We reiterate our OUTPERFORM rating for ACG despite cutting our TP by 50% as we (1) reduce our aggregate 2022F-2024F NPAT by 22%, (2) increase our WACC from 12.8% to 14.7%, and (3) now include a multiple-based valuation method that better reflects the company’s short-term outlook as well as the uncertainty around the liquidity of property developers that could affect home furnishing demand.
- Our lower NPAT forecast is due to our more pessimistic outlook on demand from exports, new homes and the furnishing of existing homes. We cut our aggregate 2022F-2024F revenue by 14%. We also forecast 2023 revenue and NPAT to drop 10% YoY and 14% YoY, respectively.
- ACG’s financial condition is healthy with a net cash/equity ratio of 21% and cash ratio of 1.1x as of end-Q3 2022. We forecast net financial income to account for 20% of aggregate 2022-2023F PBT. ACG’s sales to property developers accounted for 15% of its revenue in 2021. -