FOCUS Wismilak Company Update 19 May 2014

Transcription

1 FOCUS Wismilak Mandiri Sekuritas Analyst Herman Koeswanto, CFA SECTOR: CIGARETTE NEUTRAL (from BUY) Current Price Rp680 Price Target Rp740 (+8.8%) Prev. TP:Rp Week range Rp630 - Rp1,010 Stock Data Bloomberg Code WIIM IJ Mkt.Cap (Rpbn/US$mn) 1,428.0 / Issued Shares (Mn) 2.100,0 Avg. Daily T/O (Rpbn/US$mn) 1.1 / 0.1 Major shareholder Central Tower Capital Pte Ltd 22,5% Walla Family 19,4% Others 58,1% EPS consensus (Rp) Mansek Cons Diff 2014F (5.7) 2015F (40.8) 2016F 63.9 n/a n/a Share price performance 3m 6m 12m Absolute (%) (12.8) (6.8) (32.0) Relative to JCI (%) (22.4) (23.2) (29.6) 1 st tier Overhang We see 50% risk that WIIM may not enter 1 st tier by the end of this year given weaker-than-expected 1Q14 sales volume which was down 37%YoY and 16%QoQ. If so, it is positive for FY14F-15F NPAT but at the expense of WIIM s market share, which continue to trail behind peers and affect long-term earnings growth. Downgrade to Neutral, prefer waiting further confirmation in coming quarters. 1Q14 performance weaker than expected. Indeed we had expected WIIM to record weak 1Q14 performance in yearly basis due to high base effect in 1Q13 post the successful launching of the Diplomat Mild. However, WIIM posted weaker- than-expected 1Q14 NPAT of Rp36bn, down 22%YoY mainly due to weakerthan-expected sales volume which was down 37%YoY and 16%QoQ following subsequent effect of significant ASP hike of 17-18%YoY last year. Less optimist and tone down growth. We found that WIIM s SKM sales volume continued to decline from 670mn sticks in 1Q13 down to around 340mn sticks in 1Q14 and hasn t recovered yet. This was mainly driven by continued decline in demand for the Diplomat Mild (DM) and Galan Mild (GM). Based on our calculation, the average sales volume in 1Q14 was 20% below the average FY13 sales volume. Therefore we view that the company s volume growth target of 20-25%YoY this year seems very challenging to achieve. We only expect 12%YoY volume growth in 2014F. Possibility of not entering 1 st tier this year? Based on our analysis and discussion with the company, we view there s a 50% chance that WIIM may fail entering the 1st tier given weak 1Q14 SKM sales volume which only accounted for 16-17% of the 2bn stick threshold. If so it would be positive for FY14F-15F NPAT but at the expense of market share and future growth and negative for FY16F NPAT. New product launches to boost sales. WIIM has launched 2 new SKM products in April, called Diplomat Mild Menthol and Fun Mild. Fun Mild is to regain back the Galan Mild market in North Sumatra and Diplomat Mild Menthol to regain back DM market that has been hurt due to significant ASP hike. However, the demand pace is not as strong as the launching of DM launched in 4Q12. WIIM plans to launch 1 new regular SKM product in 3Q14 Cut FY14F-15F NPAT by 11-15% down to Rp138bn and Rp95bn mainly due to higher A&P spending requirement up to 7% of sales to boost new product launching to catch up market share and slower volume growth. Our base case still assume that WIIM is able to enter 1 st tier end of this year. While based on our 2 nd scenario where 1 st tier entry pending toward 2015, the FY14F-15F NPAT will up by 9% and 29% to Rp144bn and Rp187bn, but hit the FY16F NPAT by 26%YoY down to Rp139bn (Please see figure 17 & 18) Downgrade to Neutral. We downgrade our rating to Neutral due to the 1 st tier entry overhang as we view that market share is more crucial than short-term earnings. We prefer to wait further confirmation of sales performance in coming quarters. We lower our TP to Rp740/share. WIIM s FY15F P/E now is trading at 15.0x or 10% discount to GGRM. FINANCIAL SUMMARY EBITDA Net Profit Fully-Diluted EPS (Rp) Fully-Diluted EPS Gr. (%) (40.3) (30.6) 40.6 P/E Ratio (x) EV/EBITDA (x) P/B Ratio (x) Dividend Yield (%) ROAE (%) Source: Company ( ), Mandiri Sekuritas ( ) Please see important disclosure at the back of this report Page 1 of 7

