ACES rekomendasi Beli

Ace Hardware Indonesia



Expansion on track



Better margins on higher volumes

ACES's gross margin improved to 45.5% in 2011 from 41.9% in 2010. In 2Q11, the gross margin reached its highest level of 49.6% thanks to ACES's suppliers giving the company lower prices because of higher volume purchases in relation to the huge expansion undertaken in 2011. Looking ahead, the improvement in gross margin is expected to last, with the company forecasting a sustainable margin of 45%.



Continuing to grow

ACES's growth strategy amidst strong domestic consumption suggests that 2012 will be another good year for the company. We forecast FY12F revenues to grow a brisk 26% to Rp3,142 bn, a touch higher than the company's target of Rp3 trillion. In the first quarter of 2012, the company already booked Rp718 bn of sales, reaching 23% of our full year sales forecast and slightly above the first quarter average over the past 5 years of 22%. The briskest SSG is at the company's South Kalimantan stores, +47.5% YTD and +44.6% in March 2012. The total SSG is 18.3% YTD.



Six new stores have opened YTD

As targeted, ACES has opened six new stores in the first four months of 2012. The newest store was opened on April 11th at Tebet Green Jakarta covering an area of 1,100 sqm. As a result, ACES now has a total of 59 stores spread throughout Indonesia. Looking ahead, the company plans to open another 9 stores this year, adding 30,782 sqm of floor space. The new stores will be located in Jakarta, Java (out of Jakarta) and out of Java. The next grand opening to take place will be on April 21st, 2012, in Kalimantan. For the toys business, the company will add five more stores this year, with most of them located in Jakarta. The capital cost will remain the same, that is about Rp4 million per sqm for store expansion. As such, the company will need to spend Rp123 bn on capital expenditure for store expansion this year, entirely funded from internal cash.



Maintain BUY with a TP of Rp4,800

We have adjusted our forecast numbers to reflect the company's good performance in 2011. We also lower our risk free rate assumption to 8.5% from 9% previously. However, we slightly trim our store expansion assumption for 2012 from 35,000 sqm to 30,782 sqm. All in all, we remain confident that ACE's expansion plans will allow the company to benefit from the continued strong demand in the market for its products. BUY maintained with a Target Price of Rp4,800, implying PE FY12F-13F of 25.0-20.1 x.