New Stores Boosted Sales
ACES has aggressively opened 8 new storesout of 10 – 14 that are planned for this year. The newest store was open mid July in Jember, East Java, bringing the total number of stores to 135. We believe newly opened stores have significantly boosted net sales to IDR 2.76 tn (+18.05% YoY) which represented 50.5% of our FY17 forecast.
Toys was the fastest growing segment (+40.61% YoY) followed by Lifestyle (+23.63% YoY) and Home Improvement (+13.67% YoY).By contribution to net sales, Home improvement remained the biggest contributor with 56.16%.
ACES also managed to keep its operating costs in check. Consequently, operating profit margin (OPM) picked up to 14.79% from 12.59% in 1H16. Net profit margin (NPM) improved to 11.84%, compared to 9.95% in the same period last year.
We nudged our FY17 net sales forecast higher from IDR 5.25 tn to IDR 5.47 tn (+4.5%). We revised up our net income forecast from IDR 624 bn to IDR 803 bn (+28.68%) in the wake of strong 1H17 results.
We expect ACES to carry this positive momentum well into the second half of the year. In our view, ACES so far has emerged relatively unscathed from recent slump that pummeled its peers in the retail industry (Figure 5).
Rating and Valuation
We downgraded our rating to SELL due to recent price movement. However, we raise the 12-month forward target price from IDR 800 to IDR 1,035, translating into 21.86x FY17E P/E. ACES currently is traded at its 4 year historical average P/E of 22.5x.