Pt Nippon Indosari Corpindo

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Nippon Indosari Corpindo

PT Nippon Indosari Corpindo Tbk is Indonesia’s largest producer of bread products and it is the country's only bread producing company that is listed on the Indonesia Stock Exchange (IDX). The company has shown robust growth in recent years due to the increased consumption of bread products by Indonesia's rising middle class. Nippon Indosari controls a 90 percent market share in Indonesia's mass production of bread products. Its Sari Roti line of bread products is a well-known brand in Indonesia.

Industry Sector	Consumer Goods Industry
Industry Sub Sector	Food and Beverages
Established	1995
Listed	28 June 2010
Listed company code	ROTI
Listed Shares	5,061,800,000
Dividend	Yes
Major Shareholders (>5%)	Indoritel Makmur Indonesia (25.77%)Bonlight Investments Limited (20.79%)KKR & Co. L.P. (15.22%) Pasco Shikishima Baking Co Ltd (8.50%)
Key Subsidiaries	-

Stock Quote Nippon Indosari Corpindo - ROTI:

Business Summary

Nippon Indosari was established in Indonesia as a Foreign Investment Company in 1995. It started operating commercially in 1997 by producing and selling bread products that were branded Sari Roti in their sole factory in Cikarang (West Java). A second factory was opened in 2005 in Pasuruan (East Java) to penetrate markets in East Java and Bali. To meet Indonesia’s increasing demand for bread products, the company established another factory in Cikarang in 2008 and decided to become a public company in 2010. Part of the money it generated through this IPO was used to build three additional factories in Semarang (Central Java), Medan (North Sumatra) as well as Cibitung (West Java) in 2011. In 2012, Nippon Indosari opened two new factories in Palembang (Sumatra) and Makassar (Sulawesi). In 2013, the company opened two new plants in Cikande (Banten) and Purwakarta (West Java).

In 2014, the company's total of ten factories have a combined production capacity of 4.2 million pieces of bread per day (from 3.5 million pieces per day in 2013). Nippon Indosari's best sold bread products are Sari Roti Sweet Bread and Sari Roti White Bread. Together these two products account for almost 100 percent of total sales.

Bonds Issuance Nippon Indosari Corpindo

In 2013, Nippon Indosari issued Bond Program Phase I with the principal amount of IDR 500 billion (USD $44.2 million) with an 8 percent (per year) fixed coupon rate maturing in five years (this bond issuance was listed on the Indonesia Stock Exchange in June 2013). Proceeds are allocated to business expansion (56 percent) and the remainder for bank loan repayments to Bank Central Asia (BCA). The company is rated idAA- by Pefindo (an independent credit rating agency), reflecting its strong market position, strong cash flow and support from all shareholders (bond ratings are reviewed annually).

Bond Program Phase II was issued on 18 March 2015, also with the principle amount of IDR 500 billion, but with a ten percent coupon rate. This bond is due in 2020. Proceeds are allocated to BCA loan repayment (68 percent) and business expansion (32 percent).

Nippon Indosari Corpindo's Financial Highlights:

	2015	2016	2017
Net Sales	2,174.5	2,521.9	2,491.1
Gross Profit	1,155.0	1,301.1	1,307.9
Net Income	270.5	280.0	135.4
Total Assets	2,706.3	2,919.6	4,559.6
Total Liabilities	1,517.8	1,476.9	1,739.5
Earnings perShare¹	53,45	55,31	27,66
Dividend perShare¹	10,61	13,73

	2009	2010	2011	2012	2013	2014
Net Sales	485.9	612.2	813.3	1,190.8	1,505.5	1,880.3
Gross Profit	222.1	289.0	379.4	556.4	698.6	901.4
Net Income	57.1	99.8	115.9	149.1	158.0	188.6
Total Assets	347.0	568.3	759.1	1,204.9	1,822.7	2,142.9
Total Liabilities	179.1	112.8	212.7	538.3	1,035.4	1,182.8
Earnings perShare¹	66	106	115	29,47²	31,20²	37,27
Dividend perShare¹	-	-	28,6	36,83	3,12²	5,53

^{in billion IDR rupiah, except stated otherwise}^{¹ in IDR rupiah}^{² adjusted to 1:5 stock split}^{Source: Nippon Indosari Corpindo, Annual Report 2017}

The map below - that indicates Nippon Indosari's spatial distribution of factories - shows a major presence on the island of Java, Indonesia's most populous island. The bigger cities on Java are where Indonesia's middle class is rising sharply. Having multiple factories across Java therefore means that its products are produced close to its (potential) markets. This is important for curtailing logistics costs as the country lacks quality and quantity of infrastructure.

Although bread products are highly unlikely to replace rice as Indonesia's main staple food, strong sales of bread products in recent years - and in combination with the current low per capita consumption of bread in Indonesia - indicates that this market contains high potential for growth. Bread products are increasingly more consumed by Indonesia's expanding middle class. Currently, there are only a few mass producers of bread products in Indonesia, while there are many small or home producers and some boutique bakeries. Only the mass producers, such as Nippon Indosari, have well developed distribution lines throughout the country in combination with a growing number of sales outlets.

Nippon Indosari Corpindo's Bonds:

Description	Date of Issuance	Tenor (year)	Amount(IDR million)	Coupon Rate	Rating(Pefindo)
Bond Phase I - 2013	11 June 2013	5	500,000	8%	idAA-
Bond Phase II - 2015	18 March 2015	5	500,000	10%	idAA-

^{Source: Nippon Indosari Corpindo, Annual Report 2015}

Projection Nippon Indosari Corpindo's Future Corporate Earnings:

	2018	2019F	2020F	2021F
Net Revenue	2,767.0	3,322.0	3,929.0	4,433.0
Net Profit	173.0	229.0	297.0	332.0
EBITDA	335.0	478.0	598.0	663.0
P/E Ratio (x)	45.0	33.9	27.7	24.1
P/BV (x)	1.9	1.8	1.6	1.5