2 FIGURE 1. SALES BREAKDOWN, AS OF 2013 WIIM at a Glance FIGURE 2. KEY BRANDED PRODUCT BREAKDOWN Source: Company, Mandiri Sekuritas FIGURE 3. INDUSTRY MARKET SHARE FIGURE 4. EBIT MARGIN COMPARISON Source: Nielsen, HM Sampoerna FIGURE 5. EPS GROWTH TREND FIGURE 6. LEVERAGE & ROE TREND Please see important disclosure at the back of this report Page 2 of 7

3 FIGURE 7. WIIM 1Q14 RESULTS, Bloomberg FIGURE 8. WIIM WITNESSED CONTINUOUS WEAKER SALES AND OPERATING PROFIT IN %YOY QUARTERLY PERFORMANCE FIGURE 9. QUARTERLY GROSS VS EBIT MARGIN FIGURE 10. SKM SALES VOLUME CONTINUE TO DECLINE IN 1Q14 FIGURE 11. 1Q14 AVERAGE SALES VOLUME STILL BELOW 2013 AVERAGE Please see important disclosure at the back of this report Page 3 of 7

4 FIGURE 12. WEEKLY SALES VOLUME OF SKM BRANDED PRODUCT FIGURE 13. WEEKLY SALES VOLUME OF SKT BRANDED PRODUCT FIGURE 14. SALES VOLUME PRORPORTION PE R SEGMENT IN A QUARTERLY BASIS FIGURE 15. GROSS MARGIN COMPARISON BY SEGMENT FIGURE 16. BASE CASE EARNINGS FORECAST CHANGES Source: Company, Mandiri Sekuritas Please see important disclosure at the back of this report Page 4 of 7

5 FIGURE 17. SCENARIO 1: OUR BASE CASE, 1 ST TIER IN 4Q14 FIGURE 18. SCENARIO 2: DELAYING 1 ST TIER ENTRY TOWARD 2015 Please see important disclosure at the back of this report Page 5 of 7

6 Wismilak Profit and Loss Revenue 1,119 1,588 2,133 2,646 3,194 Gross profit Operating profit EBITDA Net Interest (24) (4) (15) (53) (89) Interest expense (25) (14) (20) (57) (95) Interest income Forex Losses/Gains (1) (4) Net Other 16 2 (2) 1 1 Pre-Tax Profit Income Tax (28) (43) (46) (32) (45) Others Minority Interests (0) (0) (0) (0) (0) Net Profit Cashflow Statement Operating Profit Oth.Recurring Income/(Exp) (8) (1) (17) (52) (88) Depr & Amort Other Gain / Loss Tax (28) (43) (46) (32) (45) Change in Working Capital (67) (214) (64) (198) (24) Other Operating Cash Flow 3 32 (36) 11 5 Operating Cash Flow 13 (18) 56 (81) 126 Capital Expenditure 2 (134) (84) (74) (79) Free Cash Flow 16 (152) (28) (155) 47 Other Investing Cash Flow (1) (12) Cash Flow From Investing 1 (146) (71) (74) (79) Net Change in Debts 11 (119) Net Interest Received / (Paid) Equity Funds Raised Other Financing Cash Flow (70) 42 (113) (26) (46) Cash Flow From Financing 308 (78) (50) Non-Recurring Income (Exp) (1) (4) Extraordinaries Income (Exp) Net Change in Cash 321 (246) (65) Cash at beginning Cash at End Valuation YE Dec 2012A 2013A 2014F 2015F 2016F PER (x) EV/EBITDA (X) P/BV (X) P/CF (X) Dividend Yield (%) Balance Sheet Cash and ST Investment Acct Receivable Inventory ,108 1,187 Others Current Assets 1, ,129 1,548 1,806 Investments Fixed Assets Others Total Assets 1,207 1,229 1,462 1,947 2,275 Current Liabilities ,000 1,230 Acct. Payable ST Borrowings Others Long-Term Liabilities Long-Term Payable Others Total Liabilities ,035 1,268 Shareholder's Equity ,005 Key Ratios Growth (% YoY) Sales EBIT (10.7) 48.8 EBITDA (13.7) 46.5 Net Profit (40.3) (30.6) 40.6 Profitability (%) Gross Profit Margin Oper. Margin EBITDA Margin Net Margin ROAA ROAE Leverage Net Debt / Equity (%) (14.6) EBITDA / Gross Interest (x) Per share data (Rp) EPS CFPS BVPS DPS Please see important disclosure at the back of this report Page 6 of 7

7 Mandiri Sekuritas A subsidiary of PT Bank Mandiri (Persero) Tbk Plaza Mandiri 28 th Floor, Jl. Jend. Gatot Subroto Kav , Jakarta 12190, Indonesia General: , Fax : (Equity Research), (Equity Sales) RESEARCH John Rachmat Head of Equity Research, Strategy john.rachmat@mandirisek.co.id Tjandra Lienandjaja Banking tjandra.lienandjaja@mandirisek.co.id Handoko Wijoyo Construction, Toll Road handoko.wijoyo@mandirisek.co.id Hariyanto Wijaya, CFA, CPA Plantation, Heavy eq., Energy hariyanto.wijaya@mandirisek.co.id Herman Koeswanto, CFA Consumer, Poultry herman.koeswanto@mandirisek.co.id Liliana S Bambang Property, Building Material liliana.bambang@mandirisek.co.id Ariyanto Kurniawan Telecom, Coal & Metal Mining ariyanto.kurniawan@mandirisek.co.id Rizky Hidayat Property, Media rizky.hidayat@mandirisek.co.id Vanessa Ariati Tanuwijaya Banking, Health Care vanessa.tanuwijaya@mandirisek.co.id Aldian Taloputra Economist aldian.taloputra@mandirisek.co.id Leo Putra Rinaldy Economist leo.rinaldy@mandirisek.co.id Aditya Sastrawinata Research Assistant aditya.sastrawinata@mandirisek.co.id Wisnu Trihatmojo Research Assistant wisnu.trihatmojo@mandirisek.co.id INSTITUTIONAL SALES Lokman Lie Co-Head Institutional Equities lokman.lie@mandirisek.co.id Silva Halim Co-Head Institutional Equities silva.halim@mandirisek.co.id Andrew Handaya Institutional Sales andrew.handaya@mandirisek.co.id Cindy Amelia P. Kalangie Institutional Sales cindy.amelia@mandirisek.co.id Jane Theodoven Sukardi Institutional Sales jane.sukardi@mandirisek.co.id Janefer Amanda Soelaiman Institutional Sales janefer.soelaiman@mandirisek.co.id Karmia Tandjung-Nasution Institutional Sales karmia.tandjung@mandirisek.co.id Mirna Santikara Salim Institutional Sales santikara.salim@mandirisek.co.id Oos Rosadi Institutional Sales oos.rosadi@mandirisek.co.id Vera Ongyono Institutional Sales vera.ongyono@mandirisek.co.id Yohan Setio, CFA Institutional Sales yohan.setio@mandirisek.co.id Zahra Aldila Niode Institutional Sales zahra.niode@mandirisek.co.id Kusnadi Widjaja Equity Dealing kusnadi.widjaja@mandirisek.co.id Edwin Pradana Setiadi Equity Dealing edwin.setiadi@mandirisek.co.id RETAIL SALES Ridwan Pranata Head Retail Equities ridwan.pranata@mandirisek.co.id Boy Triyono Jakarta Branch boy.triyono@mandirisek.co.id Yohanes Triyanto Kelapa Gading Branch yohanes.triyanto@mandirisek.co.id Hendra Riady Mangga Dua Branch hendra.riady@mandirisek.co.id Umar Abdullah Pondok Indah Branch umar.abdullah@mandirisek.co.id Indra Mas ari Bandung Branch indra.mas ari@mandirisek.co.id Yuri Ariadi Pontianak Branch yuri.ariadi@mandirisek.co.id Ruwie Medan Branch ruwie@mandirisek.co.id INVESTMENT RATINGS: Indicators of expected total return (price appreciation plus dividend yield) within the 12-month period from the date of the last published report, are: Buy (10% or higher), Neutral (-10% to10%) and Sell (-10% or lower). DISCLAIMER: This report is issued by PT. Mandiri Sekuritas, a member of the Indonesia Stock Exchanges (IDX). Although the contents of this document may represent the opinion of PT. Mandiri Sekuritas, deriving its judgement from materials and sources believed to be reliable, PT. Mandiri Sekuritas or any other company in the Mandiri Group cannot guarantee its accuracy and completeness. PT. Mandiri Sekuritas or any other company in the Mandiri Group may be involved in transactions contrary to any opinion herein to make markets, or have positions in the securities recommended herein. PT. Mandiri Sekuritas or any other company in the Mandiri Group may seek or will seek investment banking or other business relationships with the companies in this report. For further information please contact our number or fax ANALYSTS CERTIFICATION: Each contributor to this report hereby certifies that all the views expressed accurately reflect his or her views about the companies, securities and all pertinent variables. It is also certified that the views and recommendations contained in this report are not and will not be influenced by any part or all of his or her compensation.