Outside Java More Than Doubled Its Margin While Jabodetabek and Java Lost a Third of Theirs
The prior post found H1 2017's finance cost alone dragging total income down 53.4% while the headline "net income to owners" line fell a much gentler 16.4%. This is PT Sumber Alfaria Trijaya Tbk's audited consolidated financial statements for the year ended December 31, 2017, and the story has changed again: it is no longer just a finance-cost problem sitting below an otherwise-healthy operating line. Net revenue grew 9.5% to Rp61,464,903 million and gross profit grew a faster 10.4% to Rp12,001,317 million - but income from operations fell 18.5% to Rp1,036,957 million from Rp1,272,180 million, because selling and distribution expenses grew 15.9% (Rp8,931,421 million to Rp10,347,220 million), nearly double the pace of revenue.
That operating-margin compression happened almost entirely in two of the company's three geographic segments. Jabodetabek's segment income fell 30.4% (Rp1,116,260 million to Rp776,514 million) and its margin collapsed from 4.80% to 3.31%; Java excluding Jabodetabek fell 30.3% (Rp1,237,087 million to Rp862,159 million), margin down from 6.10% to 3.80% (see Segment Performance below). Outside Java went the other way entirely - segment income more than tripled (+218.6%, Rp156,295 million to Rp497,915 million) and margin more than doubled too (1.25% to 3.24%), the region this site has tracked as the thinnest-margin one since the first post now sitting ahead of both established regions on margin. Combined segment income actually fell 14.9% for the year (Rp2,509,642 million to Rp2,136,588 million), and even an 11.1% drop in unallocated corporate overhead (Rp1,237,462 million to Rp1,099,631 million - the first decline in the line this site flagged growing faster than segment income in every prior post) wasn't enough to offset it.
On top of a genuinely weaker operating line, finance cost jumped 23.0% year-over-year, from Rp525,827 million to Rp646,936 million, on the same bank-loan re-leveraging flagged at H1 2017 - pulling income before tax down 53.2% and total income for the year down 53.5%, to Rp257,735 million from Rp553,835 million. Net income attributable to owners fell a somewhat gentler 50.1% (Rp601,589 million to Rp300,275 million) - Rp300 billion is the lowest full-year profit the company has posted since 2013, per its own five-year presentation chart, ending a run that saw net income roughly stagnant through 2014-2015 and then jump sharply in 2016.
The Prescription
Alfamart's real opportunity here is to take the discipline that produced Outside Java's tripled segment income and more-than-doubled margin, and apply it to the two regions that just lost a third of theirs. This isn't a hypothetical playbook - it already exists inside the same P&L: Outside Java grew revenue 22.3% and still expanded margin, while Jabodetabek grew revenue barely at all (+0.8%) and lost nearly a third of its margin, and Java ex-Jabodetabek grew revenue faster (+11.7%) but lost margin at almost exactly the same rate as Jabodetabek. Whatever cost structure Outside Java is running - newer stores, different labor mix, a leaner rollout - it's producing better unit economics in the region investors would assume is hardest to serve. A company that can run a 3.24% margin while opening stores in the parts of Indonesia furthest from its logistics base has no excuse for a 3.31% margin in Greater Jakarta, its oldest and most logistically favorable market.
What it should stop doing: relying on a single bank counterparty for the overwhelming majority of its short-term funding. PT Bank Central Asia Tbk now accounts for roughly 91% of the Company's short-term bank loans (see Beyond the Usual), a sharp reversal from the six-lender book flagged at H1 2017 - the Company has already proven twice this year that it can diversify its funding (the six-lender H1 book) and price it more cheaply (the 8.50% bond refinance covered in the prior post); concentrating back into one relationship undoes both lessons at once.
