FOCUS Ace Hardware Company Update 07 April 2017

Transcription

1 FOCUS XXX Company Update XX XXXXX 213 FOCUS Ace Hardware Company Update 7 April 217 Mandiri Sekuritas Analyst Laura Taslim laura.taslim@mandirisek.co.id Adrian Joezer adrian.joezer@mandirisek.co.id Sector : Retail BUY (from Neutral) Current Price Rp925 Price Target Rp1,1 (+18.9%) Prev. TP:Rp97 52-wk range Rp1,4 - Rp72 Stock Data Bloomberg Code ACES IJ Mkt.Cap (Rp bn/us$ mn) 15,864 / 1,19 Issued Shares (mn) 17,15 Avg. Daily T/O (Rp bn/us$ mn) 4.4/.3 Major shareholder PT Kawan Lama Sejahtera 6.% Public 4.% EPS consensus Mansek Cons Diff 217F F F Share price performance 3m 6m 12m Absolute (%) Relative to JCI (%) (5.2) This is It The New Favor Ace Hardware (ACES) continued to post stronger than expected sales growth in two consecutive months, with encouraging pick-up in ex-java region. This is another validation of our mid-to-high-end retailer preferences. As 4Q16 EBIT has grown at 2% YoY, we think the street is too conservative in forecasting 8% 217 EBIT growth. We raised 217/18 EPS by 17%/11%, lifting our rating to Buy. Another strong month in Mar 17 with sales growth rose to 13% YoY from 12.1% in Feb 17, bringing up 1Q17 growth to 11% (from 8% in 4Q16). SSSG unexpectedly rose to 8% YoY in Mar 17, continuing its acceleration phase from 2%/8% in Jan/Feb. This resulted in a 5% SSSG for 1Q17, better than the 3.3% in 4Q16, tracking above management guidance of 3%. The strongest improvement in Mar 17 was for ex-java (to 7% from 4% in Feb 17), followed by Jakarta (to 7% from 5%) and Java (to 9% from 8%). Besides the resilient spending in highincome earners, as also evident in Mitra Adiperkasa (MAPI), we credited the improvement to commodity regions. Improvement trend in durable goods purchases index to 11 in Mar 17 (from 17 in Feb 17) based on the consumer confidence index survey also explained ACES strong performance. Could growth sustain? We think so. With 6% correlation between property presales growth and ACES s SSSG, we think the improvement in FY17 presales could support ACES products. In 1Q17, aggregate presales estimated to grow by 14% YoY, vs. FY16 s 19% drop. This should give some support, along with commodity up-cycle, toward ACES products. That said, we comfortably raised FY17 SSSG assumption to 4% from 3.5% previously. We believe the street still underestimates ACES s cost efficiency efforts, as it still persistently aims for 8% EBIT growth in FY17 despite the staggering 2% YoY growth in 4Q16. While cost efficiency efforts would continue this year, aboveinflation SSSG would also lead to better operating leverage, given the much lower minimum wage growth this year and help accelerating management s efforts to reduce inventory days. Upgrade to BUY. We raised 217/18 EPS by 17%/11% on higher SSSG and lower operating costs, making us 7%/9% ahead of street. With above-inflation SSSG and ongoing cost efficiency, we expect EBIT margin to increase to 15% in 217, the highest since 212. We raise our rating to Buy as we see inflection point on core EPS growth to 1% this year. Our new DCFbased PT of Rp1,1 implies 26x/24x 217/218 PE. FINANCIAL SUMMARY YE Dec (Rp Bn) 215A 216A 217F 218F 219F EBITDA ,15 Net Profit Fully-diluted EPS (Rp) Fully-diluted EPS growth (%) P/E Ratio (x) EV/EBITDA (x) P/B Ratio (x) Dividend Yield (%) ROAE (%) Source: Company ( ), Mandiri Sekuritas ( ) Please see important disclosure at the back of this report Page 1 of 5

2 Company Update 7 April 217 ACES - At a Glance FIGURE 1. GEOGRAPHICAL SALES BREAKDOWN 1% 9% 8% 7% 6% 5% 4% 3% 2% 1% % Jakarta Java ex Jakarta Ex Java FIGURE 2. MONTHLY SSSG BREAKDOWN PER DIVISION 15.% 1.% 5.%.% -5.% -1.% Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Jan-17 Feb-17 Jakarta Java Ex Jakarta Ex-Java Series4 Mar-17 FIGURE 3. ACES SSSG VS. PROPERTY MARKETING SALES FIGURE MONTH TRAILING INVENTORY DAYS 8% 7% 6% 5% 4% 3% 2% 1% % -1% 25% 2% 15% 1% 5% % -5% E 217E 218E Aggregate property presales growth ACES' SSSG (RHS) 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 FIGURE 5. EPS GROWTH TREND FIGURE 6. LEVERAGE TREND (Rp) (%) (1) (%) (5) (1) (15) (2) (25) (3) (35) (4) (x) 3, 2,5 2, 1,5 1, 5 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-17 Dec-18 Dec-19 Dec-2 Dec-1 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-17 Dec-18 Dec-19 Dec-2 EPS EPS Growth [RHS] Net Debt/Equity (NDE) Interest Cover [RHS] Please see important disclosure at the back of this report Page 2 of 5

3 Company Update 7 April 217 FIGURE 7. ACES MONTHLY OPERATIONAL DATA Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Jan-17 Feb-17 Mar-17 Gross sales (Rp bn) YoY -.1% 3.5% 5.9% 14.7% -.6% -4.3%.% 7.9% 5.6% 1.8% 8.9% 12.1% 13.1% Cumulative Gross Sales (Rp bn) 1,15 1,515 1,912 2,325 2,773 3,151 3,519 3,933 4,344 4, ,281 YoY 4.8% 4.5% 4.8% 6.4% 5.2% 4.% 3.5% 3.4% 3.6% 4.3% 8.9% 9.5% 11.4% YoY SSSG - Monthly Jakarta.3%.2%.7% 13.% -3.1% -5.4% -4.5% 2.2%.2% 1.6% 1.8% 4.8% 6.5% Java.6% 1.9% 3.6% 1.4% -3.3% -6.1% -1.4% 4.8% 1.7% 3.8% 2.6% 7.7% 8.6% Ex-Java 1.%.9%.2% 9.% -6.6% -5.8% -4.9% 3.7%.5% 6.8% 1.2% 3.9% 7.1% Overall.6% 1.1% 1.7% 1.9% -4.1% -5.8% -3.3% 3.7%.9% 3.9% 2.% 5.8% 7.6% YoY SSSG - YTD Jakarta 2.2% 1.7% 1.5% 3.4% 2.3% 1.3%.7%.8%.8%.9% 1.8% 3.2% 4.3% Java 2.7% 2.4% 2.7% 4.% 2.7% 1.5% 1.2% 1.6% 1.6% 1.8% 2.6% 4.9% 6.2% Ex-Java 3.9% 3.% 2.5% 3.6% 1.8%.8%.2%.6%.6% 1.2% 1.2% 2.4% 4.% Source: Company FIGURE 8. EARNINGS REVISION SUMMARY Previous New %changes Rp bn Net Sales 5, , , , % % Operating Income % 7% EBITDA % 5% Pretax Profit % 11% Net Income % 11% Core Income % 11% Margin Gross margin 48.4% 49.1% 47.8% 48.2% EBIT margin 13.5% 14.% 15.% 14.9% EBITDA margin 15.2% 15.8% 16.5% 16.6% Pretax margin 14.1% 14.7% 16.3% 16.2% Net margin 11.4% 11.8% 13.1% 13.% Core margin 11.4% 11.8% 13.2% 13.1% Source: Mandiri Sekuritas estimates Please see important disclosure at the back of this report Page 3 of 5

