Deep Dive Analysis of Listed Companies

Broker: PT Maybank Sekuritas Indonesia

Date of Report: November 20, 2024

Aspirasi Hidup Indonesia (ACES IJ): A Promising Future in Home Improvement Retail

Aspirasi Hidup Indonesia, known for its pioneering efforts in the home improvement retail sector, has maintained a stronghold in Indonesia with a vast network of stores. The company has transitioned into a growth phase, showing promising double-digit EPS growth forecasts for FY25-26. The target price (TP) remains at IDR1,150, based on a target 18x FY25E PER, aligning with its 3-year mean. The company offers a decent dividend yield ranging from 4-6%, and analysts maintain a “BUY” recommendation.

Strong Performance and Expansion Strategies

Despite a high Same Store Sales Growth (SSSG) base in October 2023, ACES reported a favorable SSSG of +4.8% YoY in October 2024. This growth is noteworthy given the competitive market conditions. The company’s strategic pricing outside Java, with a 4-12% markup compared to Java, has bolstered its performance, achieving a +5.2% YoY SSSG outside Java in October 2024.

ACES’ sales for the first ten months of 2024 reached IDR6.9 trillion, aligning with expectations and forming a significant portion of the forecasts. This performance was supported by four new store openings and a thematic promotion by a private label brand, enhancing brand recognition.

Expanding in Less Saturated Markets

With a focus on less saturated markets, ACES accelerated its store launches, particularly outside Java, accounting for 40% of new stores in 10M24. This expansion is expected to fuel growth, with sales growth projected to accelerate to 13% in FY25E. The outside-Java operations promise higher profit margins due to lower salary and rental costs, along with a faster payback period.

Challenges and Risks

The main downside risks include significant IDR depreciation and lower-than-expected SSSG or EBIT margin. Despite these challenges, the consistent outperformance outside Java and strategic store expansions are positive indicators for sustained growth.

Value Proposition and Financial Metrics

ACES boasts a unique merchandising strategy, with many products imported or under exclusive private labeling rights. Its dominance in the home improvement segment, coupled with potential growth in home ownership, suggests sustainable returns. However, profit margins face pressure from currency depreciation and high fixed costs.

The company expects 12-14% annual revenue growth in FY24-26, supported by sales area expansion. Inventory levels are projected to remain high due to new brand inventories, but positive free cash flow is anticipated to keep the company net cash positive over the next few years.

Environmental, Social, and Governance (ESG) Initiatives

ACES has been proactive in its ESG efforts, sourcing from ISO-certified suppliers and enforcing energy-efficient policies. Social initiatives include local sourcing from SMEs and comprehensive employee training programs. However, there is room for improvement in governance, particularly with board composition and related-party transactions.

Conclusion

Aspirasi Hidup Indonesia (ACES IJ) is poised for growth with its strategic market expansion and robust operational framework. The company’s innovative approach in merchandising and focus on less saturated markets are key drivers for its future success. While challenges remain, the outlook for ACES is promising, supported by its comprehensive ESG initiatives and strategic financial management.