Deep-dive 2022-3: MAP Aktif Adiperkasa
Indonesia’s leading sports retailer expects higher foot traffic post-COVID
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MAP Aktif Adiperkasa (MAPA IJ) is the clear leader in Indonesian sports retailing with a 63% market share. The company helps foreign sportswear brands sell into the Indonesian market through its 1,121 offline retail stores.
The current store network includes “Planet Sports”, “Golf House” and “Athlete’s Foot” branded stores in the premium segment and “Sports Station”, “Kidz Station”, “Payless” and “RSH” branded stores in the mass-market segment. The majority of stores are multi-brand, offering Indonesian consumers access to foreign brands such as Nike and Reebok.
Indian national VP Sharma founded MAP Aktif’s parent Mitra Adiperkasa. He came to Indonesia in the 1980s and set up the company in 1991. He is widely seen as the driving force behind the modernisation of the Indonesian retail industry. MAP Aktif has a professional management team, headed by the former British athlete and sportswear retail veteran Michael David Capper.
Parent Mitra Adiperkasa group runs over 2,000 retail outlets in Indonesia, including Starbucks, Zara, Marks & Spencer, Sogo, Burger King etc. The sportswear segment MAP Aktif was spun off in 2015 to prepare for an injection of capital from British private equity firm CVC for IDR 1.5 trillion. CVC helped MAP Aktif improve its inventory management system. While structured as a loan, it gave CVC the option to convert the loan into 30% equity in MAP Aktif at its IPO in 2018. Since then, CVC has been selling down its stake to just 7.5% but does not appear to be willing to sell at the current level.
There are significant barriers to entry for international companies wanting to sell their products in Indonesia. Foreign companies cannot fully own stores below 2,000sqm. They therefore typically team up with local retailers to get access to the market.
Parent Mitra Adiperkasa has won several awards, including “Best managed company in Indonesia” by AsiaMoney and “Retailer of the year (emerging markets)” by the World Retail Congress. MAP Aktif itself is an outstanding operator with a high return on capital at the store level.
The company enjoys secular growth. Before the pandemic, MAP Aktif’s store count increased by an average of 10% per year, on top of same-store sales growth. Underlying high-teens growth is possible. Sports retailing is still under-penetrated in Indonesia. The country’s sports goods retail selling space per capita is only 1.3 square metres per 1,000 people compared with 10.1 square metres in China and 11.5 square metres in Singapore.
COVID-19 hurt the Indonesian retail industry through various restrictions, including reduced opening hours for shopping malls and even complete shutdowns. Indonesia is in the early stages of an Omicron wave, which is likely to lead to knee-jerk reactions from central and provincial governments but is paving the way for herd immunity and potentially - an end to the pandemic.
MAP Aktif trades at roughly 9x P/E and 7x EV/EBIT against pre-pandemic numbers. Historically the stock has traded closer to 18x. Underlying top-line growth was in the high teens before the pandemic with a strong return on capital. So there might be a potential for a re-rating if and when the business recovers from COVID-19.
Online e-commerce could a threat to the business. Note, however, that even developed market peers such as JD Sports have thrived in a climate of rising e-commerce penetration. It seems that consumers want to try on shoes and clothing before buying. And foreign brands seem to be happy with MAP Aktif as their Indonesian partner since it can help them distribute their products across both offline and online retail channels.