A Rough Year but Buyback Initiation Provides Allure
Key Takeaways :
▪️In 3Q23, ARNA's sales volume witnessed a +14.5% QoQ increase, reaching 15.6mn sqm. This increase in-line with our expectations, as moderating construction material prices have aided in the recovery of purchasing power.
▪️Furthermore, the inflation rate for building materials hit its lowest level in 23 consecutive months in Sep-23 at +0.1% YoY. Looking ahead, we anticipate that the sustained recovery of consumer purchasing power will serve as a catalyst for sales volume.
▪️We assess the buyback program as a reflection of the undervalued stock price, potentially serving as a positive catalyst for the shares. Interestingly, the previous buyback periods (FY15, FY18, FY20) have yielded positive returns.
▪️We recommend BUY for ARNA IJ with a lower TP of IDR900. Despite its disappointing performance, ARNA shares are currently trading at an attractive price at around -1.4x STD PE ratio (5-year-average) of 10.1x.
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