Indonesia’s largest retailer to list unit amid volatile market

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Photo from: MAP Active

(Source: Nikkei Asian Review | May 25, 2018)

Mitra Adiperkasa, Indonesia’s largest retailer of foreign brands, has announced an initial public offering for its subsidiary, MAP Aktif Adiperkasa, seeking to raise up to 1.3 trillion rupiah ($91.9 million).

MAP Aktif Adiperkasa, or MAA, which operates sportswear concept stores with brands such as Adidas, Reebok and Sketchers in its portfolio, is offering up to 550 million shares at a price range of 2,000 rupiah to 2,400 rupiah a share. Mitra Adiperkasa said this week that it was looking to list “around late June.”

The IPO comes at a time of volatility in Indonesia’s stock market. Rising interest rates in the U.S. have caused some foreign investors in Indonesia to consider moving their investments out of local financial markets and back to the U.S. The Jakarta Composite Index has fallen roughly 6.5% since the beginning of the year and hit an 11-month low in early May.

Wika Realty, a subsidiary of state-owned contractor Wijaya Karya, on Tuesday said it will postpone its IPO due to volatile market conditions.

Approximately 90% of the proceeds from MAA’s offering will be used for partial repayment of the noninterest bearing bonds issued in 2015 by Mitra Adiperkasa to the Hong Kong-based private equity firm Asia Sportwear Holding, the company said in a statement. The bond, novated to MAA, was issued to refinance existing debts as Mitra Adiperkasa aimed to lower interest expenses and help its expansion plans. As of December 2017, the carrying value of the bonds stood at 1 trillion rupiah.

The remaining 10% will be used for working capital financing purposes.

“Last year in 2017, MAA booked net revenue of 5.1 trillion rupiah and achieved net income of 285 billion rupiah,” said Fetty Kwartati, Mitra Adiperkasa’s head of corporate communications. “By reducing its outstanding debt amount, this IPO is expected to strengthen MAA’s capital structure to further support its growth.”

Mitra Adiperkasa operates such brands as Zara, Marks & Spencer, Tommy Hilfiger and Starbucks, and department stores Galeries Lafayette, Seibu and Sogo.

The retailer appears to be confident that its strong earnings, despite tepid private consumption in Indonesia, will be attractive enough for investors. Mitra Adiperkasa posted an operating profit of 248 trillion rupiah in the first three months of this year, a 36% jump compared with the same period last year.

The company has also undergone structural reforms, most notably scaling back on its department store business by closing Lotus and Debenhams.

“Further improvement in specialty stores’ performance as a result of store rationalization and changes in sales mix towards more profitable brands should help to support margin improvement [of Mitra Adiperkasa],” a DBS analyst wrote earlier this month, adding that MAA’s public offering “should result in a lower gearing, finance costs and tax rates” for the parent company.

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