Key Financial Metrics
FY2017 vs. FY2016 (P&L and cash flow), and December 2017 vs. December 2016 (balance sheet) - consolidated, audited
FX: IDR 13,558 = USD 1 (a validated period-end exchange rate as of December 29, 2017, the last trading day of the year - used for every USD conversion below).
| Metric | FY2017 (IDR) | FY2017 (USD) | FY2016 (IDR) | YoY |
|---|---|---|---|---|
| Net Revenue | Rp61,464,903M | ~$4,533.5M | Rp56,107,056M | ✅ +9.5% |
| Gross Profit | Rp12,001,317M | ~$885.3M | Rp10,872,498M | ✅ +10.4% |
| Income from Operations ("Operating Income") | Rp1,036,957M | ~$76.5M | Rp1,272,180M | ⚠️ -18.5% |
| Finance Cost | Rp646,936M | ~$47.7M | Rp525,827M | ⚠️ +23.0% |
| Income Before Tax | Rp318,873M | ~$23.5M | Rp681,896M | ⚠️ -53.2% |
| Income for the Year (total) | Rp257,735M | ~$19.0M | Rp553,835M | ⚠️ -53.5% |
| Net Income (attributable to owners) | Rp300,275M | ~$22.1M | Rp601,589M | ⚠️ -50.1% |
| EPS | Rp7.23 | ~$0.00053 | Rp14.49 | ⚠️ -50.1% |
| EBITDA» (Operating Income + D&A) | Rp3,438,654M | ~$253.7M | Rp3,305,991M | ✅ +4.0% |
| Balance sheet metric | Dec 2017 (IDR) | Dec 2017 (USD) | Dec 2016 (IDR) | Change |
|---|---|---|---|---|
| Total Assets | Rp21,901,740M | ~$1,615.5M | Rp19,474,367M | ⚠️ +12.5% |
| Total Liabilities | Rp16,651,570M | ~$1,228.4M | Rp14,179,604M | ⚠️ +17.4% |
| Total Equity (attributable to owners) | Rp5,107,897M | ~$376.7M | Rp5,137,354M | ⚠️ -0.6% |
| Total Cash | Rp946,700M | ~$69.8M | Rp936,614M | ✅ +1.1% |
| Net Cash from Operations (FY) | Rp3,322,625M | ~$245.1M | Rp2,097,454M | ✅ +58.4% |
| Capital Expenditures (FY) | Rp1,574,150M | ~$116.1M | Rp2,198,773M | ✅ -28.4% |
A small note on that FY2016 operating-cash-flow figure: the FY2016 post reported Rp2,099,475 million for the same line, sourced from the FY2016 report itself; this post uses Rp2,097,454 million because that's the comparative figure this year's own audited statement presents alongside FY2017 - a Rp2,021 million difference, immaterial either way, but this post follows the rule of citing the filing actually being used as this quarter's source.
"Adjusted EBITDA»" still isn't a metric Alfamart reports; the EBITDA line above is Income from Operations plus depreciation and amortization (Rp2,401,697M for FY2017 per the segment note, versus Rp2,033,811M in FY2016), matching the company's own presentation-deck figure (Rp3,439 billion) and the convention used in every prior post here. EBITDA still grew 4.0% even as operating income fell 18.5%, because D&A itself grew 18.1% - a genuine reminder that EBITDA can mask exactly the kind of operating-margin deterioration detailed above if read on its own.
Free cash flow» (operating cash flow minus capex) swung to +Rp1,748,475M for FY2017, from -Rp101,319M in FY2016 (using this year's own comparative figures - see the note above), completing the reversal the H1 2017 post first showed at the half-year mark (+Rp754,155M). Operating cash flow rose 58.4% while capex fell 28.4% - a genuinely stronger cash-generation year even as the P&L above it weakened, and the clearest sign yet that the FY2016 negative-FCF print flagged in that post's title was a one-year event rather than a new normal.
Debt-to-Equity Ratio (DER)» (interest-bearing debt, including finance leases and consumer financing, over equity attributable to owners, computed directly from this filing's own balance-sheet columns): 1.54x at December 2017, up from 1.31x at December 2016 - a real full-year increase, but a moderation from the 1.76x peak already reported at June 2017. Total interest-bearing debt fell from roughly Rp8.85 trillion at mid-year back to Rp7,857,919 million by year-end, even as it still finished 16.7% above the December 2016 level. Net gearing (net debt over the same equity base) was 1.35x, up from 1.13x at December 2016 and down from 1.34x at June 2017. Both remain inside the Company's own 2.5x interest-bearing-debt-to-equity bond covenant, which the Company confirms it was in compliance with at both period-ends.
