Ace Hardware Indonesia (ACES IJ) Dec-18: finishing strong
Event
Ace Hardware Indonesia (ACES) released its Dec-18 sales figures, which was the highest monthly sales figure in ACES’ history. Overall, we deem the result as in line with our expectation.
Our Take
Dec-18 SSSG jumped to highest point in 2018. ACES’ Dec-18 SSSG jumped to 19.0% vs Nov-18: 11.1%, with widespread growth seen on all regions. The Dec-18 SSSG of Jakarta/Java ex Jkt/Outside Java regions posted 7-8ppts MoM improvement to 16.5%/19.6%/20.4% respectively. While on cumulative basis, ACES 12M18 SSSG reach 13.5%, in line with our expectation.
Dec-18 Revenue: breaking new record high. ACES Dec-18 revenue reached IDR836bn, up by +43.6% MoM (due to seasonality effect) and grew by +29.2% YoY. This is ACES’ highest monthly revenue ever, which brings 12M18 revenue to IDR7.1tn (+23.3% YoY), slightly above our FY18F estimate (102% of our FY18F sales estimates).
Strengthening Rupiah should ease concern on ACES margin. In Oct-18, ACES share price down significantly by -15.1% in two weeks, mainly over the concern of Rupiah depreciation to above IDR15,000/USD. Now that the Rupiah has appreciated back to the level of IDR14,000/USD, we believe the investor concern over the impact of Rupiah depreciation towards ACES margin should ease.
Fairly valued; downgrade to HOLD-OPF. ACES has appreciated by 10.4% over the last week, resulting in limited upside toward our target price. We maintain our target price at IDR1,765/share, implying 27.3x of 2019F EPS (+2 std deviation from five-years average) and 1.1% upside. Key risk toward our call includes higher or lower-than-expected SSSG and currency volatility.
