Aspirasi Hidup Indonesia (ACES.IJ Rp 735; BUY TP Rp 1,100) Growth Momentum Intact Despite a Normalized Jul24 SSSG

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Aspirasi Hidup Indonesia (ACES IJ)

Growth Momentum Intact Despite a Normalized Jul24 SSSG

ACES reported a normalized SSSG of 4.6% in Jul24 and 9.8% for 7M24, exceeding mgmt’s FY24 target of at least 7% and our FY24F of 7.6%.
Our channel check indicated Nitori Japan may emerge as a potential competitor, but we believe it will take time to match ACES’ scale.
We reaffirm our Buy rating on the back of ACES’ EPS growth (FY24-26F CAGR of 11%), with an unchanged TP of Rp1,100.

Normalized Jul24 SSSG of 4.6%; 7M24 SSSG: 9.8%, above FY24

ACES reported 7M24 sales of Rp4.8tr (+13.8% yoy vs our FY24F: +11.1% yoy), representing 57% of our FY24F (inline). In Jul24, ACES reported a normalized SSSG of 4.6% (vs. Jun24: 8.7% and Jun23: 14.8%), with a strong SSSG of 8.5% yoy reported from markets outside Java. By end of Jul24, 7M24 SSSG reached 9.8% (vs 7M23: 6.2%), surpassing the company’s FY24 guidance of at least 7% and our FY24F of 7.6%, supported by strong performances outside Java (12.1% yoy). ACES anticipates better SSSG in Aug24, aided by Independence Day promotions (7-27 Aug24) and low-base comparisons in Aug23. In Jul24, ACES opened two new stores in Ternate (North Maluku) and Palopo (South Sulawesi).

Nitori’s entry: Limited immediate impact on ACES’s market position

Nitori Japan (Nitori Co.,Ltd) opened its first store in Indonesia in Jul24 in Central Park Mall (Jakarta), as part of its plan to add 116 stores across Asia (total stores worldwide of 1,082 in FY23). Based on our survey, Nitori offers a range of products similar to those of ACES and Informa, but with a distinct Japanese style in detailing. However, we noted that the store’s size is smaller compared to ACE Hardware’s outlets, and Nitori provides an ambiance that combines elements of Muji and Ikea. As a newcomer in Indonesia, we believe it may take some time for Nitori to match the network, economies of scale, and range of services provided by ACES. By the end of Jun24, ACES has a total of 239 stores in Indonesia.

Maintain Buy with an unchanged TP of Rp1,100

We maintain our Buy rating on ACES with an unchanged TP of Rp1,100 (implying 20x FY25 PE, in line with the average 3yr PE). We believe ACES’ FY24-26F EPS CAGR of 11% is intact, backed by strong execution and a proven track record in merchandising. Further catalysts for ACES are 3Q24 earnings and greater clarity regarding the termination of the agreement with ACES US. The downside risk includes lower-than-expected performance of outer Java stores.

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