ROAA» / ROAE» (full year, average total assets and average equity attributable to owners, the same basis as every prior post here): approximately 1.45% / 5.86% in FY2017, down sharply from 3.47% / 12.19% in FY2016 - consistent with the 50.1% owners'-net-income decline, only partly offset by a larger asset and equity base. The Company's own presentation shows a closely comparable 1.45% / 5.70% for the same period, using year-end rather than average denominators.
Key Operational Metrics
- Total store network: 15,028 stores as of December 2017 (11,469 company-owned, 3,559 franchise) across all four brands (Alfamart, Alfamidi, Lawson, Dan+Dan), up from 13,745 at the end of 2016 - a net addition of 1,283 stores for the year. The Company's own presentation separately breaks out a net addition of 1,111 Alfamart stores and 179 Alfamidi stores (a combined 1,290, close to but not identical to the all-brand total, implying a small net decline at Lawson/Dan+Dan). Permanent employees: 47,310, up 12.3% from 42,115 at the end of 2016 - continuing to outgrow the 9.3% store-count growth rate, and a meaningful driver of the salary-cost growth behind the operating-margin compression above (selling-expense salaries, wages and benefits grew 15.4% to Rp4,995,705M from Rp4,327,106M).
- Warehouses: 42 nationwide as of September 2017 per the presentation (32 for Alfamart, 9 for Alfamidi, 1 for Dan+Dan), plus 3 depos opened during the year (Gorontalo, Bengkulu, Sumbawa).
- Market share: the combined Alfamart/Alfamidi share of Indonesia's minimarket-format modern-trade channel rose to 36.8% from 35.4% a year earlier (Alfamart alone to 31.4% from 30.4%, Alfamidi to 5.4% from 5.0%) - a smaller gain than the 37.0% already reported at H1 2017, meaning share gains moderated somewhat in H2 even as the full-year trend stayed positive.
- Industry backdrop: Indonesia's total FMCG sales growth slowed further to 2.5% for the full year, from 7.7% in 2016; the modern-trade channel slowed to 3.3% from 8.6%; and the minimarket channel itself slowed to 6.4% from 13.7% - a sharper deceleration than the already-slowing figures reported at H1 2017, confirming this was genuinely the toughest full year for Indonesian grocery retail this site has covered, per the Company's own framing. Alfamart's 9.5% revenue growth still outpaced its own channel's 6.4% growth, though by a narrower margin than H1's near-doubling.
Segment Performance
Alfamart reports the same three geographic segments as every prior post - Jabodetabek (greater Jakarta), Java excluding Jabodetabek, and Outside Java.
| Segment | Revenue (FY2017) | Revenue (FY2016) | YoY | Segment Income (FY2017) | Segment Income (FY2016) | YoY | Margin (2017 vs 2016) |
|---|---|---|---|---|---|---|---|
| Jabodetabek | Rp23,450,258M | Rp23,269,547M | ✅ +0.8% | Rp776,514M | Rp1,116,260M | ⚠️ -30.4% | 3.31% vs 4.80% |
| Java (excl. Jabodetabek) | Rp22,676,437M | Rp20,295,946M | ✅ +11.7% | Rp862,159M | Rp1,237,087M | ⚠️ -30.3% | 3.80% vs 6.10% |
| Outside Java | Rp15,345,296M | Rp12,550,635M | ✅ +22.3% | Rp497,915M | Rp156,295M | ✅ +218.6% | 3.24% vs 1.25% |
Outside Java delivered the fastest revenue growth of the three regions for a fifth consecutive report and, for the first time, the highest margin too - 3.24%, ahead of both Jabodetabek (3.31% only barely still ahead) and Java ex-Jabodetabek. This is the region the first post found running the thinnest margin of the three; it has now closed nearly the entire gap in two years.
