Nippon Indosari (MV $570m): Indonesia’s #1 bread maker with 90% share in the mass market with the “Sari Roti” brand
ROE 34.3% and trading at EV/EBIT 17.4x, EV/EBITDA 14x

Nippon Indosari (JSX: ROTI) is the largest mass market producer of breads in Indonesia and Asia ex-Japan producing over 4.2 million pieces of bread daily, up from 1.5 million pieces five years ago in 2011, commanding a dominant 90% of the mass market share with its Sari Roti brand. Nippon Indosari operates in the industrial bakery segment which contributes to 20% market share of the overall highly fragmented bread industry in Indonesia with room for growth to consolidate the home/small producers making up 68% of the overall market and boutique bakery accounting for 12% of the market. Indonesia’s baked goods consumption per capita of 2.3kg is below its ASEAN peers including Thailand’s 2.4kg, Malaysia 7.6kg, Singapore’s 9.7kg and HK’s 11.8kg. Indosari operates 10 factories in 3 islands located in Java (7), Sumatra (2) and Sulawesi (1) that is supported by a strong distribution network of 61,000 point of sales via modern trade channels comprising 79% of sales (minimarts such as Indomaret and Alfamart and supermarkets such as Hero Supermarket and Carrefour) and traditional mom-and-pop outlets (21%). Established in 1996 by Wendy Yap and her father Piet Yap, the key executive who helped build Salim Group’s Bogasari flour mill empire, together with Japan’s Pasco Shikishima and Sojitz Corp who later became strategic shareholders. Wendy Yap was previously the franchise holder of Wendy’s fast-food restaurants in Indonesia in the 1990s and was familiar with the food business and how to set up a system for consistency and quality of products. Nippon Indosari was listed on 28 June 2010 raising Rp188bn and it has became one of Indonesia’s most recognizable household brands with its famous tagline “ROTInya Indonesia”. Before its listing in 2009, Salim Group’s Anthoni Salim purchased over half of the shares owned by the Yap family to become one of the major shareholders with a 31.5% stake; the Yap family continues to own 25.1% stake. Strategic business and technological partner Pasco Shikishima, Japan’s second-largest baker with almost years of experience in the bread industry, owns a 8.5% stake, while Japan’s leading trading house Sojitz Corporation owns a 4.3% stake.

1) What Makes It a Wide-Moat Business? Fundamental Dynamics Behind 34.3% ROE

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