Introduction to Aspirasi Hidup Indonesia (ACES IJ)

Aspirasi Hidup Indonesia (ACES IJ), a pioneer in the home improvement and lifestyle retailing business, has been a dominant player in Indonesia’s market. The company is well-regarded for its extensive network, innovative branding, and robust supply chain. The latest report by Maybank Investment Bank highlights ACES’ transition from a turnaround phase to a growth phase, supported by promising financials and strategic initiatives.

Introducing the New AZKO Brand

ACES recently unveiled its new brand, AZKO, with banners already spotted in Jakarta stores. This strategic move aligns with the company’s plan to expand its home improvement offerings, potentially introducing multiple brands named sequentially from A to Z. Despite this rebranding, store ambiance and design remain consistent with existing ACE stores.

The launch of AZKO underscores ACES’ competitive advantages, including strong consumer recognition of private labels, an extensive supply chain network, and operational excellence. The company’s Same-Store Sales Growth (SSSG) projections of 8.0% for FY25-26 remain unchanged, affirming the stability of its business model.

Financial Performance and Projections

ACES is positioned as an attractive investment opportunity with a robust growth trajectory. Key financial highlights include:

• Revenue Growth: Projected to grow at 12-14% annually for FY24-26.
• EPS Growth: Expected double-digit growth of 36% in FY25 and 20% in FY26.
• Net Profit: Forecasted to surpass pre-pandemic levels with IDR 1,094 billion in FY25.
• Dividend Yield: Estimated at 5.1% for FY25 and 6.1% for FY26, among the highest in Indonesia’s retail sector.

Moreover, ACES is expected to maintain a net cash position, supported by positive free cash flow over the forecast period. Its FY25E PER of 12.5x remains attractive, close to 1SD below its three-year mean.

ESG Initiatives and Sustainability Efforts

ACES demonstrates a proactive approach to Environmental, Social, and Governance (ESG) practices:

Environmental Initiatives

• Sourcing merchandise from ISO-certified suppliers with ESG-compliant manufacturing processes.
• Maintaining 8.5% of its total SKUs as environmentally friendly products since 2022.
• Implementing energy-saving measures such as LED lighting and eliminating plastic bags in Jakarta stores.

Social Contributions

• Empowering local SMEs through the Pendopo brand, available in 95% of stores.
• Providing employee upskilling programs like the Kawan Lamaku Kuliah Lagi initiative.
• Ensuring workplace safety, with no reported accidents in 2022.

Governance Practices

• Whistleblowing systems to prevent illegal activities and conflicts of interest.
• 20% independent commissioners on the Board of Commissioners (BoC).
• Transparent related-party transactions, such as the acquisition of PT Kawan Lama Inovasi in 2024.

Despite these efforts, ACES’ overall ESG score of 28 indicates room for improvement, particularly in setting long-term targets and enhancing its reporting framework.

Key Risks and Opportunities

ACES faces several potential risks and opportunities:

Upside Opportunities

• Slower-than-expected increases in operational costs.
• Economic growth in new locations enabling faster store expansion.
• Reduced competition due to competitor exits.

Downside Risks

• Regulatory changes affecting store expansion or import tariffs.
• Further depreciation of the Indonesian rupiah impacting costs.
• Execution risks if ACES ventures outside its core home improvement business.

Recommendation

Maybank Investment Bank maintains a BUY recommendation for ACES with a target price of IDR 1,150, representing a 57% upside from its current share price of IDR 755. This outlook reflects ACES’ strong growth prospects, attractive valuations, and competitive position in Indonesia’s retail market.

Conclusion

With its strategic initiatives, financial resilience, and commitment to ESG practices, Aspirasi Hidup Indonesia is well-poised to capitalize on growth opportunities in the home improvement retail sector. Investors seeking high-growth potential and stable dividend yields should consider adding ACES to their portfolio.