Java excluding Jabodetabek grew revenue fastest among the two established regions (+11.7%) but posted the same roughly 30% segment-income decline as Jabodetabek, and lost more margin in the process (6.10% to 3.80%, a 230-basis-point drop, versus Jabodetabek's 149-basis-point drop) - reversing the recovery the H1 2017 post found putting this region back ahead of Jabodetabek on margin.
Jabodetabek grew revenue barely at all (+0.8%, the slowest of the three for a fifth consecutive period) while still losing nearly a third of its segment income - the flagship market's growth deceleration and margin compression arrived in the same year, rather than one masking the other.
Segments Compared
The ranking that held across every prior period covered here - Outside Java fastest, Java ex-Jabodetabek second, Jabodetabek slowest, on both revenue and income growth - broke down on margin this year. Combined segment income across all three regions fell 14.9% (Rp2,509,642M to Rp2,136,588M), and even though unallocated corporate overhead - the line first flagged in the FY2015 post as consistently outgrowing segment income - actually fell 11.1% this year (Rp1,237,462M to Rp1,099,631M), the first decline in the five periods this site has tracked it, it wasn't enough to offset the segment-income drop: overhead as a share of segment income still rose, from 49.3% to 51.5%, because segment income fell faster than overhead did. The absolute-rupiah reversal is real, but it's not the efficiency improvement it might look like in isolation.
Beyond the Usual
Short-term bank borrowing is now concentrated almost entirely in a single lender
Short-term bank loans grew to Rp4,088,799 million from Rp3,179,025 million at December 2016 (+28.6%) - a smaller increase than the +62.0% pace reported at H1 2017, but the lender roster changed dramatically in the process. The new Sumitomo Mitsui and expanded Bank Mandiri facilities that widened the book to six relationships in H1 are both gone from the December 2017 balance: the Company-level book now consists entirely of PT Bank Central Asia Tbk (Rp3,350,000 million revolving plus a Rp13,799 million overdraft), with a further Rp365,000 million BCA facility, Rp200,000 million from The Bank of Tokyo-Mitsubishi UFJ, and Rp160,000 million from Bank Mandiri sitting at the subsidiary level. BCA alone now accounts for roughly 91% of total short-term bank loans - a sharp reversal from the six-counterparty diversification this site flagged at H1 2017, and a single-lender concentration this filing doesn't itself flag as a risk (see The Prescription above).
The related-party stake this site has tracked for five straight rounds was bought out for a token price
PT Sumber Trijaya Lestari ("STL"), the Company's e-commerce subsidiary, had its ownership resolved this year after the FY2016 post and H1 2017 post both flagged five consecutive capital-injection rounds by related party PT Amanda Cipta Persada ("ACP") with no independent valuation ever disclosed. On September 8, 2017, the Company bought ACP's entire 48.98% stake (1,273,480 shares) for a purchase price of just Rp1,000 million. The filing discloses why the price was so low: the book value of the net liabilities transferred from ACP's stake was Rp8,179 million - meaning STL's accumulated losses had already pushed ACP's slice of the business into negative equity by the time it exited, after ACP had contributed roughly Rp127 billion in cash across five rounds since May 2016. The Company and MIDI now hold 99.95% and 0.05% of STL directly, and a subsequent-events note discloses a further Rp25,000 million capital injection in February 2018 - entirely from the Company and MIDI, with ACP no longer part of the cap table at all. The valuation-disclosure gap flagged twice before is now moot, but the outcome it obscured is now visible: a related party's multi-round "investment" ended up worth less than nothing.
Alfamart's 35%-owned Philippines associate, Alfamart Trading Philippines Inc., reversed the deterioration the H1 2017 post found undoing its brief recapitalization: net asset value more than tripled to Rp276,271 million from Rp82,968 million at December 2016, after the Company and its subsidiary Alfamart Retail Asia Pte. Ltd. pushed in additional capital lifting the cost of investment to Rp131,795 million from Rp48,298 million. The associate's cumulative losses kept growing too (Rp35,062 million versus Rp20,297 million), but the new capital more than outpaced them, and the Company's own carrying value of the investment rose to Rp95,657 million from Rp31,058 million.
Liabilities for employee benefits jumped 56.9% to Rp1,061,388 million from Rp676,298 million, but almost none of that increase ran through the income statement: it was driven mainly by a lower actuarial discount-rate assumption (7.75%-8.85% in 2017, versus a flat 8.85% in 2016), producing a Rp191,146 million pre-tax remeasurement loss recognized directly in other comprehensive income rather than profit or loss. That's the single largest driver of why total equity attributable to owners edged down 0.6% for the year despite a positive net income - an accounting mechanic worth knowing about before reading the equity decline as a business problem.
Cash dividends paid held flat at Rp180,632 million for a second consecutive year, unchanged even as net income to owners roughly halved - meaning the FY2017 payout ratio jumped to roughly 60% of net income to owners, from about 30% in FY2016, without any disclosed change in dividend policy.
Target Valuation Range
Enterprise value ~Rp32.24 trillion (~$2.38B), implying 9.38x EV/EBITDA - but trailing P/E has nearly doubled to ~84.4x, by far the highest multiple in this site's coverage, purely because FY2017 net income collapsed while the share price barely moved. Whether AMRT is actually overpriced depends much more on whether FY2018 net income recovers back toward FY2016 levels than on anything the market did to the share price this year.
Alfamart's shares closed at Rp610 on December 29, 2017 - down 2.4% from Rp625 at December 2016, but up 7.0% from the Rp570 already reported at June 2017. The Company's only stock split (10-for-1, July 2013) predates this period and remains reflected in both the filed share count and today's historical price data - no further split has occurred since (confirmed against public split-history records, used only to validate that no adjustment is required here).
| Market cap → enterprise value | FY2017 |
|---|---|
| Share price (period-end) | Rp610 |
| Shares outstanding | 41,524,501,700 |
| Market capitalization | Rp25.33 trillion (~$1.87B) |
| Plus: interest-bearing debt | Rp7.86 trillion |
| Less: cash and equivalents | Rp0.95 trillion |
| Enterprise value | Rp32.24 trillion (~$2.38B) |
| Peer-multiple sanity check | H1 2017 | FY2017 | Change |
|---|---|---|---|
| Trailing P/E | ~40.3x | ~84.4x | ⚠️ up sharply |
| EV/EBITDA | ~8.6x | ~9.38x | ⚠️ up |
| P/B | ~4.70x | ~4.96x | ⚠️ up slightly |
Trailing P/E (~84.4x, using FY2017's own reported net income to owners of Rp300,275 million) is roughly double the ~40.3x already reported at H1 2017 and nearly double the ~43.1x at FY2016 - and it's arithmetic rather than sentiment: the share price barely moved (Rp570 to Rp610) while trailing earnings fell by half. EV/EBITDA (against FY2017 EBITDA of Rp3,438,654 million) is back closer to the ~9.6x-10.7x range seen at FY2016 and earlier - EBITDA's relative stability versus net income (see Key Financial Metrics above) keeps this multiple far less extreme than the P/E. P/B (book value of ~Rp5,107,897 million equity attributable to owners ÷ 41.52 billion shares) is modestly above H1 2017, tracking the small price increase against a nearly flat book value.
No listed domestic peer still exists for a direct minimarket-format comparison - Indomaret remains privately held under the Salim Group. A full DCF still isn't included here: this year's earnings collapse makes a single-year cash-flow base a poor foundation for one, and this site will wait for a period with a cleaner read on normalized profitability before attempting it. The share price itself moved within a Rp498-Rp695 range across the trailing two years (a roughly 40% peak-to-trough swing, right at the threshold this site treats as needing its own section) with no single identifiable driver in the documents reviewed for this post - the low came in October 2016 and the high in September-October 2017, bracketing rather than tracking the operating and financing swings detailed above, so it's folded into this section rather than given its own.
PT Sumber Alfaria Trijaya Tbk's audited consolidated financial statements as of December 31, 2017 and for the year then ended, and the Company's management presentation for the same period.