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Ace Hardware Indonesia(ACES IJ.IDR. 1.810 BUY TP: IDR. 1,925) - 18 Januari 2021
January 19, 2021 10:40

Ace Hardware Indonesia (ACES IJ)

SSSG dipped back in Dec 20

As a result of strict PSBB to minimize holiday Covid-19 clusters, ACES’ SSSG dipped to -14.5% in Dec20 with sales of IDR772bn (+32.4% MoM and -12.2% yoy), leading to a YTD December 2020 SSSG figure of -9.3%. Jan20 should be marked with a lower figure because of the stricter PSBB from 18 December to 8 January 2021, which will be followed by Java – Bali from 11 January to 25 January. The stricter PSBB may result in a potentially heavier slump in Jan20 as malls have to close at 7.00pm. We maintain our TP at IDR1,925 despite the proven resilience of ACES under the worst PSBB conditions. Given the recent share price decline, we upgrade our call to BUY with limited upside of 10.6%. 


Still hampered by strict PSBB. December sales were tempered by the strict PSBB from 18 December to 8 January 2020. The result is a -14.5% Dec20 national figure and -18.4% in Jakarta. For the capital city, the figure slumped by 8.3p.p vs Nov20. The weakness in the trend is across the board with ex Java being the biggest decliner. Nevertheless, the Indonesian 12M20 sales of IDR7.5tn (-7.4% yoy) are still in-line with our estimates despite the tempestuous 2020. 


January 2021 to also be challengingdue to the tail-end of the holiday PSBB up until 8 January and the newly-imposed Java and Bali strict PSBB shortening the operational hours to 7.00pm only. A closer look at mall traffic indicates the traffic only inched up by 2.5% at high season post implementation when its . For ACES, its SSSG will be lowered by this new PSBB. We view that the Jan21 SSSG might be in the same region of negative teens as the Dec 20 figure of -14.5%.  


The National vaccination program has already started with the Indonesian President, Joko Widodo, getting the first shot to mark the start of the program. Options are also kept open for self-paid vaccinations to ease and expedite vaccinations although the majority of the population will be entitled to free vaccines. Given this backdrop, we believe the Ramadan and Eid momentum can still be salvaged this year, thus lifting the performance of retailers in 2021.   

Upgrade to BUY, same TP of IDR1,925 as the company has proven to be the most resilient amid the current pandemic with sales being in-line. ACES currently trades at 29.8x 2021 earnings, just above the average of its 5 year forward PE, steep but still offer some upside.

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