Yet another $387m of CPF$ to be burnt to 7th month ghost by Ho Ching Loong

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Singapore’s GIC to invest $387m in Indonesia’s Trans Retail, owned by CT Corp

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Ishita Russell
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Shiwen Yap
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February 24, 2016:

Singapore sovereign wealth fund GIC has agreed to invest 5.2 trillion rupiah ($387 million) in Trans Retail, the retail arm of Indonesian conglomerate CT Corp, according to a statement by the companies.

Trans Retail operates hypermarkets, supermarkets, and cash & carry stores under the Carrefour and TRANSmart brands.The collaboration with GIC will enable the Indonesian company to capture the full potential of the country’s modern retail market.

GIC had earlier invested in the NYSE-listed Dollar General Corporation in the US, a discount retail chain with significant market share in the US. Indonesia’s large population and growing middle class are likely to see the investment pay off, given the comparable scale that Indonesia has to the US in terms of population. In August 2015, GIC partnered with Carlyle to bid for Tesco’s South Korean unit.

Commenting on the investment, CT Corp chairman Chairul Tanjung stated: “The partnership with GIC is a significant step forward in enabling Trans Retail to expand its store footprint and realize its vision of becoming a leading multi-format retailer and transforming the Indonesian consumer’s shopping experience. This partnership will strengthen Trans Retail’s leadership position in the industry and enhance the Indonesian consumer experience positively.”

GIC had in 2014 signed an agreement with Indonesia’s Rajawali Group to jointly invest up to $500 million in property projects in Indonesia, marking its second JV between the two.

“The investment by GIC reflects our confidence in Indonesia’s long-term growth potential. We are keen to build lasting partnerships with reputable local partners and look forward to a deep relationship with CT Corp, which also has a strong track record for making good investments and share our investment values,” said Amit Kunal, the head of the Direct Investments Group, Southeast Asia, at GIC.

A Bloomberg report observed that Indonesia, alongside Mexico, is predicted to displace Russia and Italy among the top 10 global economies within the next 35 years’ time, with China, the U.S. and India taking the top three slots, according to forecasts by the Economist Intelligence Unit. According to a report by McKinsey and Co, Indonesia will see the addition of 90 million people to its consuming class by 2030.

This is likely to see GIC increase its exposure in consumer-facing sectors and invest in FMCG-related sectors and financial services over the next few years, given the long-term prospects provided by these sectors. This is due to energy demand potentially tripling from 2012 levels by 2030, and more convenience stores expected to lead a retail revolution.

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Investment commentary

The GIC investment is occurring amidst a continuous slowdown in global demand of export commodities, a Euromonitor report notes. This development is further impacting the income sources of a majority of Indonesians, especially those employed in the mining and agriculture sectors.

With the strengthening US dollar against the local currency, resulting in soaring prices of imported goods and raw materials, prices of consumer goods hve continued to inflate year on year. This has weakened the purchasing power of most Indonesians, especially those in the low-income segment.

Purchases of retail goods witnessed a moderate increase in 2015 in terms of value sales with volume growth increasing minimally, especially amidst extensive smartphone and tablet computer proliferation, in addition to manufacturers and retailers expanding to internet retail channels. This is due to the growth of Indonesia’s logistics network to service a widespread customer base reaching remote areas across Indonesia,

According to Euromonitor, Internet retailing has emerged as the dominant portion in the marketplace in terms of value transactions in Indonesia. With grocers outperforming non-grocers in terms of retail – due to provisioning for basic needs – weakened purchasing power has led to a shift towards selecting more economical products.

With positive projected growth expected to come from the Indonesian economy, Indonesia still remains a challenging retail environment, with its infrastructure and logistics deficit ameliorated by government infrastructure projects.

Given external economic headwinds, retailing is expected to show significantly lower constant value CAGR than other comparable sectors, but is likely to enjoy sustained growth in the future.

CT Corp maintains ownership of the Carrefour brands through PT Trans Retail, which is a wholly-owned subsidiary of the conglomerate. Trans Retail retains exclusive right to use the carrefour brand in Indonesia under a lisence agreement with Carrefour. As of December 2015, the company operates 86 hypermarkets and supermarkets as well as 2 cash and carry stores located in 35 cities throughout Indonesia.


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