(ACES IJ / ACES.JK, OUTPERFORM - Upgraded, Rp920 - Tgt. Rp1,050, Consumer)
We upgrade Ace to Outperform from Underperform with a new target price of Rp1,050 (from Rp740). Reasons for our upgrade are: 1) a more conducive macroeconomic environment given declining inflation; 2) higher bargaining power with suppliers, possibly leading to higher margins; and 3) a recovery in the construction sector. We have switched our valuation methodology back to single-step DCF (16.2% WACC, 6% LTG) from 2-step DCF previously. Following this and our earnings upgrade, our target price rises to Rp1,050, implying 12.8x and 10.6x CY09-10 core earnings respectively.
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