ACE Hardware Indonesia

(ACES IJ)
Steady progress towards recovery
As the large-scale social restrictions (PSBB) in Jakarta kick in again, with malls allowed to
operate at maximum 50% of capacity, we remain cautiously optimistic on ACES as new
products sold, e.g. kitchenware and sporting goods, have supported the company’s
sales and margin. The company is the beneficiary of consumers’ new popular lifestyle
during PSBB. We expect traffic to keep improving gradually. Despite the recent
Retail
depreciation of IDR against USD, we think that the company should be able to maintain
margin as inventory is adequate and the target market is resilient.
Company Report
August SSSG at -5.7% (vs. -8.1% in July)
September 16, 2020
ACES booked August same-store-sales-growth (SSSG) of -5.7%, better than July (-8.1%) or
June (-10.7%). Albeit still booking negative SSSG, ACES’ performance is relatively more
(Upgrade) Buy resilient than other retailers under our coverage, in our view, as evidenced by its better
sales during 2Q. According to the company, ACES’ recovery in SSSG is mostly driven by
Target Price (12M, IDR) 1,950 the gradual improvement in stores’ traffic, especially in ex-Java region, as average
selling prices (ASPs) remain stable. Jakarta remains the worst performer since July, as
Share Price (9/16/20, IDR) 1,520 the city is still imposing PSBB. Jakarta has moved into the second phase of full PSBB
after 3 months of transitional period since mid-June. Nonetheless, this time around,
Expected Return 28.3% malls are allowed to open, which further relieves the downside potential and echoes our
view on retailers’ gradual recovery.

New popular lifestyle during PSBB supports ACES’ sales

Consensus Net Profit (21F, IDRbn) 1,098 Throughout August, ACES successfully sold a higher number of lifestyle products,
NP Mirae Asset vs. consensus (21F, %) 3.5 including gardening tools, cooking utensils/kitchenware, sporting goods (bicycles), and
other similar kinds of goods sold last month. During PSBB, many people found ‘new
EPS Growth (21F, %) 32.0
normal’ activities, such as cooking, bicycling around their house, and gardening. We
P/E (21F, x) 22.9
believe that the sales of lifestyle products helped support the company’s overall margin
Industry P/E (Current, x) 17.3
(as lifestyle products’ GPM is 200bps higher than that of home improvements). In
Benchmark P/E (21F, x) 13.7
August, ACES’ sales reached IDR648bn (-3.6% YoY, +5.2% MoM), notching cumulative
Market Cap (IDRbn) 26,068.0
sales of IDR4.9tr (-5.6% YoY), in line with our projection at 63% run-rate against FY20F
Shares Outstanding (mn) 17,150.0 forecast (vs. 64% during the same period last year).
Free Float (%) 40.0
Boom sales coming up, more traffic to stores expected
Beta (Adjusted, 24M) 1.0
52-Week Low (IDR) 970 ACES will conduct a boom sale program in either September or October, which we
52-Week High (IDR) 1,890 expect will attract more customers to its stores, thus affirming our prediction for
gradual traffic recovery towards year-end. We believe, despite rising inventory in 2Q,
(%) 1M 6M 12M boom sales would not drag down the company’s overall margin as it is occationally done
Absolute -2.8 26.9 -10.1 every year.
Relative 0.0 9.2 7.9
Maintain forecasts; Upgrade to Buy
(D-1yr=100)
JCI ACES
120 We are cautiously optimistic on the company as we’ve seen how ACES is able to adapt to
110
100
changing consumers’ trend and needs. We maintain our forecasts and target price;
90 hence, we upgrade our recommendation to Buy (from Trading Buy). Our TP of IDR1,950
80
70
was derived using 2021F EPS and P/E target of 29.5x. We believe a gradual SSSG
60 recovery towards year-end remains intact. ACES is our top pick within retailer sector.
50
9/19 11/19 1/20 3/20 5/20 7/20 9/20
rt

