Arwana Citramulia (ARNA) is a market leader in a niche sector of the ceramic tiles industry. With a focus on the middle-low segment, the company is benefiting from the growth in the GDP per capita for households which use its products. As a result, ARNA’s utilization is nearly maxed out every year. Thus, going forward, the company is not only focused on maintaining its strong balance sheet and impressive ROE, but also seeks to grow its capacity to meet higher expected demand in the future. Trading at 24x FY14 P/E, the stock is definitely not cheap at the moment. Hence, in our view, we see any correction in the share price as a possible opportunity to accumulate the stock, especially considering the post-election catalysts in regard to a higher state budget allocation on public housing, education, and healthcare.
Market leader in a niche sector of the ceramic tiles industry
In recent years, Arwana Citramulia (ARNA) has focused its business efforts on the middle-low market segment of the ceramic tiles industry which, overall, is estimated to account for 70% of the total tiles market. Under the ‘Arwana’ brand name - which contributes more than 90% of its revenues - the company has benefited from the country’s burgeoning middle class and increasing GDP per capita. As a result, ARNA has recorded very strong financial performance: earnings have grown by 39% CAGR over the past five years on the back of 19% CAGR growth in revenues. The company’s strategy of tapping into the suburban city areas - rather than the more developed city areas – allows the company to boost sales by extending its reach to more customers.
To distribute its products, ARNA sells them through its 65% owned subsidiary and sole distributor named PT Primagraha Keramindo. The remaining ownership of 35% is held by Catur Sentosa Adiprana (CSAP IJ), a building materials distributor and retailer that has an extensive distribution network. As a result, ARNA’s products were distributed through more than 92 sub-distributors and almost 35,000 retail outlets nationwide in 2013 – giving it extensive market reach.
http://dmia.danareksaonline.com/BeritaRiset/CompanyResearch
Market leader in a niche sector of the ceramic tiles industry
In recent years, Arwana Citramulia (ARNA) has focused its business efforts on the middle-low market segment of the ceramic tiles industry which, overall, is estimated to account for 70% of the total tiles market. Under the ‘Arwana’ brand name - which contributes more than 90% of its revenues - the company has benefited from the country’s burgeoning middle class and increasing GDP per capita. As a result, ARNA has recorded very strong financial performance: earnings have grown by 39% CAGR over the past five years on the back of 19% CAGR growth in revenues. The company’s strategy of tapping into the suburban city areas - rather than the more developed city areas – allows the company to boost sales by extending its reach to more customers.
Currently, ARNA’s four operational plants are located in suburban city areas with two plants in West Java (Tangerang and Serang), one in East Java (Gresik), and one in South Sumatera (Palembang). With its latest plant located in Palembang, the company hopes to achieve greater efficiencies from lower piped gas prices in Sumatera in addition to lower logistical costs. On the operations side, the company’s utilization is nearly maxed out every year - an indication of the strong demand in the ceramic tile industry.
To distribute its products, ARNA sells them through its 65% owned subsidiary and sole distributor named PT Primagraha Keramindo. The remaining ownership of 35% is held by Catur Sentosa Adiprana (CSAP IJ), a building materials distributor and retailer that has an extensive distribution network. As a result, ARNA’s products were distributed through more than 92 sub-distributors and almost 35,000 retail outlets nationwide in 2013 – giving it extensive market reach.
http://dmia.danareksaonline.com/BeritaRiset/CompanyResearch
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