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Danareksa Equity Snapshot - ACES, 13 Februari 2020
February 13, 2020 09:34

Ace Hardware Indonesia

Uptick from New Year’s Flooding and CNY

ACES’ YTD SSSG ticked up as reflected in Jan 20’s sales of IDR709.6bn, achieving 7.7% of our 2020 sales forecast, i.e. in-line. The yoy growth hit double digits again at 10.7% yoy mainly driven by the impact from the flooding in the Greater Jakarta area in the 1st week of January 2020 plus Chinese New Year moving to Jan 20 as opposed to Feb 19. SSSG was 5.4% in Jan 20, up from 1.1% in Dec19, driven by Jakarta SSSG at 6.1%, while the other areas which booked growth of +5% tracked the same growth trajectory as 2019’s SSSG of 5.5%. We maintain our HOLD call as the performance is in-line with our expectation that performance will continue to taper in 2020, and the valuation is fair at this juncture.

Robust Jan20 SSSG may continue. SSSG increased significantly from 1.1% in Dec19 to 5.4% in 1M20. We suspect this was due to Chinese New Year sales which fell in January rather than in Feb last year. More high value items were sold in stores especially in the Greater Jakarta area as the capital was struck by flooding in the 1st week of January 2020. Jan 20’s SSSG marked the continuation of last year’s 2019 SSSG of 5.5%, while Feb 20’s performance will also be lifted by the impact of the Corona Virus Outbreak which surfaced in late January 2020 till the present date pushing sales of N-95 masks.

More promotions to celebrate festivities. Promotions kicked off with Year End Sales spanning to 7th Jan 2020, which coincided with the flooding in Jakarta; thus the discounts could be fully utilized by shoppers. This was followed by its Silver Year anniversary from 8th Jan to 4th Feb and followed up by Ace 25 year Beyond Helpful stretching to 3rd March 2020. The anniversary promotions encompassed a vast array of SKUs, comparable to the Ace Boom Sale (from March to April), and they will generate more footfall to ACES stores. We believe this shall mean that monthly SSSG might be lifted and sustained at north-of-5% through-out 1Q20.

Maintain HOLD, TP of IDR1,550. We maintain our HOLD call on the company as we still see the monthly result is in-line with our forecast and, while we still foresee normalization of this year’s SSSG, we feel ACES is now fairly valued. ACES is trading at 24.0x 2020 PE or slightly above its 5 years forward earnings mean. The risks to our call are better-than-expected SSSG and margins improvements, rupiah appreciation, and a significant improvement in purchasing power.

… read more 20200213 ACES