FY (Dec.) 12/16 12/17 12/18 12/19 12/20F 12/21F

PT. Mirae Asset Sekuritas Indonesia Revenue (IDRbn) 4,935.9 5,938.6 7,239.8 8,142.7 7,805.9 9,159.0
Gross profit (IDRbn) 2,351.8 2,834.7 3,443.2 3,887.1 3,709.1 4,353.8
Trade Operating profit (IDRbn) 729.9 869.3 1,072.4 1,162.6 1,012.5 1,258.3
Christine Natasya Net profit (IDRbn) 710.6 777.7 964.6 1,030.1 859.7 1,136.7
+62-21-5088-7000 (ext.: 162) EPS (IDR) 41 45 56 60 50 66
natasya@miraeasset.co.id BPS (IDR) 178 205 247 277 306 357
P/B (x) 8.6 7.4 6.2 5.5 5.0 4.3
P/E (x) 36.7 33.5 27.0 25.3 30.3 22.9
ROE 23.3 22.2 22.8 21.7 16.4 18.5
ROA 19.0 17.6 18.1 17.4 14.8 16.7
Dividend yield (%) 1.0 1.1 1.5 1.9 1.2 1.0
Net gearing (x) -0.2 -0.3 -0.2 -0.3 -0.3 -0.3
Source: Company data, Mirae Asset Sekuritas Indonesia Research

PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.
September 16, 2020 ACE Hardware Indonesia

Figure 1. ACES’ YTD monthly SSSG Figure 2. ACES' YTD SSSG by region

(%) (%) Jakarta Java -Ex Jakarta Ex Java

15 25

20
10
15
5.7
10
5
2.5
5
0 0
-6.5
-5
-5 -7.8
-10
-9.5
-10 -7.7 -15
3/16 8/16 1/17 6/17 11/17 4/18 9/18 2/19 7/19 12/19 5/20 1/16 5/16 9/16 1/17 5/17 9/17 1/18 5/18 9/18 1/19 5/19 9/19 1/20 5/20

Source: Company data, Mirae Asset Sekuritas Indonesia Research Source: Company data, Mirae Asset Sekuritas Indonesia Research

Figure 3. ACES’ monthly SSSG and monthly revenue Figure 4. ACES’ monthly SSSG by region

(%) Monthly revenue (R) (IDRbn) (%) Jakarta Java -Ex Jakarta Ex Java
34.0
Monthly SSSG (L)
30 1,000.0

20 19.0

664 750.0
10
4.0
-4.3
0 1
500.0
-10.7 -8.7
-10 -11.0

-20
250.0
-26.0
-30 -27.7
-40 0.0 -41.0
1/18 6/18 11/18 4/19 9/19 2/20 7/20 1/18 5/18 9/18 1/19 5/19 9/19 1/20 5/20

Source: Company data, Mirae Asset Sekuritas Indonesia Research Source: Company data, Mirae Asset Sekuritas Indonesia Research

Figure 5. ACES’ monthly SSSG Figure 6. ACES’ average ticket size

(%) (IDR'000)

30 440 431.6
20 417.8
19
404.5
10 6 11 405 394.3
389.9
6 5 380.8
0 1 1 377.2
-5 -5.7 370
-10 354

-20
335
-30 -27.7

-40 300
7/17 11/17 3/18 7/18 11/18 3/19 7/19 11/19 3/20 7/20 2014 2015 2016 2017 2018 FY19 1Q20 1H20

Source: Company data, Mirae Asset Sekuritas Indonesia Research Source: Company data, Mirae Asset Sekuritas Indonesia Research

