Date of Report: October 21, 2024
Broker: PT Maybank Sekuritas Indonesia
Overview
Aspirasi Hidup Indonesia (ACES IJ) operates as a leading home improvement and lifestyle retailer in Indonesia. The company has established itself as a pioneer in the sector with a broad network across the country, known for unique merchandising strategies, including importing products and maintaining exclusive private labeling rights. ACES has transitioned from a turnaround phase to a growth phase, positioning itself for double-digit earnings growth in the upcoming years.
Financial Performance
9M24 Sales and Performance:
- 9M24 sales reached IDR6.2 trillion, marking a 14% increase year-over-year (YoY) and aligning with consensus forecasts.
- Sales accounted for 73% of Maybank IBG and consensus FY24 forecasts, consistent with historical performance levels.
- Despite this growth, sales remain 5% lower than pre-pandemic (FY19) levels, with FY19 having a high baseline due to multiple sales events.
Financial Projections:
- The report maintains a “BUY” rating for ACES with a revised target price (TP) of IDR1,150, up from IDR950, reflecting improved growth visibility and a higher target price-to-earnings ratio (PER) of 18x.
- Predicted revenue growth of 11.8% for FY24E, with expectations of a 13% CAGR for FY23-26E.
- EBIT margin is forecasted to increase to 12.5%-12.7% for FY24-26E, supported by cost-saving measures.
Key Strategic Initiatives
Expansion Strategy:
- ACES is expanding into less saturated ex-Java regions where operational costs, including wages and rent, are lower. This strategy has facilitated a quicker payback period (24 months compared to 30 months in Java).
- In 9M24, Same Store Sales Growth (SSSG) was reported at 9.8%, with ex-Java areas showing the highest growth at 12.3%.
- The company plans to open nine more stores in Q4 of FY24E, bringing the total to 20 new stores for the fiscal year.
- Plans for 2025 include rebranding stores to appeal to younger consumers, starting in January.
Profitability and Cost Efficiency:
- ACES has implemented strategies to improve cost-efficiency, such as reducing inventory holding times and capitalizing on lower operational costs outside Java.
- EBITDA margin is expected to improve, reflecting these cost-saving efforts.
- The company remains net cash positive, with healthy free cash flow expected to continue over the coming years.
Risks and Challenges
Potential Downside Risks:
- Significant depreciation of the Indonesian Rupiah (IDR) could impact costs.
- Lower-than-expected SSSG and EBIT margins could affect overall profitability.
- Regulatory changes, particularly those affecting import tariffs or operational expansion, pose potential risks.
- Expansion into non-core businesses could carry execution risks, diverging from their specialized retail model.
ESG (Environmental, Social, and Governance) Initiatives
Environmental Efforts:
- ACES has emphasized sustainable practices, including sourcing from ISO-certified suppliers and incorporating environmentally friendly products (8.5% of total SKUs in 2022).
- The company supports energy efficiency by using LED lighting and discouraging the use of plastic and paper across stores, especially in compliance with Jakarta’s zero-plastic policy.
Social and Community Impact:
- Local sourcing initiatives have been strengthened, with the Pendopo brand, offering products from local SMEs, now present in 95% of ACES stores.
- ACES is committed to gender diversity, with improvements in the male-to-female workforce ratio and opportunities for women in management roles.
- The company also invests in employee development, offering training programs and educational support through initiatives like “Kawan Lamaku Kuliah Lagi.”
Governance Policies:
- The board of commissioners (BoC) and board of directors (BoD) have established independent roles to maintain governance standards.
- Shareholding transparency and adherence to regulations are maintained, although some concerns were noted regarding related-party transactions.
Market Position and Competitive Edge
Competitive Advantages:
- ACES’ extensive store network across Indonesia gives it a solid competitive edge, supported by its strong brand recognition as the go-to destination for home improvement.
- Exclusive product offerings and strategic imports help differentiate ACES from other players in the market.
- The expansion focus on underserved areas allows for tapping into markets with less competition, driving overall profitability and growth.
Conclusion
Aspirasi Hidup Indonesia is well-positioned for sustained growth with robust expansion strategies, solid financial projections, and ongoing cost-efficiency measures. The company’s focus on less saturated markets and innovative store rebranding is expected to drive future growth. Despite potential risks related to currency fluctuations and regulatory changes, ACES maintains a favorable outlook, backed by strong financial health and strategic initiatives to enhance profitability and market share.
