Date of Report: October 17, 2024
Broker: PT Maybank Sekuritas Indonesia
Overview
Aspirasi Hidup Indonesia (ACES IJ) operates as a home improvement and lifestyle retail business. It is the largest network in Indonesia within its segment, offering a diverse range of imported products and exclusive private labels. The company has maintained its position as a leader in the market through its robust merchandising strategy, which helps it to attract and retain customers.
Investment Rating and Price Target
- Recommendation: Maintain BUY
- 12-Month Price Target: IDR 950 (10% upside)
- Current Share Price: IDR 900
Business Strategy and Growth Prospects
Transition to Growth Phase
ACES has shifted from a turnaround phase to a growth phase. The company is focusing on new initiatives, such as store rebranding, which will feature modern designs. This is expected to drive double-digit EPS growth in the coming years.
Store Rebranding and Refurbishment
The company plans to rebrand all 240 stores starting January 2025, moving away from the “ACE Hardware” brand. This rebranding effort will include modern store designs intended to increase customer footfall, especially among younger shoppers aged 20-34. The renovations are expected to support projected sales growth rates of 12%, 13%, and 14% year-over-year for FY24, FY25, and FY26 respectively.
Financial Position
ACES maintains a strong financial profile:
- Free Cash Flow (FCF): High FCF projected for FY25 and FY26 (IDR 461 billion and IDR 550 billion, respectively).
- Free Float: Increased to 40.03% in September 2024, enhancing stock liquidity.
- Tax Incentives: Due to higher free float, the company benefits from a reduced corporate tax rate of 19%, which positively affects its profit forecasts.
Key Financial Metrics
- Revenue Growth: Expected 9-12% revenue growth for FY24-26.
- EBIT Margin: Anticipated to rise to 12.5-12.7% in FY24-26 from 11.3% in FY23.
- Inventory Management: ACES will maintain a longer inventory cycle of approximately 250 days, emphasizing in-store merchandise availability to meet customer needs.
Market Position and Competitive Edge
Largest Network in Indonesia
ACES stands out as the pioneer in the home improvement segment, with a unique merchandising strategy. Most of its products are imported or sourced via exclusive private labeling, differentiating it from competitors. The company’s solid branding and extensive network make it the preferred destination for home improvement solutions.
Focus on Modern and Attractive Stores
Continuous refurbishment and modern store designs are key strategies to attract the younger demographic, which constitutes a significant portion of Indonesia’s population. This approach is expected to sustain same-store sales growth (SSSG) over the forecast period.
ESG Initiatives
ACES is actively improving its Environmental, Social, and Governance (ESG) practices:
- Environment: The company sources from ISO-certified suppliers and has introduced various green initiatives, including the use of LED lighting and a ban on plastic bags in Jakarta stores.
- Social: ACES supports local SMEs by sourcing products under its Pendopo brand, available in 95% of its large-format stores.
- Governance: ACES has implemented a whistleblowing system to prevent illegal activities and maintain transparency in management.
Risks and Opportunities
Upside Potential
- Cost Efficiency: Slower-than-expected increases in operational costs (such as wages and rent) could improve profitability.
- Market Expansion: Expansion into new locations with stronger economic growth could drive faster store network growth.
- Increased Liquidity: The higher free float could lead to improved stock performance.
Downside Risks
- Regulatory Changes: New regulations limiting store expansion or increasing import tariffs could affect growth.
- Currency Depreciation: A weaker IDR could increase costs, impacting profit margins.
- Business Diversification Risks: Expansion outside its core business of home improvement may introduce execution risks.
Conclusion
The report by PT Maybank Sekuritas Indonesia maintains a positive outlook for Aspirasi Hidup Indonesia. The company’s strategic store rebranding, robust financial health, and focus on sustainable growth are expected to drive future performance, positioning it well within the competitive retail landscape.
