Bond Market Indonesia: Sumber Alfaria Trijaya to Refinance Debt
Often companies issue (new) bonds to settle debt that is to mature soon. This strategy is called (debt) refinancing. This is particularly attractive for a company when the country's interest rate environment - set by the central bank - is easing. Sumber Alfaria Trijaya, listed on the Indonesia Stock Exchange, is one of the companies that uses this tactic. Over the next couple of years the company plans to issue IDR 3 trillion (approx. USD $226 million) worth of bonds, divided in two series, to refinance its existing bonds.
Sumber Alfaria Trijaya is an Indonesia-based retail company, primarily engaged in the convenience store industry. The firm is the holding company of Indonesia's popular convenience store chain Alfamart (mini-markets). There are more than 1,000 Alfamart stores across the Indonesian archipelago (after the Salim Group's Indomaret it is the leader in Indonesia's mini-market segment). Sumber Alfaria Trijaya also controls convenience store Lawson as well as cosmetics and health care store DanDan, and Alfamidi.
The public offering for the first tranche of Sumber Alfaria Trijaya's planned bond issuance (involving IDR 1 trillion worth of bonds) is scheduled for 17-18 May 2017. Tomin Widian, Finance Director of Sumber Alfaria Trijaya, said all proceeds of the issuance will be used to settle debts that are to mature on 26 June 2017 (stemming from its first bond issuance). This strategy is expected to lead to declining debt interest expenses for the company.
But although there is a major focus on debt settlements, the company also remains eager to expand its business. Sumber Alfaria Trijaya, which was established in 1989, plans to open 1,500 new Alfamart stores across the country as well as two new distribution centers in the years ahead. Currently the company already has 12,366 Alfamart stores, of which 73 percent is directly owned by the company (the remainder is owned by its franchise partners). Besides the Alfamart mini-markets, the company also owns 1,230 Alfamidi stores, 35 Lawson stores, and 114 DanDan stores.
Public Offering Sumber Alfaria Trijaya Bonds:
|Name||Continued Bond II Phase I Year 2017|
|Issuer||Sumber Alfaria Trijaya|
|Value||IDR 1 trillion|
|Rating||AA- (Fitch Ratings Indonesia)|
|Series A||3 years|
|Series B||5 years|
|Order amount||min. IDR 5 million|
|Interest payments||every three months|
|Offering period||17-18 May 2017|
|Distribution of bonds||23 May 2017|
|Listing at the IDX||24 May 2017|
|Underwriters||BCA Sekuritas, Mandiri Sekuritas|
With regard to its expansion program, Sumber Alfaria Trijaya set aside IDR 2.9 trillion in capital expenditure (capex) for 2017, a 32 percent increase from last year's capex. About 90 percent of this capex will be used for businesses expansion by opening additional stores, while the remainder will be used to develop storage facilities in Manado, North Sulawesi and Bali. Up to 80 percent of 2017 capex is financed using the company's internal cash reserves. For the remainder it will seek bank loans. The additional outlets should contribute to targeted double-digit (annual) revenue growth in 2017.
Fitch Ratings Indonesia rates Sumber Alfaria Trijaya's bonds at AA-, implying there is a relatively low chance that the company will fail to meet its obligations to investors. Fitch is positive about Sumber Alfaria Trijaya due to the company's plan to add numerous outlets, while it already has a leading position in the country's convenience store industry. Furthermore, the company's profit forecast looks promising in the years ahead.
A risk, however, is government policy. In 2013 the central government announced it wants to cap the number of branches a company with a foreign restaurant franchise can own to 250 stores by October 2017. For Sumber Alfaria Trijaya this means it needs to reduce the number of directly run Alfamarts by adding sub-franchises.
Fitch further notes that Sumber Alfaria Trijaya's financial data are healthy. The company keeps IDR 937 billion in cash reserves, as well as IDR 2 trillion in unused credit. Meanwhile IDR 1.5 trillion worth of debt is set to mature later this year.
Corporate Earnings Sumber Alfaria Trijaya:
(in billion IDR)
(in billion IDR)
How to buy Sumber Alfaria Trijaya's bonds? The following steps are required:
1) become a client of BCA Sekuritas or Mandiri Sekuritas
2) fill in the order form
3) receive confirmation of your order
4) conduct the payment
5) settlement & distribution
The company's share performance so far this year is less rosy. Up to 21 April 2017 Sumber Alfaria Trijaya's shares fell 13.60 percent to IDR 540 a piece.
Stock Quote Sumber Alfaria Trijaya - AMRT: