores last year. For this year, it lowered its guidance to 6-8 new stores from 10-12 stores previously, as management expects some delays from real estate developers. We are assuming for seven new stores this year.

3,419

2,919

2,419

1,919

Recovery of consumer sentiment. LPPF’s target market is the mid-low/middle income consumers, which make up about 60% of the country’s population. A pickup in the consumer sentiment, represented by the Consumer Confidence Index, would lift sales growth.

1,419 2014A

2015A

2016F

Operating EBIT

2017F

Pre tax Profit

2018F Net Profit

Margins Trend 17.0% 16.0%

Larger share of retail sales to lift margins. LPPF operates two main business segments: consignment sales and retail sales. Gross margins from retail sales are higher than from consignment sales, at c.43% vs. c.31%. Going forward, we expect retail sales to outpace consignment sales, which would expand margins as the revenue mix shifts.

15.0% 14.0% 13.0% 12.0% 11.0% 10.0% 9.0% 2014A

Expect net profit to grow at 16% CAGR (FY15(FY15-18F). Our earnings projection is premised on: (1) margin expansion arising from a shift in revenue mix, (2) new stores openings, (3) as well as improving same-store growth as the economy recovers, supported by a debt-free balance sheet and strong cash flow generation. Low exposure to USD/IDR volatility. More than 80% of LPPF’s products are sourced locally, so margins are virtually unaffected by the volatile rupiah. Currently, the rupiah is trading at Rp13,200 to the dollar. Our in-house forecast for the rupiah is Rp13,703 by the end of 2016, implying slight downside. We like LPPF for its minimal exposure to the USD and relatively stable earnings throughout our forecast period.

2015A

Operating Margin %

2016F

2017F

2018F

Net Income Margin %

New stores 11

11.1 8.9 6.7

8 7

7

2016F

2017F

6

4.4 2.2 0.0 2014A

2015A

2018F

Same-store growth (%) 10.8

10.7 9.4 8.4

8.6

7.6 6.8

6.5 4.3 2.2 0.0 2014A

2015A

2016F

2017F

2018F

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 3

Company Guide Matahari Department Store

Balance Sheet: An assetasset-light, debtdebt-free company. At the end of 2015, LPPF has paid off its outstanding debt, in line with its objective in being debt-free by end of last year. The other positive aspect is the company’s asset-light business model. We like that 100% of LPPF’s stores are leased – 70% on 10-year fixed rent contracts and 30% on revenue sharing contracts with the space operator.

Leverage & Asset Turnover (x) 2.4 5.00

2.4 2.3

4.00

2.3 2.2

3.00

2.2 2.1

2.00

2.1 2.0

1.00

2.0

LPPF also does not rely heavily on distribution centres as its effective supply chain allows for just-in-time inventory system; its goods are shipped to its stores nationwide within 48 hours of arriving at the distribution centre. This business model has allowed the company to improve its operating efficiency, and its store and marketing initiatives have expanded net margins over the past few years.

0.00

1.9 2014A

2015A

2016F

2017F

Gross Debt to Equity (LHS)

2018F

Asset Turnover (RHS)

Capital Expenditure Rpm 450.0 400.0 350.0 300.0 250.0

Share Price Drivers: BetterBetter-thanthan-expected same store growth. A recovery in the domestic economy and a pickup in consumer spending will be reflected in better-than-expected SSSG for LPPF. In FY15, LPPF stores recorded 6.8% SSSG, which was weak but relatively better than peers’ amid the slow economy. Going into this year, expectations are that LPPF will capitalise on the Lebaran season, when consumers generally spend more. Again, stronger-than-expected SSSG in the quarter could rerate the stock. Lebaran season this year will fall in early July, thus, higher consumer spending will be observed in 2Q16.

200.0 150.0 100.0 50.0 0.0 2014A

2015A

2016F

2017F

2018F

Capital Expenditure (-)

ROE (%) 800.0% 700.0% 600.0% 500.0% 400.0% 300.0% 200.0%

Key Risks: Slower demand because of higher price of subsidised fuel Increase in fuel price could reduce middle-low/middle income consumers’ disposable income, subsequently reducing discretionary spending.

100.0% 0.0% 2014A

2015A

2016F

2018F

Forward PE Band (x) (x) +2sd: 36.6x

35.9

Limited available space for expansion LPPF’s store expansion could be slowed down if space becomes more limited. This could lead to a slower-than-expected revenue growth for the firm.

