Fast-growing retail category. We believe structural trends are compelling and should serve as tailwinds for the ASEAN home improvement sector. A positive demographic profile where millennials are starting to buy homes, rising disposable incomes, urban flight and decentralisation driven by the COVID-19 pandemic, as well as e-commerce support, would all contribute to further growth.

ASEAN home improvement is underpenetrated. The ASEAN home improvement sector is a ~US$6.7 bn industry that is relatively underpenetrated and has ample growth opportunities. Home improvement spending per capita as well as home improvement retail space per capita both remain low versus the levels in more developed markets. We see the sector delivering a five-year CAGR to 2025 of ~9%, driven by Indonesia and the Philippines which are expected to have CAGRs of ~13% and ~10%, respectively.

Home improvement in the limelight. The sector has been gaining interest, as it has been seen as a key beneficiary of the COVID-19 crisis, with more people spending longer times at home. Moving forward, we believe the key drivers to watch out for are new and meaningful store openings, healthy same store sales growth which should accelerate from a low base in 2020, and margin improvements.

Top picks within ASEAN. Our top picks within ASEAN include MRDI in Malaysia and ACES in Indonesia for their strong growth and return profiles. We also like HOME in the Philippines, HMPRO in Thailand, and DFI in Singapore. We are also raising our target prices for WLCON from P22 to P24 and for GLOBAL from Bt27 to Bt28.50.