Singapore, September 03, 2015 -- Moody's Investors Service has upgraded PT Matahari Putra Prima Tbk's
(MPPA) corporate family rating to Ba3 from B2.
The outlook on the rating is stable.
Moody's upgrade of MPPA's concludes its review for upgrade
which commenced on 17 June.
RATINGS RATIONALE
The upgrade reflects a reduction in MPPA's adjusted debt due to
changes in Moody's approach for capitalizing operating leases.
The updated approach for standard adjustments for operating leases is
explained in the cross-sector rating methodology "Financial
Statement Adjustments in the Analysis of Non-Financial Corporations",
published on 15 June 2015.
"MPPA's Ba3 rating also considers the company's leading
market position in the fast-moving consumer goods segment,
its proven expansion capabilities, its continued strong operating
performance and the company's commitment to a moderate dividend policy,"
says Jacintha Poh, a Moody's Assistant Vice President and Analyst.
MPPA has the largest footprint of stores versus its competitors,
with operations in over 67 Indonesian cities. The company's
asset-light business model where it leases all its stores has supported
the rapid opening of new stores whist its strong distribution system has
led to successful expansion outside Java.
MPPA opened 21 new stores in 1H 2015, bringing its total number
of stores under operation to 288, from 267 stores in 2014.
The company remains on track to achieve its plan of adding 42 new stores
-- 15 Hypermart, 6 Foodmart and 21 Boston Health &
Beauty -- in 2015.
"Despite intense competition in the modern retail segment and rising
utilities and labor costs, we expect MPPA to keep operating margins
above 5% over the next 12-18 months, by continuing
to offset margin pressure through operational efficiencies,"
adds Poh.
The company's plan to keep its dividend payments at or below 35%
of net income, which we expect to be funded by internally generated
cash flow rather than through debt, as was the case historically
will support a strong financial profile such that leverage as measured
by adjusted debt/EBITDA will be less than 2x and retained cash flow/net
adjusted debt to be about 35%-40% in 2015 and 2016.
We expect MPPA's liquidity position to be adequate. As of
30 June 2015, the company had a cash position of IDR280 billion
and with its expected cash flow from operations of approximately IDR500
billion in the next 12 months, it is sufficient to cover debt payment
of IDR515 billion, capital expenditure of IDR85 billion and dividend
payment of IDR194 billion.
For the 12 months ended 30 June 2015, the company had an operating
margin of 5.8%, adjusted debt/EBITDA of 1.8x
and retained cash flow/net adjusted debt of 31%. The debt
largely reflected Moody's operating lease adjustments rather than
the company's bank loan facilities or bond issuances.
The stable rating outlook reflects Moody's expectation that MPPA will
maintain its dominant market position and continue to maintain healthy
financial metrics, while pursuing growth.
Upward ratings pressure is unlikely over the near to medium term,
but could emerge if MPPA: (1) successfully implements its business
plans and grow its revenue to above IDR25 trillion; and (2) maintains
a strong financial profile such that retained cash flow/net adjusted debt
trends above 30%.
On the other hand, MPPA's ratings could face downward pressure if:
(1) its parent -- PT Multipolar Tbk (unrated) extracts cash
from the company; and/or (2) it adopts more aggressive shareholder
return policies, thereby weakening its liquidity position or causing
it to incur additional debt. Moody's considers an adjusted debt/EBITDA
of more than 3.0x, and retained cash flow/net adjusted debt
trends below 15% on a sustained basis, as indications that
a ratings downgrade may be necessary.
The principal methodology used in this rating was the Global Retail Industry
published in June 2011. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
PT Matahari Putra Prima Tbk, listed on the Indonesia Stock Exchange,
is a leading retailer in Indonesia with multiple retail formats.
As of 30 June 2015, the company operates 111 hypermarkets,
71 foodmarts and 106 Boston stores in over 67 Indonesian cities.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides certain regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Jacintha Poh
Asst Vice President - Analyst
Corporate Finance Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
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Laura Acres
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
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Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Moody's upgrades Matahari Putra Prima to Ba3; outlook stable