2017F

30.9

+1sd: 29.6x

25.9

Avg: 22.6x

20.9 15.9

-1sd: 15.5x

10.9

-2sd: 8.5x

Company Background PT Matahari Department Store Tbk engages in the retail business for several types of products such as clothes, accessories, bags, shoes, cosmetics, and household appliances.

ASIAN INSIGHTS Page 4

5.9 Jul-12

Jul-13

Jul-14

Jul-15

Jul-16

Source: Company, DBS Vickers

VICKERS SECURITIES

Company Guide Matahari Department Store

Key Assumptions FY Dec

2014A 2014A

2015A 2015A

2016F 2016F

2017F 2017F

2018F 2018F

New stores Same-store growth (%)

6 10.7

11 6.80

7 7.60

7 8.40

8 9.40

Segmental Breakdown FY Dec

2014A 2014A

2015A 2015A

2016F 2016F

2017F 2017F

2018F 2018F

9,552 4,899 45.4 14,496

10,354 5,729 50.2 16,133

11,229 6,490 55.3 17,774

12,241 7,385 61.3 19,687

13,462 8,474 68.5 22,004

2,981 2,038 28.7 5,048

3,228 2,412 31.8 5,671

3,512 2,777 36.0 6,325

3,840 3,212 39.8 7,092

4,237 3,746 44.5 8,027

31.2 41.6 63.3 34.8

31.2 42.1 63.4 35.2

31.3 42.8 65.0 35.6

31.4 43.5 65.0 36.0

31.5 44.2 65.0 36.5

2014A 2014A

2015A 2015A

2016F 2016F

2017F 2017F

2018F 2018F

7,926 (2,878) 5,048 (2,937) 2,111 (27.1) 0.0 (233) 0.0 1,851 (431) 0.0 0.0 1,419 1,419 2,318

9,007 (3,336) 5,671 (3,342) 2,330 8.10 0.0 (92.8) 0.0 2,245 (464) 0.0 0.0 1,781 1,781 2,564

10,057 (3,732) 6,325 (3,671) 2,654 8.10 0.0 23.7 0.0 2,686 (555) 0.0 0.0 2,131 2,131 2,936

11,286 (4,194) 7,092 (4,078) 3,014 8.10 0.0 39.3 0.0 3,061 (633) 0.0 0.0 2,429 2,429 3,327

12,779 (4,753) 8,027 (4,562) 3,465 8.10 0.0 60.3 0.0 3,533 (730) 0.0 0.0 2,803 2,803 3,809

17.3 17.2 18.5 23.4

13.6 10.6 10.3 25.5

11.7 14.5 13.9 19.6

12.2 13.3 13.6 14.0

13.2 14.5 15.0 15.4

34.8 14.6 9.8 891.1 41.6 122.9 60.0 9.0

35.2 14.4 11.0 161.0 45.8 118.4 70.0 25.1

35.6 14.9 12.0 122.1 45.3 95.7 70.0 NM

36.0 15.3 12.3 98.2 43.2 81.6 70.0 NM

36.5 15.7 12.7 84.6 41.8 72.9 70.0 NM

Gross Revenues (Rpbn) Consignment sales Retail sales Service fees Total Gross Profit (Rpbn) Consignment sales Retail sales Service fees Total Gross Profit Margins (%) Consignment sales Retail sales Service fees Total Income Statement (Rpbn) FY Dec Revenue Cost of Goods Sold Gross Profit Other Opng (Exp)/Inc Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) PrePre-tax Profit Tax Minority Interest Preference Dividend Net Profit Net Profit before Except. EBITDA Growth Revenue Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (Pre-ex) (%) Margins & Ratio Gross Margins (%) Opg Profit Margin (%) Net Profit Margin (%) ROAE (%) ROA (%) ROCE (%) Div Payout Ratio (%) Net Interest Cover (x)

Revenues are based on gross consignment sales

Revenues are based on net consignment sales

Source: Company, DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 5

Company Guide Matahari Department Store

Quarterly / Interim Income Statement (Rpbn) 2Q2015 3Q2015 FY Dec 2Q2015 3Q2015 Revenue Cost of Goods Sold Gross Profit Other Oper. (Exp)/Inc Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) PrePre-tax Profit Tax Minority Interest Net Profit Net profit bef Except. EBITDA

