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LPPF: Tumbled by One-off Loss, Maintain BUY but Lower TP of Rp5,750
08 Mar 2019

LPPF: Tumbled by One-off Loss, Maintain BUY but Lower TP of Rp5,750

On the bottomline, the company suffered a 42.5% YoY decline in net profit from Rp1.91 trillion to Rp1.1 trillion, mostly due to one-off, non-cash loss from investment in PT Global Ecommerce Indonesia (operator of mataharimall.com – which was terminated in the end of Nov18) as much as Rp769.78 billion. Aside the investment loss, however, LPPF’s net profit was actually slightly declined by only 2.1% YoY to Rp1.87 trillion.

Webelieve the current share price has been undervalued, while we expect LPPF sales in 2019F/20F to grow by 3.5%/2.6% YoY on the back of conservative 0% and 1% SSSG, respectively, lower than our previous expectation of 4% due to shadier outlook in department store concept amid wilder competition in fashion retail industry both in store or on the web, but we are optimistic on company’s next initiatives to reformat both the store size and assortments as well as expand more to specialty store concept. Hence we generate a new target price of Rp5,750/ share, from previous target price of Rp8,000, which offers a 34.3% upside, as we believe the stock has been oversold.

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