4 Company Update 7 April 217 Ace Hardware Profit & Loss YE Dec (Rp Bn) 215A 216A 217F 218F 219F Revenue 4,743 4,936 5,452 6,16 6,769 Gross Profit 2,254 2,352 2,65 2,92 3,288 Oper. Profit ,34 EBITDA ,15 Net Interest Interest Expense (3) (2) (1) (1) (1) Interest Income Forex Losses/Gains Net Other Pre-Tax Profit ,122 Income Tax (152) (157) (177) (195) (224) Others Minority Interests Net Profit Cash Flow YE Dec (Rp Bn) 215A 216A 217F 218F 219F Operating Profit ,34 Net Interest Depr & Amort Other expenses/income Other Gain / Loss Tax (152) (157) (177) (195) (224) Chg in Working Capital (77) (279) (163) (49) (49) Other Oper. Cash Flow 64 (2) Oper. Cash Flow Capital Expenditure (13) (277) (26) (27) (281) FCF (OPCF after Capex) Other Investing CF 7 15 CF From Investing (124) (127) (26) (27) (281) Net Chg in Debts (4) (18) Equity Funds Raised (19) Dividend (273) (263) (355) (357) (392) Other Financing CF 2 (1) CF From Financing (294) (281) (355) (357) (392) Non-Recur. Inc (Exp) Extraord. Inc(Exp) Net Change in Cash Cash at beginning Cash at End ,237 Valuation YE Dec 215A 216A 217F 218F 219F PER (x) EV/EBITDA (x) P/BV (x) P/CF (x) Dividend Yield (%) Balance Sheet YE Dec (Rp Bn) 215A 216A 217F 218F 219F Cash & ST Investment ,237 Acct. Receivable Inventory 1,522 1,59 1,712 1,73 1,74 Others Current Assets 2,467 2,822 3,11 3,35 3,695 Investments Fixed Assets ,18 Others 1, ,75 1,988 2,284 Total Assets 3,268 3,731 4,111 4,591 5,16 Curr. Liabilities Acct. Payable ST Borrowings Others Long-Term Liabilities Long-Term Payable Others Total Liabilities Shareholder s Equity 2,629 3,49 3,48 3,835 4,346 Key Ratios YE Dec 215A 216A 217F 218F 219F Growth (% YoY) Sales EBIT EBITDA Net Profit Profitability (%) Gross Profit Margin Oper. Margin EBITDA Margin Net Margin ROAA ROAE Leverage Net Debt / Equity (%) (22.8) (22.9) (2.9) (24.2) (28.3) EBITDA/Gross Int. (x) ,769. 1, ,267.9 Per Share Data (Rp) EPS CFPS BVPS DPS Please see important disclosure at the back of this report Page 4 of 5

5 Mandiri Sekuritas A subsidiary of PT Bank Mandiri (Persero) Tbk Plaza Mandiri 28 th Floor, Jl. Jend. Gatot Subroto Kav , Jakarta 1219, Indonesia General: , Fax : (Equity Sales) RESEARCH Tjandra Lienandjaja Deputy Head of Equity Research, Banking tjandra.lienandjaja@mandirisek.co.id Liliana S Bambang Property, Building Material liliana.bambang@mandirisek.co.id Adrian Joezer Consumer, Strategy adrian.joezer@mandirisek.co.id Ariyanto Kurniawan Telecom, Coal, Metal, Automotive ariyanto.kurniawan@mandirisek.co.id Bob Setiadi Construction, Toll Road bob.setiadi@mandirisek.co.id Francis Lim Quant, Health Care, Hospital francis.lim@mandirisek.co.id Yudha Gautama Mining, Plantation yudha.gautama@mandirisek.co.id Laura Taslim Retail laura.taslim@mandirisek.co.id Priscilla Thany Banking priscilla.thany@mandirisek.co.id Ferdy Wan Building Material, Industrial Est., Media ferdy.wan@mandirisek.co.id Lakshmi Rowter Research Assistant lakshmi.rowter@mandirisek.co.id Gerry Harlan Research Assistant gerry.harlan@mandirisek.co.id Audrey C. Hanzdima Research Assistant audrey.hanzdima@mandirisek.co.id Leo Putera Rinaldy Chief Economist leo.rinaldy@mandirisek.co.id Wisnu Trihatmojo Economist wisnu.trihatmojo@mandirisek.co.id Aziza Nabila Amani Research Assistant aziza.amani@mandirisek.co.id INSTITUTIONAL SALES Lokman Lie Co-Head Institutional Equities lokman.lie@mandirisek.co.id Silva