4Q2015 4Q2015

1Q2016 1Q2016

2Q2016 2Q2016

2,302 (839) 1,463 (861) 602 1.30 0.0 (16.6) 0.0 587 (124) 0.0 463 463 660

2,892 (1,080) 1,812 (887) 925 2.50 0.0 (13.3) 0.0 914 (178) 0.0 736 736 988

2,194 (816) 1,378 (832) 547 5.60 0.0 (48.5) 0.0 504 (107) 0.0 397 397 615

1,862 (700) 1,162 (856) 307 1.70 0.0 0.60 0.0 309 (65.2) 0.0 244 244 367

3,318 (1,196) 2,122 (967) 1,155 (3.7) 0.0 (2.4) 0.0 1,149 (235) 0.0 913 913 1,219

42.2 114.4 135.0 150.2

25.6 49.7 53.6 59.1

(24.1) (37.8) (40.9) (46.1)

(15.1) (40.3) (43.9) (38.6)

78.2 232.1 276.6 274.7

36.1 14.9 11.4

34.4 17.6 14.0

35.3 14.0 10.2

35.3 9.3 7.4

36.6 19.9 15.8

Balance Sheet (Rpbn) FY Dec

2014A 2014A

2015A 2015A

2016F 2016F

2017F 2017F

2018F 2018F

Net Fixed Assets Invts in Associates & JVs Other LT Assets Cash & ST Invts Inventory Debtors Other Current Assets Total Assets

726 0.0 570 786 955 45.1 331 3,413

877 0.0 740 947 1,008 39.3 279 3,889

844 0.0 740 1,571 1,209 54.9 279 4,698

782 0.0 740 2,414 1,352 50.8 279 5,617

688 0.0 740 3,296 1,628 68.9 279 6,700

ST Debt Creditor Other Current Liab LT Debt Other LT Liabilities Shareholder’s Equity Minority Interests Total Cap. & Liab.

423 1,411 685 410 325 159 0.0 3,413

110 1,552 777 0.0 344 1,106 0.0 3,889

110 1,721 777 0.0 344 1,745 0.0 4,698

110 1,911 777 0.0 344 2,474 0.0 5,617

110 2,153 777 0.0 344 3,315 0.0 6,700

Non-Cash Wkg. Capital Net Cash/(Debt) Debtors Turn (avg days) Creditors Turn (avg days) Inventory Turn (avg days) Asset Turnover (x) Current Ratio (x) Quick Ratio (x) Net Debt/Equity (X) Net Debt/Equity ex MI (X) Capex to Debt (%) Z-Score (X)

(764) (46.8) 2.1 192.8 130.5 2.3 0.8 0.3 0.3 0.3 24.7 14.4

(1,002) 836 1.6 182.6 118.6 2.3 0.9 0.4 CASH CASH 348.6 16.5

(956) 1,461 2.0 182.2 127.9 2.1 1.2 0.6 CASH CASH 226.5 15.7

(1,007) 2,304 1.6 179.8 127.1 2.0 1.5 0.9 CASH CASH 226.5 15.0

(955) 3,186 2.0 178.3 134.8 1.9 1.7 1.1 CASH CASH 226.5 14.1

Growth Revenue Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (Pre-ex) (%) Margins Gross Margins (%) Opg Profit Margins (%) Net Profit Margins (%)

Margins based on gross revenues

Source: Company, DBS Vickers

ASIAN INSIGHTS Page 6

VICKERS SECURITIES

Company Guide Matahari Department Store

Cash Flow Statement (Rpbn) FY Dec

2014A 2014A

2015A 2015A

2016F 2016F

2017F 2017F

2018F 2018F

Pre-Tax Profit Dep. & Amort. Tax Paid Assoc. & JV Inc/(loss) Chg in Wkg.Cap. Other Operating CF Net Operating CF Capital Exp.(net) Other Invts.(net) Invts in Assoc. & JV Div from Assoc & JV Other Investing CF Net Investing CF Div Paid Chg in Gross Debt Capital Issues Other Financing CF Net Financing CF Currency Adjustments Chg in Cash Opg CFPS (Rp) Free CFPS (Rp)

1,851 207 (431) 0.0 (87.0) (3.3) 1,535 (205) 0.0 0.0 0.0 12.6 (193) (460) (907) 0.0 0.0 (1,367) 37.7 13.7 556 456

2,245 234 (464) 0.0 240 10.8 2,266 (385) 0.0 0.0 0.0 (158) (542) (852) (689) 0.0 0.0 (1,541) (22.1) 161 694 645

2,686 282 (555) 0.0 (46.6) 0.0 2,366 (250) 0.0 0.0 0.0 0.0 (250) (1,491) 0.0 0.0 0.0 (1,491) 0.0 625 827 725

3,061 313 (633) 0.0 51.1 0.0 2,793 (250) 0.0 0.0 0.0 0.0 (250) (1,700) 0.0 0.0 0.0 (1,700) 0.0 843 940 871

3,533 344 (730) 0.0 (52.4) 0.0 3,094 (250) 0.0 0.0 0.0 0.0 (250) (1,962) 0.0 0.0 0.0 (1,962) 0.0 882 1,078 975

Strong cash flow generation

Source: Company, DBS Vickers Target Price & Ratings History

21917

Rp

20917

10

19917

6 8

18917 17917

4 5 1

3

2

9 7

16917 15917

S.No.

