Multi Indocitra (MICE) may not a well-known company both in the eyes of
investors and the public in general, but this company is a manufacturer of one
the most famous brand of baby needs in Indonesia: Pigeon, as well as cosmetics with the same brand. MICE also had had
a side business by making energy-saving lamps with brand 'Hori', but it seems
that the business was failed.
MICE is a relatively brand new company in Indonesia. The history started in
1995 as the holder of license from Pigeon Corp., a company of baby needs from
Japan, to make products with brand ‘Pigeon’. Until today, MICE’ businesses are
about to make milk bottles, pacifiers, breast milk pumps, soap and shampoo for
babies, powder and baby oil. However, the company is quite successful in
developing distribution networks for its products, which the products of baby
needs with Pigeon label can be found from Banda Aceh, Aceh Province, to
Jayapura, Papua Province.
Well, as a father of two toddlers, I think the business of baby supplies is
indeed promising. When your wife give birth to your children, you, like it or
not, have to buy milk bottles of various sizes. And in Indonesia, the most
preferred brand is Pigeon (there is also ‘Huki’ brand, but we prefer Pigeon).
When we were buying soap and shampoo for babies, the prices are more expensive
than regular soaps and shampoos. There are newborn babies at any time, so MICE will
always get consumers for its products.
Based on the profile of the industry, I assumed that MICE is a profitable
company, and its net asset and net profit will grow consistently from year to
year. Unfortunately, it is not. Here's more about the company financial
performance since 2007. Please note that the equity is not including the non-controlling
interests, and the net income is net income after shared with the
non-controlling interests. Figures in billions of Rupiah, except profit margins
and ROE in percent.
Year
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
Equity
|
176
|
185
|
202
|
229
|
240
|
302
|
441
|
Revenue
|
244
|
308
|
340
|
423
|
465
|
560
|
591
|
Net Profit
|
30
|
24
|
28
|
28
|
30
|
41
|
40
|
Net Profit Margin
(%)
|
12.3
|
7.8
|
8.1
|
6.7
|
6.5
|
7.3
|
6.8
|
ROE (%)
|
17.1
|
13
|
13.7
|
12.3
|
12.5
|
13.5
|
9.1
|
Okay, as you can see, except for 2007, MICE only able to generate profits less
than 15% of its net capital, and the profit itself only able to grow less than
ten percent (in average) each year. As a result, growth in equity is also not
significant. And for the size of a manufacturer (MICE makes milk bottles, not
importing it from Japan), MICE’ profit margins are too small, ie less than ten
percent. If the company still performs like this until the following years, then
the shares would not rise too high even after waiting for several years, and it
means that MICE is not a best option for long-term investment.
So why does MICE not perform well, while the industry looks promising?
Well, I do not know, but that's probably because there is a certain agreement
with the Pigeon Corp. which depress the company’s profit. Because if you
notice, in the last few years MICE is always trying to launch its own products/brands
(outside Pigeon), but unfortunately still failed. For example, about two years
ago the company launched ‘Hori’, a brand of light bulbs, but the results were
disappointing: The lamp business only lasted briefly before then abandoned.
Later, the management of the company once again tried their luck with
another expansion, with the launching of cosmetic products (in contrast to business
of lamps, MICE already experienced in this business before, by producing
cosmetics for teens, also with brand Pigeon) with brands of Astalift and Aibu. Astalift is a brand of cosmetics for upper middle class
female, where MICE already opened outlets of Astalift in six major malls in
Jakarta and surrounding areas, and another mall in Medan, North Sumatera. While
Aibu is a brand of cosmetics for teens, which sold at all locations including
through road shows to schools.
![]() |
Outlet of Astalift in one of malls in Jakarta |
Then how about the results? Will the two brands be successful? Well,
considering that MICE launched Astalift and Aibu in this year, then of course
the results will not be immediately visible in the near future. So we have to
wait. Instead, maybe because the company was spending a lot of costs for the new
ventures, the company’s revenue and profit for 2014 were depressed. Until the
second quarter of 2014, MICE revenue was down 14.3% over the same period of the
previous year, and the net profit also fell 36.6%.
And because of that bad performance, the stock became depressed to as low
as Rp350 per share, but this is the point: MICE, at a price of Rp400 – 450 per
share, was already a cheap stock, so today’s price only make it to become cheaper,
with PBV of 0.5 times only. If you
buy 100% stake in MICE at the current share price, then you will spend Rp 210 billion, to acquire net working
capital (current assets net current liabilities) valued at Rp264 billion, not including fixed assets belonging to the company!
So in this case, the stock of MICE can be said to be absolutely (not relatively) undervalue.
However, just because the stock price is cheap, it does not mean that MICE
will immediately rise again in the near future. Based on experience, a stock
will go up, sometimes skyrocketed if the value was really cheap (like this MICE),
if, and only if the following things
happen: 1 There is a certain positive sentiment which prompted the investors to
belive that the company's financial performance will be improved in the next
financial statements, 2 The company distributed large dividends, or 3. The
financial performance of the company is actually improved, like if the profits
seem higher than profits over the same period of previous year.
Now, note that for point number 1, the positive sentiment. For a stock like
MICE, it is less likely to happen, because only few people pay attention to
this stock (MICE is a third-liner stock, with market cap of less than US$ 20
million), as well as you can never read anything about this company in the
media. For the dividend, this year MICE only paid dividends of Rp10 per share to
the shareholders, aka not significant. In the past, MICE was very diligent in
paying dividends, but the management is a little bit stingy this year, which
probably because they need funds to finance their expansion above. From its net
profit in 2013, only 15% are paid out as dividends.
So now we have the possibility of number 3: MICE will probably rise back if
later the performance looks better. And that means, if you are interested with
this stock, then you may have to wait at least until the company released its
financial report for the third quarter of 2014, at the end of September.
On the other hand, if you still believe about the long term prospects of
the company (if you read in the internet, MICE is often discussed by value
investors since its valuation was very low), including also believe that this
stock can present
a jackpot like March 2013 ago, where it suddenly flew to nearly Rp850 per
share, then you may do the installment from now on. MICE may still need time to
rebound, can be up to next year if they are successful in their cosmetics venture,
or if the company pays a large dividend. But on the other hand, the stock
cannot go down further because after all, the valuation is already very low.
For your information, two veteran local value investors value, namely Mr. Haiyanto and Mr. Surono Subekti, also held MICE in large quantities since looong
time ago. Only Mr. Haiyanto already sold his holding, may be when the price rose
a lot in the last 2013. Well, if you are Mr. Haiyanto, then look at the MICE’
price today: Is it not tempting enough to make you buy it again?
PT Multi Indocitra, Tbk.
Rating of Financial Performance in First Half 2014: BB
Rating of Stock Price at 350: A
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