Ace Hardware Indonesia (ACES IJ)

Solid SSSG in May24, expect the positive trend to continue in Jun24

 

  • ACES booked a solid SSSG of 10.1% in May24 (May23: 1.1%), consistent with the findings from our weekly retail channel check in May.
  • We expect ACES to book further positive SSSG in June as it is continuing its thematic and cashback promotions to boost online sales.
  • We believe solid SSSG until May24 shall pave the way for good 2Q24 results. Maintain Buy rating with an unchanged TP of Rp1,200.

Expect solid SSSG in 2Q24

SSSG in May24 is reported at 10.1% (vs. Apr24: 6.8% and May23: 1.1%, boosted by three long weekends and May promotions (Electrical Lighting Fair), in contrast to the soft post-Lebaran period last year. Java (ex-Jkt) was the growth driver in May24, with SSSG of 11.1%, followed by Ex-Java at 10.9% and Jakarta at 6.6%. The solid May24 led to 5M24 SSSG of 11.1% (vs. 5M23: 3.5%), above the company’s FY24 guidance of 7%. We expect ACES to book positive SSSG in June on the back of the ongoing “Boom Sale” promotional event from June 12 to July 9, 2024, and supported by the long Eid Al-Adha weekend (June 17th -18th).

 

Optimistic sales target, supported by focused initiatives

In our latest meeting, ACES management outlined its initiatives to enhance communication, improve the customer journey and loyalty, and invest in omnichannel infrastructure to predict on-demand products and enhance the customer experience in new cities. Its online sales contributed 10-11% mostly from RupaRupa, Miss Aces), targeting 20% in the next five years and increasing the number of new SKUs by 10% every year (FY23 >6,000 SKUs). ACES is also continuing its expansion by opening 7 new stores YTD (5 Ace Hardware in Pejaten, Banyuwangi, Kota Wisata, Garut, Rawa Buntu and 2 Ataru in Surabaya and Medan) and with 8-13 new stores expected in 2H24.

 

Maintain Buy with an unchanged TP of Rp1,200

We maintain our Buy rating with an unchanged TP of Rp1,200 (implying FY24F PE of 28.3x, vs. the avg 3-y PE of 20.9x) as we expect its solid top line growth to continue (FY24F: 11.1%), supported by SSSG performance and store expansion. Key risks to our rating include a soft top line post Ramadan if inflation remains stubbornly high, leading to lower margins and Rupiah weakening, which will hamper overall purchasing power.

 

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