Dat e

Closing Price

T arget Rat ing Pric e

1:

10 Aug 15

18400

20000

BUY

2:

28 Oct 15

17000

20000

BUY

3:

22 Mar 16

18200

20000

BUY

4:

24 Mar 16

18000

20000

BUY

5:

27 Apr 16

18800

20000

BUY

6:

09 May 16

18475

20000

BUY

7:

24 May 16

18000

20600

BUY

8:

25 May 16

18650

20600

BUY

9:

30 May 16

18650

20600

BUY

10:

29 J un 16

20150

20600

BUY

14917 13917 Jul-15

Nov-15

Mar-16

Jul-16

Not e : Share price and Target price are adjusted for corporate actions.

Source: DBS Vickers

ASIAN INSIGHTS

VICKERS SECURITIES Page 7

Company Guide Matahari Department Store

DBS Vickers recommendations are based an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return i.e. > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

Share price appreciation + dividends GENERAL DISCLOSURE/DISCLAIMER This report is prepared by PT DBS Vickers Securities Indonesia. Indonesia. This report is solely intended for the clients of DBS Bank Ltd and DBS Vickers Securities (Singapore) Pte Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of PT DBS Vickers Securities Indonesia. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd., its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”)) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that: (a) (b)

such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein.

Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making.

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VICKERS SECURITIES

Company Guide Matahari Department Store

ANALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of 28 Jul 2016, the analyst(s) and his/her spouse and/or relatives who are financially dependent on the analyst(s), do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities).

COMPANYCOMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. PT DBS Vickers Securities Indonesia (''DBSVI'') have a proprietary position in Matahari Department Store recommended in this report as of 27 July 2016. 2.

Compensation for investment banking services: DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

RESTRICTIONS ON DISTRIBUTION General

This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

Australia

This report is being distributed in Australia by DBS Bank Ltd. (“DBS”) or DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”), both of which are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, which differ from Australian laws. Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

Hong Kong

This report is being distributed in Hong Kong by DBS Vickers (Hong Kong) Limited which is licensed and regulated by the Hong Kong Securities and Futures Commission and/or by DBS Bank (Hong Kong) Limited which is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission. Where this publication relates to a research report, unless otherwise stated in the research report(s), DBS Bank (Hong Kong) Limited is not the issuer of the research report(s). This publication including any research report(s) is/are distributed on the express understanding that, whilst the information contained within is believed to be reliable, the information has not been independently verified by DBS Bank (Hong Kong) Limited. This report is intended for distribution in Hong Kong only to professional investors (as defined in the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) and any rules promulgated thereunder.)

Indonesia

This report is being distributed in Indonesia by PT DBS Vickers Securities Indonesia.

Malaysia

This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR Singapore

This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.

ASIAN INSIGHTS

VICKERS SECURITIES Page 9

Company Guide Matahari Department Store

Thailand

This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. Research reports distributed are only intended for institutional clients only and no other person may act upon it.

United Kingdom

This report is being distributed in the UK by DBS Vickers Securities (UK) Ltd, who is an authorised person in the meaning of the Financial Services and Markets Act and is regulated by The Financial Conduct Authority. Research distributed in the UK is intended only for institutional clients.

Dubai

This research report is being distributed in The Dubai International Financial Centre (“DIFC”) by DBS Bank Ltd., (DIFC Branch) having its office at PO Box 506538, 3rd Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it.

United States

This report was prepared by PT DBS Vickers Securities Indonesia. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.

Other jurisdictions

In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions. PT DBS Vickers Securities Indonesia DBS Bank Tower, Ciputra World 1, 32/F Jl. Prof. Dr. Satrio Kav. 3-5, Jakarta 12940, Indonesia Tel. 6221-3003 4900, Fax: 6221-3003 4943

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VICKERS SECURITIES

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Matahari Department Store - DBS Bank

Indonesia Company Guide Matahari Department Store Refer to important disclosures at the end of this report Version 4 | Bloomberg: LPPF IJ | Reuters:...

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