Halim Co-Head Institutional Equities silva.halim@mandirisek.co.id Aditya Sastrawinata Institutional Sales aditya.sastrawinata@mandirisek.co.id Andrew Handaya Institutional Sales andrew.handaya@mandirisek.co.id Cindy Amelia P. Kalangie Institutional Sales cindy.amelia@mandirisek.co.id Feliciana Ramonda Institutional Sales feliciana.ramonda@mandirisek.co.id Kevin Halim Institutional Sales kevin.halim@mandirisek.co.id Mirna Santikara Salim Institutional Sales santikara.salim@mandirisek.co.id Oos Rosadi Institutional Sales oos.rosadi@mandirisek.co.id Zahra Aldila Niode Institutional Sales zahra.niode@mandirisek.co.id Kusnadi Widjaja Equity Dealing kusnadi.widjaja@mandirisek.co.id Edwin Pradana Setiadi Equity Dealing edwin.setiadi@mandirisek.co.id Jane Theodoven Sukardi Equity Dealing jane.sukardi@mandirisek.co.id Michael Taarea Equity Dealing michael.taarea@mandirisek.co.id RETAIL SALES Andreas M. Gunawidjaja Head Retail Equities andreas@mandirisek.co.id Boy Triyono Plaza Mandiri boy.triyono@mandirisek.co.id A. A. Damargumilang Pondok Indah Office Tower damar.gumilang@mandirisek.co.id Herianto Pondok Indah Prioritas herianto@mandirisek.co.id Hendra Riady Mangga Dua hendra.riady@mandirisek.co.id Indra Mas'ari Bandung indra.mas ari@mandirisek.co.id Yogiswara P. Yogyakarta yogiswara.perdana@mandirisek.co.id Widodo Solo widodo@mandirisek.co.id Linawati Surabaya Linawati@mandirisek.co.id Bambang Suwanto Malang bambang.suwanto@mandirisek.co.id Ruwie Medan ruwie@mandirisek.co.id Aidil Idham Palembang aidil.idham@mandirisek.co.id Yuri Ariadi Pontianak yuri.ariadi@mandirisek.co.id INVESTMENT RATINGS: Indicators of expected total return (price appreciation plus dividend yield) within the 12-month period from the date of the last published report, are: Buy (15% or higher), Neutral (-15% to15%) and Sell (-15% or lower). DISCLAIMER: This report is issued by PT. Mandiri Sekuritas, a member of the Indonesia Stock Exchanges (IDX) and Mandiri Sekuritas is registered and supervised by the Financial Services Authority (OJK). Although the contents of this document may represent the opinion of PT. Mandiri Sekuritas, deriving its judgement from materials and sources believed to be reliable, PT. Mandiri Sekuritas or any other company in the Mandiri Group cannot guarantee its accuracy and completeness. PT. Mandiri Sekuritas or any other company in the Mandiri Group may be involved in transactions contrary to any opinion herein to make markets, or have positions in the securities recommended herein. PT. Mandiri Sekuritas or any other company in the Mandiri Group may seek or will seek investment banking or other business relationships with the companies in this report. For further information please contact our number ANALYSTS CERTIFICATION: Each contributor to this report hereby certifies that all the views expressed accurately reflect his or her views about the companies, securities and all pertinent variables. It is also certified that the views and recommendations contained in this report are not and will not be influenced by any part or all of his or her compensation.