In-depth Analysis of Aspirasi Hidup Indonesia
Introduction
PT Maybank Sekuritas Indonesia provides an in-depth analysis of Aspirasi Hidup Indonesia (ACES IJ), a leader in the home improvement and lifestyle retail sector in Indonesia. This report examines the company’s transition into a growth phase, highlighting its financial performance, strategic initiatives, and future prospects.
Investment Thesis and Recommendation
The report maintains a “BUY” recommendation for ACES with a target price (TP) of IDR1,150. This valuation is based on a forecasted double-digit EPS growth for FY25-26E, coupled with a target 18x FY25E PER, aligning with its 3-year mean. The recommendation is underpinned by ACES’ strong EPS turnaround, projected to grow by +5% in FY24, +36% in FY25, and +20% in FY26. Furthermore, a decent dividend yield of 4-6% adds to the investment appeal. However, potential risks include significant IDR depreciation and lower-than-expected Same Store Sales Growth (SSSG) or EBIT margin.
Sales and Market Performance
ACES reported a solid SSSG of +4.8% YoY for October 2024, despite a high base from the previous year’s Boom Sale promotion. The business has gained significant traction outside Java, evidenced by its ability to set higher merchandise prices, resulting in an outside-Java SSSG of +5.2% YoY. In the first ten months of 2024, the company achieved sales of IDR6.9 trillion, a 13% increase YoY, aligning with market expectations.
Strategic Expansion and Growth
ACES accelerated its store launches, adding 15 new stores in the first ten months of 2024, with a focus on less saturated markets outside Java, which comprise 40% of the new stores. This strategy is expected to drive FY25E sales growth to 13% and improve the EBIT margin to 13.5%. The expansion benefits from higher profit margins outside Java due to lower salary and rental costs, and a faster payback period of 24 months.
Financial Metrics and Projections
ACES is projected to experience revenue growth of 12-14% annually from FY24 to FY26, supported by a 3-6% annual increase in sales area. The EBIT margin is expected to rise from 11.3% in FY23 to between 12.5% and 14.6% in FY24-26, driven by cost-saving initiatives. The company’s inventory holding is anticipated to remain high due to new brand launches, but it will maintain a net cash position, supported by positive free cash flow.
ESG Initiatives
ACES has been proactive in its ESG initiatives, sourcing merchandise from ISO-certified suppliers and maintaining ESG-friendly SKUs at 8.5% of the total. The company enforces energy-efficient policies and has a Clean Environment Programme, which includes distributing LED lamps and rechargeable batteries. Despite the progress, there is a need for ACES to improve its ESG framework and set medium to long-term targets.
Risks and Opportunities
Potential upside for ACES includes slower-than-expected increases in operational costs, strong economic growth in new locations, and reduced competition due to competitor exits. However, downside risks include regulatory changes affecting store expansion, increased import tariffs, and further IDR depreciation impacting costs.
Conclusion
Overall, Aspirasi Hidup Indonesia (ACES IJ) is positioned for sustained growth, leveraging its strategic expansion and strong market presence. While there are risks, the company’s proactive approach to market challenges and ESG compliance enhances its investment appeal. PT Maybank Sekuritas Indonesia’s “BUY” recommendation reflects confidence in ACES’ growth trajectory and financial resilience.