Mirae Asset Sekuritas Indonesia Research 2

September 16, 2020 ACE Hardware Indonesia

Figure 7. Inventory days

(days)
280 282

245 241
229
216
210 219

175 184

140

105

70

Source: Company data, Mirae Asset Sekuritas Indonesia Research

Mirae Asset Sekuritas Indonesia Research 3

September 16, 2020 ACE Hardware Indonesia

Table 1. ACES’ storecount

No. Date Store count Location m2
1 30-Jan-19 177th Hankam Pondok Gede, Bekasi 2,100
2 22-Feb-19 178th Mall Botania, Batam 3,500
3 15-Mar-19 179th Madiun Lawu Plaza, East Java 2,000
4 25-Apr-19 180th Grand Mall Batam, Riau 3,400
5 28-Apr-19 181st Kings Plaza Bandung 1,800
6 3-May-19 182nd Caman, Bekasi, West Java 960
7 3-May-19 183rd Jatinangor Town Square, Sumedang 2,000
8 9-May-19 184th Ciputra World, Surabaya 3,200
9 30-May-19 185th Medan 1,400
10 2-Jun-19 186th Rawa Buntu, Tangerang 900
15-Jun-19 -186 Depok, West Java (1,840)
11 23-Aug-19 186th Pasar Minggu, Jakarta 700
12 25-Sep-19 187th Pacific Place Jakarta 1,700
23-Mar-19 -187 Central Park (2,700)
13 16-Oct-19 187th Neo Soho Jakarta 2,950
14 24-Oct-19 188th Living Plaza Jababeka Bekasi, West Java 4,650
15 18-Nov-19 189th Taman Anggrek Jakarta 3,740
16 21-Nov-19 190th Rabam Kendari, Sulawesi Tenggara 1,780
17 28-Nov-19 191st Jambi Prima Mall, Jambi 1,600
18 29-Nov-19 192nd Deli Park, Medan 2,700
19 30-Nov-19 193rd Duta Mall, Kalimantan 2,000
20 7-Dec-19 194th Plaza Asia, Sumedang, West Java 1,490
21 17-Dec-19 195th Pangkal Pinang, Bangka Belitung 1,800
22 19-Dec-19 196th Java Mall, Semarang, Central Java 1,500
23 27-Dec-19 197th Tamini Square, Jakarta 1,750
1 11-Jan-20 198th Mall Boxies, Bogor, Jawa Barat 2,200
2 29-Feb-20 199th Gorontalo 3,000
3 12-Mar-20 200th Makassar, Sulawesi 4,150
4 13-Mar-20 201st Mojokerto, East Java 2,300
5 24-Apr-20 202nd Yogyakarta (Java ex Jakarta) 2,000
6 12-May-20 203rd Living Plaza Pamulang 2,930
7 22-May-20 204th Citimall Dumai, Riau 2,660
8 26-May-20 205th Medan Fair mall, Sumatera 2,140
10-Jun-20 -205 Living Plaza Simpang Lima, Jawa Tengah (3,800)
9 24-Jun-20 205th Queen City Mall, Semarang 7,200
10 3-Jul-20 206th The Sarawangan, Depok, Jawa Barat 2,270
11 17-Jul-20 207th Citra Raya Tangerang 2,250
2-Aug-20 -207 Kuningan City (1,200)
Source: Company data, Mirae Asset Sekuritas Research

Mirae Asset Sekuritas Indonesia Research 4

September 16, 2020 ACE Hardware Indonesia

Figure 8. ACES’s presence on Tokopedia

Source: Internet, Mirae Asset Sekuritas Indonesia

Figure 9. ACES’ presence on Shopee

Source: Internet, Mirae Asset Sekuritas Indonesia

Mirae Asset Sekuritas Indonesia Research 5

September 16, 2020 ACE Hardware Indonesia

ACE Hardware Indonesia (ACES/Buy/TP IDR1,950)

Statement of Financial Condition

Income Statement (Summarized)
(Summarized)
(IDRbn) 12/18 12/19 12/20F 12/21F (IDRbn) 12/18 12/19 12/20F 12/21F
Revenue 7,240 8,143 7,806 9,159 Assets
COGS 3,797 4,256 4,097 4,805 Cash 799 1,255 1,626 1,944
Gross Profit 3,443 3,887 3,709 4,354 Receivables 43 96 72 81
Opex (2,371) (2,725) (2,697) (3,096) Inventories 2,520 2,653 2,301 2,686
Operating Profit 1,229 1,305 1,070 1,373 Others 735 581 553 649
Other income/(expenses) 157 143 57 115 Total current assets 4,096 4,584 4,552 5,360
Profit before income tax 1,203 1,280 1,044 1,369 Fixed assets - net 801 502 819 894
Income tax expenses (226) (243) (178) (233) Others 424 489 447 537
Minority interest 12 7 7 (1) Total NC assets 1,225 1,336 1,266 1,431
Net profit 965 1,030 860 1,137 Total assets 5,321 5,920 5,819 6,790
Liabilities and equity

Growth (%) ST bank loans and CM 115 - 16 18

Revenue 21.9 12.5 -4.1 17.3 Accounts payables 198 178 171 200
EBITDA 23.9 7.8 -11.1 22.6 Others current liabilities 318 390 267 326
Net profit 24.0 6.8 -16.5 32.2 Total current liabilities 631 568 453 545
Profitability (%) Others 455 594 117 117
Gross margin 47.6 47.7 47.5 47.5 Total NC liabilities 455 610 117 117
Operating margin 17.0 16.0 13.7 15.0 Total liabilities 1,086 1,178 570 662

EBITDA margin 16.0 15.4 14.2 14.9 Shareholders' equity 4,235 4,742 5,249 6,129

Cash Flow (Summarized) Ratios (Summarized)

(IDRbn) 12/18 12/19 12/20F 12/21F (x) 12/18 12/19 12/20F 12/21F
CF from operation Current ratio 7.0 6.5 8.1 10.0
Net profit 965 1,030 860 1,137 Quick ratio 1.3 2.4 3.7 3.7
Depreciation/amortization 80 53 84 91 Net debt to equity -0.2 -0.3 -0.3 -0.3
Change in working capitals (596) (150) 279 (377) Interest coverage 26.2 294.0 209.5 287.8
Others (252) 245 (441) (114) Cash conversion cycle 194.2 209.4 192.8 191.7
CF from operation 197 1,177 781 737 (%)
CF from Investments ROE 22.8 21.7 16.4 18.5
Net capex (176) 246 (55) (165) ROA 18.1 17.4 14.8 16.7
CF from investments (176) 246 (55) (165)
CF from financing activity Valuations
Increase/(decrease) in debt 115 (99) (0) 3 Dividend yield (%) 1.5 1.9 1.2 1.0
Increase/(decrease) in equity 82 6 (45) 1 P/E ratio (x) 27.0 25.3 30.3 22.9
Dividend payments (389) (484) (309) (258) P/BV ratio (x) 6.2 5.5 5.0 4.3
CF from financing activity (192) (577) (354) (254) EV/EBITDA (x) 21.9 19.9 22.0 17.7
Increase (Decrease) in Cash (171) 847 372 318
Beginning balance 902 799 1,255 1,626
Ending balance 799 1,255 1,626 1,944
Source: Company data, Mirae Asset Sekuritas Indonesia Research
estimates

Mirae Asset Sekuritas Indonesia Research 6

September 16, 2020 ACE Hardware Indonesia

APPENDIX 1

Important Disclosures & Disclaimers

2-Year Rating and Target Price History
Company (Code) Date Rating Target Price (IDR) ACES Analyst's TP
ACES IJ 9/16/2020 Buy 1,950
2,400
8/3/2020 Trading Buy 1,950
7/16/2020 Trading Buy 1,920
5/3/2020 Hold 1,450 1,900
2/4/2020 Hold 1,575
12/6/2019 Hold 1,700 1,400
11/1/2019 Hold 1,720
7/31/2019 Hold 2,000
4/2/2019 Trading Buy 2,000 900
12/5/2018 Trading Buy 1,900 Sep-18 Sep-19 Sep-20
11/1/2018 Trading Buy 1,560

Stock Ratings Industry Ratings

Buy Relative performance of 20% or greater Overweight Fundamentals are favorable or improving
Trading Buy Relative performance of 10% or greater, but with volatility Neutral Fundamentals are steady without any material changes
Hold Relative performance of -10% and 10% Underweight Fundamentals are unfavorable or worsening
Sell Relative performance of -10%
* Ratings and Target Price History (Share price (----), Target price (----), Not covered (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆))
* Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months.
* Although it is not part of the official ratings at PT Mirae Asset Sekuritas Indonesia, we may call a trading opportunity in case there is a technical or short-
term material development.
* The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of
future earnings.
The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic
conditions.

Equity Ratings Distribution

Buy Trading Buy Hold Sell
Equity Ratings Distribution 38% 20% 35% 7%
*Based on recommendations in the last 12-months (as of June 30, 2020)

Disclosures
As of the publication date, PT Mirae Asset Sekuritas Indonesia, and/or its affiliates do not have any special interest with the subject company and
do not own 1% or more of the subject company's shares outstanding.

Analyst Certification
Opinions expressed in this publication about the subject securities and companies accurately reflect the personal views of the Analysts primarily
responsible for this report. Except as otherwise specified herein, the Analysts have not received any compensation or any other benefits from the
subject companies in the past 12 months and have not been promised the same in connection with this report. No part of the compensation of
the Analysts was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report but, like all
employees of PT Mirae Asset Sekuritas Indonesia, the Analysts receive compensation that is impacted by overall firm profitability, which includes
revenues from, among other business units, the institutional equities, investment banking, proprietary trading and private client division. At the
time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of the Analyst or PT
Mirae Asset Sekuritas Indonesia except as otherwise stated herein.

Disclaimers
This report is published by PT Mirae Asset Sekuritas Indonesia (“Mirae Asset”), a broker-dealer registered in the Republic of Indonesia and a
member of the Indonesia Exchange. Information and opinions contained herein have been compiled from sources believed to be reliable and in
good faith, but such information has not been independently verified and Mirae Asset makes no guarantee, representation or warranty, express
or implied, as to the fairness, accuracy, completeness or correctness of the information and opinions contained herein or of any translation into
English from the Bahasa Indonesia. If this report is an English translation of a report prepared in the Indonesian language, the original Indonesian
language report may have been made available to investors in advance of this report. Mirae Asset, its affiliates and their directors, officers,
employees and agents do not accept any liability for any loss arising from the use hereof. This report is for general information purposes only and
it is not and should not be construed as an offer or a solicitation of an offer to effect transactions in any securities or other financial instruments.
The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of the local business environment,
its common practices, laws and accounting principles and no person whose receipt or use of this report would violate any laws and regulations or
subject Mirae Asset and its affiliates to registration or licensing requirements in any jurisdiction should receive or make any use hereof.
Information and opinions contained herein are subject to change without notice and no part of this document may be copied or reproduced in
any manner or form or redistributed or published, in whole or in part, without the prior written consent of Mirae Asset. Mirae Asset, its affiliates
and their directors, officers, employees and agents may have long or short positions in any of the subject securities at any time and may make a
purchase or sale, or offer to make a purchase or sale, of any such securities or other financial instruments from time to time in the open market or

Mirae Asset Sekuritas Indonesia Research 7

September 16, 2020 ACE Hardware Indonesia

otherwise, in each case either as principals or agents. Mirae Asset and its affiliates may have had, or may be expecting to enter into, business
relationships with the subject companies to provide investment banking, market-making or other financial services as are permitted under
applicable laws and regulations. The price and value of the investments referred to in this report and the income from them may go down as well
as up, and investors may realize losses on any investments. Past performance is not a guide to future performance. Future returns are not
guaranteed, and a loss of original capital may occur.

Distribution
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All Other Jurisdictions: Customers in all other countries who wish to effect a transaction in any securities referenced in this report should contact
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subject Mirae Asset and its affiliates to any registration or licensing requirement within such jurisdiction.

Mirae Asset Sekuritas Indonesia Research 8

September 16, 2020 ACE Hardware Indonesia

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Mirae Asset Sekuritas Indonesia Research 9