Alfaria to Add 400 Stores in ’09

The Jakarta Globe, Aditya Wikrama, January 16, 2009 

Mini-market retailer PT Sumber Alfaria Trijaya Tbk kicked off a moderately successful initial public offering on Thursday by announcing plans to add 400 more stores to its Alfamart chain this year as part of an ambitious Rp 500 billion ($45 million) expansion. 

Shrugging off analysts projections of falling domestic demand this year, the company, which is owned by the powerful Sampoerna family, said it was confident about listing in 2009 because it believed the market for small superette stores was a long way from reaching saturation. 

“We think that there are still a lot of business opportunities in the mini-market retail business, and we’ll use the momentum to expand our business,” said Feny Djoko Susanto, the company’s president director, on Thursday. 

The IPO was in line with a long-term plan to increase public ownership, which also takes the form of direct store ownership through its franchise program, the company said. 

Henryanto Komala, vice president director, Alfaria owns most of its stores with about 23 percent franchised, which the company said would be increased up to 30 percent this year. 

The IPO proceeds of Rp 135 billion will fund the 400-store expansion, and create four distribution centers in Solo, Central Java Province; Balaraja, Banten Province; Palembang, South Sumatra Province; and in Bali. 

The rest of the expansion costs would be financed with the company’s internal cash flow, and perhaps from bank loans, which Alfaria would get from PT Bank Central Asia Tbk, Henryanto said. 

The company said that it still expected revenue to rise 20 percent this year, although growth would be slower than previous years. 

Alfaria’s revenue expanded rapidly from Rp 2.8 trillion in 2005 to Rp 8 trillion in 2008 as its number of retail outlets grew. Between 2007 and 2008, sales are expected to rise 30 percent. 

In the IPO results released on Thursday, the company announced demand for its shares were oversubscribed by just a few percent, with an issue of 343 million shares priced at Rp 395 a share. The company had earlier revised down predictions that its share price could reach more than Rp 400 a share on last year’s growth data. 

Analysts have said that growth in the retail sector is likely to slow in 2009 to between 10 percent and 15 percent, from year-on-year 2008 growth which is expected to come in at between 20 percent and 25 percent. 

In 2008, Alfaria added 500 stores for a total of 2,500 nationwide in head-to-head competition with the Indomaret retailer, owned by the Salim Group. 

Both companies are primarily competing for the lucrative Java market. Alfamart is outnumbered by the Indomaret retailer, which operates more than 3,000 stores nationwide. 

However, the success of the company’s corner stores in urban areas, which also compete with traditional corner shops, known as warung , could mean its target is achieved, an analyst said. 

“Alfamart’s 20 percent revenue growth target [for 2009] is quite optimistic, but it could be reached provided that their expansion is on target,” said Natalia Sutanto, an analyst with PT Ciptadana Securities. Another analyst said that Alfamart’s target could be reached because the retail market had yet to be saturated with mini-markets. 

“As Alfamart products are mostly small consumables — fast-moving goods, which have faster turnover, their revenue growth can be faster than other bigger retailers,” said Ike Rahmawati, an analyst at PT Samuel Sekuritas. 

Sumber Alfaria was founded by the Sampoerna family in 1989. In 2006, the family sold a portion of its Alfa shares to Northstar Pacific, a private equity partner of US firm Texas Pacific Group.