Profit Growth Kino Indonesia Expected to Remain Strong in 2016
Cosmetics and household goods producer Kino Indonesia, which conducted an initial public offering (IPO) on the Indonesia Stock Exchange in late-2015, is expected to post good net profit growth in 2016. Last year the company's net profit surged a whopping 153 percent (y/y) to IDR 263 billion (approx. USD $20 million) due to higher selling prices and lower production costs. In 2016 Kino Indonesia's net profit is expected to grow 44 percent (y/y) to IDR 378 billion. Therefore Indopremier Securities advises investors to buy Kino Indonesia's shares.
On Monday's trading day (11/04), shares of Kino Indonesia surged 8.95 percent to IDR 5,175 a piece (while the overall Jakarta Composite Index fell 1.23 percent). So far this year the company's shares have soared a staggering 34.77 percent, reflecting investors' confidence in the company's fundamentals. Indopremier Securities set its target price for Kino Indonesia's shares at IDR 5,600 per piece. However, after the big jump on Monday, it may need to revise the target price upwards.
Kino Indonesia has grown into an acknowledged fast-moving consumer goods (FMCG) company in Indonesia with 18 brands and 16 product categories, including skin care, food & beverage, and pharmacy. Currently, the company owns 211 distribution points across the Indonesian archipelago. Its customers include large distributors, hypermarkets, supermarkets, mini-markets, cosmetic stores as well as small traditional outlets. Distribution of the company's products (in Indonesia) is conducted by its subsidiary Dutalestari.
Kino Indonesia, which started operations in 1991, has also expanded abroad, opening branches in Malaysia, the Philippines and Singapore, while establishing distributorships with foreign distributor firms in Singapore, Brunei, Vietnam and Myanmar. Since 2011, Kino Indonesia holds a license to produce, distribute, and market its famous Cap Kaki Tiga brand (Three Legs Brand) in Singapore. Meanwhile, through a joint venture (named Morinaga Kino Indonesia) with Japan-based Morinaga & Co Ltd, it produces various food items.
The company's body care products contribute most to Kino Indonesia's revenue. In 2015 this product category contributed IDR 1.68 trillion to total sales (IDR 3.60 trillion), followed by beverages (IDR 1.34 trillion) and food products (IDR 0.56 trillion). Revenue and profit rose significantly in 2015 supported by higher selling prices for its body care and beverages products, while production costs declined due to low commodity prices (the main commodities that the company uses in its production process are aluminium, sugar and alcohol).
Kino Indonesia's Financial Highlights:
| 2014 | 2015 | 2016F | 2017F | 2018F | |
| Sales | 3,339 | 3,604 | 4,335 | 5,097 | 5,760 |
| EBITDA |
236 | 461 | 542 | 669 | 744 |
| Net Profit |
104 | 263 | 378 | 461 | 514 |
| P/E Ratio (x) | 51.9 | 20.5 | 14.3 | 11.7 | 10.5 |
| P/BV (x) | 8.2 | 3.0 | 1.8 | 1.6 | 1.4 |
in billion IDR rupiah, unless stated otherwise
Source: Indopremier Securities (11/04/2016)
This year, profit and revenue growth may soar further due to an expected improvement in Indonesians' purchasing power (economic growth of Indonesia is forecast to accelerate to 5.3 percent y/y while inflation is under control and the rupiah has been strengthening against the US dollar).
Harry Sanusi, General Director of Kino Indonesia, said the company targets a 17 percent (y/y) growth in revenue and a 9 percent (y/y) growth in net profit in 2016, supported by the company's expansion plans which also includes the acquisition of companies engaged in skin care, beverages and food in an effort to diversify its products. However, he declined to inform the names of the companies that may be acquired and the target value of such acquisitions.
In December 2015 Kino Indonesia raised IDR 868.6 billion through an IPO on the Indonesia Stock Exchange in which it sold 228.6 million new shares, equivalent to 16 percent of the company's enlarged capital. Around 27 percent of IPO proceeds will be used to acquire companies.
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