Erajaya Swasembada, a company engaged in the distribution of mobile phones, vouchers and digital devices in Indonesia, set the ambitious target of opening 250 new outlets in 2018. This target is five times higher than the 50 new outlets the company managed to open in 2017.
It is interesting to note that this aggressive expansion plan of Erajaya Swasembada comes at a time when several key competitors are actually thinking about closing part of their outlets. For example, Global Teleshop and Trikomsel Oke are considering to close those outlets that show no profit. However, despite the aggressive network expansion plan, Erajaya Swasembada too is planning to close several stores that are unprofitable.
Erajaya Swasembada, which was established in 1996, currently owns a network of around 700 outlets across Indonesia, which includes brands such as Erafone, Apple reseller iBox, and Urban Republic. The Erajaya Group is engaged in the distribution and retail trading of mobile telecommunication devices such as mobile phones and tablets, subscriber identity module card (better known as SIM Cards), mobile operator network voucher top-up, accessories, and gadgets such as computers and other electronic devices. The Erajaya Group is also the official distributor for various international mobile communication brands - including Apple, Xiaomi, Samsung, Blackberry, Acer, Dell, HTC, Motorola, Sony, LG, Huawei and Venera - and is an authorized partner for major mobile operators.
But Erajaya Swasembada also has outlets abroad: M1 in Singapore and Switch in Malaysia. Besides the physical stores, Erajaya Swasembada also owns an online shop: erafone.com.
Currently most of Erajaya Swasembada's outlets (roughly 60 percent) are located in the Greater Jakarta Region where the smartphone and mobile phone market is biggest. However, as smartphone penetration in this region is estimated to be close to 100 percent by 2020, the company needs to shift its focus to other regions, particularly outside the island of Java.
Hasan Aula, Deputy President Director of Erajaya Swasembada, said the company wants to widen its footprint in Indonesia and make its outlets more accessible for the Indonesian consumer. Therefore, most of the 250 new outlets are planned to be opened in the smaller cities and districts.
Regarding the funds that are required for the development of the new outlets, the company will finance its expansion plan through loans from several banks. For example, earlier this month it signed a IDR 1.47 trillion (approx. USD $108 million) loan deal with Bank Central Asia (BCA) to enlarge its working capital and capital expenditure budgets. Meanwhile, a month earlier, Erajaya Swasembada obtained a IDR 250 billion (approx. USD $18.4 million) loan from Bank CBTC Indonesia.
Besides enlarging its network of outlets, Erajaya Swasembada also strengthened its structure through the establishment of two new subsidiaries in 2017: Erajaya Swasembada Pte Ltd in Singapore and Mitra International Indonesia. Both are engaged in the retail and distribution of telecommunication devices.
Projection Erajaya Swasembada's Future Corporate Earnings:
|P/E Ratio (x)||9.5||8.3||7.2||6.7|
in billion IDR, unless otherwise stated
Source: Ciptadana Sekuritas (19/02/2018)
Fransisca Putri, analyst at Ciptadana Sekuritas Asia, is optimistic about Erajaya Swasembada's financial performance in the period ahead with sales particularly expected to be boosted by iPhone and Xiaomi devices. Amid technological and digital developments as well as rising smartphone penetration, demand for the company's products will remain strong in the foreseeable future.
Meanwhile, Erajaya Swasembada's plan to open many stores across the smaller Indonesian cities is regarded a good plan because at these stores it can offer the more affordable Xiaomi devices to the local population that is regarded to have lower purchasing power compared to the consumer in the bigger cities.
By 10:45 am local Jakarta time on Tuesday (20/02), shares of Erajaya Swasembada, listed on the Indonesia Stock Exchange, were down 1.61 percent to IDR 915 a piece. However, so far in 2018 the company's shares surged nearly 25 percent.
Stock Quote Erajaya Swasembada - ERAA: