STOCK VALUATION OF PT ACE HARDWARE INDONESIA TBK.

• Main Author: Vetra, Ertanto
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/70053
• Institution: Institut Teknologi Bandung

PT Ace Hardware Indonesia Tbk. is a publicly listed company (IDX: ACES) focusing on home improvement and lifestyle business. Since ACES’s IPO in 2007, up until 2019, the company revenue is consistently growing at 20% CAGR while the net profit expands at 27% CAGR in the same period. In early 2020, the spread of Corona Virus (Covid-19) had put immense pressure on ACES due to the closing of retail outlets, reduced operating hours, and a drop in the number of customers visiting its outlets. Consequently, ACES revenue fell from Rp. 8.1 trillion in 2019 to Rp. 6.5 trillion in 2021 while net profit declined from Rp. 1 trillion to Rp. 704 billion in the same period. This deteriorating performance was immediately responded to by the market by the steady decline of ACES’s stock price, from its all-time high of Rp. 1,890 in 2019 to Rp 610 as of September 30, 2022. Based on this business issue, the objectives of this research are to identify external and internal factors that affect ACES’s stock performance, evaluate ACES’s stock intrinsic value, and provide recommendation for current and potential investors on whether to buy, hold or sell ACES’s stock. The external analysis consists of macroeconomic analysis, PESTLE analysis, and Porter’s Five Forces analysis. Internal analysis is conducted using financial performance analysis, financial ratio analysis, and Dupont Analysis. Based on external and internal analysis, stock valuation is carried out using both discounted cash flow analysis and relative valuation. Discounted Cash Flow using three different scenarios were considered: base, worst, and best case using different assumption on sales growth, EBIT margin, and sales to capital ratio. Base case scenario resulted in intrinsic value of Rp 528.1 while worst case scenario resulted in intrinsic value of Rp 511.1 which is lower than the market share price of Rp 610. Best case scenario resulted in intrinsic value of Rp 813.8 which is 33% higher than the market share price. However, this assumes that the company can recover its performance back to the pre-Covid numbers. Therefore, based on the base case and the worst case scenario, it is concluded that currently ACES stock price is overvalued. Relative valuation was also conducted by using the P/E and P/BV of ACES compared to those of IDX Consumer Cyclical Sector as well as to those of two of ACES’s peers, namely CSAP (PT Catur Sentosa Adiprana Tbk.) and RALS (PT Ramayana Lestari Sentosa Tbk.). The P/E ratio of ACES is 15.62x which is higher than the sector’s P/E of 14.59x, and higher than CSAP and RALS P/E of 11.35x and 10.92x, respectively. While the P/BV ratio of ACES is 1.95x which is also higher than the sector’s P/BV ratio of 1.15x, and higher than CSAP and RALS P/BV of 1.66x and 0.95x, respectively. This also indicates that ACES stock price is overvalued. Therefore, based on those result, the final recommendation for investors is to sell ACES.