(The following statement was released by the rating agency)JAKARTA/SYDNEY, May 18 (Fitch) Fitch Ratings has assigned Indonesia-based small-format retailer PT Sumber Alfaria Trijaya Tbk's (Alfamart; AA-(idn)/Stable) proposed IDR1trn bonds due in 2017 a rating of 'AA-(idn)'. At the same time, the agency assigned an 'AA-(idn)' rating to Alfamart's IDR2trn bond programme. The proposed IDR1trn bonds will be issued under this bond programme. The bonds and bond programme are rated at the same level as Alfamart's National Long-Term rating of 'AA-(idn)' as they constitute direct, unconditional, and senior unsecured obligation of the company. The rating assigned to the bond programme is no assurance that bonds issued under the programme will be assigned a rating, or that the rating assigned to a specific issue will be the same as that of the programme.  'AA' National Ratings denote expectations of very low default risk relative to other issuers or obligations in the same country. The default risk inherently differs only slightly from that of the country's highest rated issuers or obligations.Alfamart will use about 70% of the bonds proceeds for refinancing debt and the balance for working capital purposes. KEY RATING DRIVERSMarket Leadership: The rating reflects Alfamart's leadership in Indonesia's small-format modern retail segment - its 8,557 stores at end-2013 give it a market share of about 50%. With an extensive store network and strategically located distribution centers, the company benefits from economies of scale and a strong bargaining position with suppliers. These provide Alfamart with a distinctive edge compared with traditional "mom and pop" stores - it is able to provide competitive pricing, attractive product mix and shopping convenience. On-track Expansion: Alfamart set another growth record in 2013 by adding almost 1,500 new stores. The higher-than-expected new store openings resulted in higher capex for 2013, however. Fitch views this favorably as it provides room for Alfamart to scale back capex in 2014, which could be necessary given expectations that Indonesia's GDP will grow at a slower pace than in previous years. Extensive Network: Alfamart's extensive distribution network is an important bargaining chip with suppliers. About 40% of Alfamart's stores are located in densely populated Jakarta and the surrounding areas. The company is also quickly expanding to other areas in Java and other islands, such as Sumatra, Kalimantan and Sulawesi. Alfamart's deep penetration in residential areas allows quick and efficient product distribution, enabling it to enter areas where it is not economical for conventional distributors to do so. Scalable Capex: Fitch believes the scalability of its capex and its track record in executing high levels of expenditure are important mitigating factors. Scalability derives from Alfamart's small-store format and quick turnaround for new store openings. In addition, the company will gradually be able to expand its network with less capex as it moves to raise the proportion of franchise outlets. Competitive Landscape: The rating is constrained by negative free cash flows in the short to medium term, Alfamart's strategy to rent property for its stores, and the dominance of highly fragmented traditional grocery retailers in Indonesia. Fitch also considers the competitive operating environment as an important constraint because Alfamart has to continuously invest in new stores or refurbishments to maintain its market share. Stable Outlook: Alfamart's full-year 2013 results are broadly in line with Fitch's expectation and it has maintained a financial profile appropriate for its current rating. In the next 12-18 months, despite continued expansion, Fitch expects Alfamart will be able to maintain comfortable metrics, characterized by FFO-net leverage below 3x (2013: 2.6x) and FFO fixed charge cover of above 2.5x (2013: 2.7x); which underpins the Stable Outlook. RATING SENSITIVITIESNegative: Future developments that may, individually or collectively lead to negative rating action include:- FFO net leverage at more than 3.5x on a sustained basis- FFO fixed charge cover at less than 2.5x on a sustained basis Positive rating action is not expected over the medium term, due to Alfamart's debt-funded capex commitments. Primary AnalystErlin SalimAssociate Director+62 21 2988 6811PT Fitch Ratings IndonesiaDBS Bank Tower 24th Floor Suite 2403Jl Prof Dr Satrio Kav 3-5 Jakarta 12940 Committee ChairpersonVicky MelbourneSenior Director+61 2 8256 03Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com.Note to editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(idn)' for National ratings in Indonesia. Specific letter grades are not therefore internationally comparable. Applicable criteria, 'Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage', dated 5 August 2013, and 'National Scale Ratings Criteria', dated 30 October 2013, are available at 
  www.fitchratings.com.
 Applicable Criteria and Related Research: Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage
  http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139
 National Scale Ratings Criteria
  http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=720082
 Additional Disclosure Solicitation Status 
  http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=830577
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