Lippo Group’s Matahari stocks fall more than 22% after retailer cuts dividend payout

Indonesian conglomerate Lippo Group's retail arm Matahari Department Store saw investors dumping its shares on Tuesday causing the stock to plunge by more than 22%, after the group cut its dividend pay-out in lieu of weak earnings. The move from analysts downgrading their view on the firm also contributed to the stock decline.

Matahari shares fell the most since December 2011 on Tuesday after analysts downgraded the stock amid concerns on a growing e-commerce business in Indonesia threatening the retailer’s outlook.

As a result, shares of companies that are tied to Lippo Group also sank as investors were concerned that the group may lower dividends for its other businesses. Lippo Group’s Lippo Cikarang and Lippo Karawaci’s shares were lower by 7% to 9%.

Retail earnings suffer amid changing retail landscape

The retailer had shaved its dividend pay-out to 50% of net income in 2018 from 70% after its profit fell by 42%. In 2017, Matahari’s net income shrank by 5.6%, and was the first decline in at least over 5 years.

The group had said it would use the additional funds from the lower dividend pay-out ratio to support its growth strategies, such as the expansion of its specialty format stores.

In June last year, the departmental store celebrated the opening of its 155th outlet, adding to Lippo Group’s presence of more than 600 outlets located across Indonesia from different retail brands including the Matahari Department Store - such as Hypermart, and Foodmart. Lippo Group owns and operates around 70 shopping malls in the country.

Investor confidence on Lippo Group has weakened in recent months. Last year, traders abandoned shares and bonds of Lippo Group's companies after some staff with the group were arrested for investigations to a bribery case.