Ace Hardware Indonesia (ACES.IJ IDR 825 BUY.TP IDR 920) Growth recovery outlook intact on positive Jan24

Stock Code	Last Price	Change	Change %
CUAN	11,750	1,800	18.09%
DSSA	51,725	1,025	2.02%
TPIA	9,725	575	6.28%
MKPI	24,500	500	2.08%
CTBN	4,880	380	8.44%
BREN	6,700	200	3.08%
INKP	6,350	200	3.25%
PGEO	1,375	135	10.89%

Ace Hardware Indonesia (ACES IJ)

Growth recovery outlook intact on positive Jan24

ACES Jan24 YTD foot traffic shows a positive growth yoy, which we expect to continue as we approach CNY and Ramadan festivities.
FY23 SSSG (8.1%) beat the management’s guidance (+6.8%), supported by the strong performance of ex-Java stores (SSSG: +12.7%).
Growth in FY24 will focus on continuation of ex-Java expansion, traffic recovery and efficiencies. Maintain Buy rating and TP of Rp920.

A positive start in Jan24

During our group call with management, ACES indicated that its Jan24 YTD foot traffic to stores showed a positive improvement on yoy basis (mom lower on seasonality). The management expects this momentum to continue as we approach the Chinese New Year and the fasting period/Ramadan festivities in Feb-Mar24. The company also indicated that 4Q23 was a solid quarter, in line with seasonality (+8% yoy and 8.8% qoq).

Above-target FY23 SSSG of 8.1%

In Dec23, ACES’ monthly sales reached Rp813bn (+25.3% mom, +16.6% yoy), leading to a FY23 top line of Rp7.5tn (+12.3% yoy), in-line with ours/ consensus expectation (at 102.6%/ 99% of our/ cons. FY23F). ACES reported a better SSSG in Dec23 of 11.6% (Nov23: 10%) driven by 13.2% SSSG ex-Java and 11.4% SSSG in rest of Java, followed by Jakarta at 9.3% (Nov23: 2.7%). On a cumulative basis, SSSG in 12M23 reached 8.1% (11M23: 7.6% and above the revised guidance of 6.8%) with Ex Java posting the highest SSSG of 12.7% followed by Jakarta’s 6.3% (11M23: 5.5%).

Ex-Java expansion to continue in FY24

In Dec23, ACES opened new stores in Lampung (1,440sqm) and Jatiwaringin (Ace Express, 694sqm). In total, ACES opened 13 new stores and closed 8 stores in 2023, resulting in a total of 233 stores as of Dec23. In FY24, ACES will continue to open more stores, especially in ex-Java areas given the potential to attain higher operating leverage with strong foot traffic and less competition in new areas. It also targets to bring foot traffic to a normal level (pre-pandemic) through utilizing omni-channels (digital/online), more innovative products offering and rejuvenation of more stores to target a younger demographic.

Maintain Buy rating, with an unchanged TP of Rp920

We maintain our FY24-25F estimates and our TP of Rp920 (based on -0.5SD avg 3-y PE of 20.6x) and reiterate Buy rating as ACES growth recovery outlook is intact. Key risks are soft top line growth on weak purchasing power, and increasing competition in ex-Java areas that would dampen SSSG.

… Read More 20240126 ACES