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Aeon capitalises on regional expansion for ongoing growth

Posted on January 2, 2012, Monday

KUCHING: With a business based on retail chains and supermarkets, local player Aeon Co (M) Bhd (Aeon) is riding on regional expansion plans in order to boost its earnings going forward.

“In the next two years, we expect Aeon  to open one outlet each in Kedah, Johor and Penang, for which the land was acquired earlier this year in both Kedah and Johor and recently in Penang.

“While the management sees more room to grow in the west coast, the group plans to penetrate the east coast of the peninsula, and Sabah and Sarawak where it has no presence,” opined OSK Research Sdn Bhd (OSK Research) in a note.

“At the same time, the group will maintain its strategy as a residential area mall and would penetrate the small towns. Apart from the stronger same store sales growth from January to November of 2.5 per cent year-on-year (y-o-y), new openings would boost Aeon’s earnings in the next two years,” it added.

Aeon recently opened one new outlet in Rawang in 2011, but had plans to open two to three more outlets per year. Two confirmed outlets were slated to open in Ipoh and Manjung in Perak this year.

To recap, in August last year, Aeon ceased to manage One Utama Shopping Mall’s phase one; and temporarily closed its department and supermarket in the mall from February to August this year for relocation.

This had led to two consecutive quarters of top- and bottom-line y-o-y contractions. Nevertheless, the group managed to bounce back in the third quarter of 2011 with sales growth of 5.8 per cent y-o-y and net profit growth of 5.5 per cent y-o-y upon reopening as a brand new anchor tenant in One Utama.

According to the report, this had subsequently reinforced the company’s expectation that an anchor tenant would attract more customers and achieve better same-store sales versus the previous year, despite a contribution of only four months this year.

“Hence, despite the eight-month closure of the One Utama outlet, which is one of the group’s best performing, we are still projecting for a 12.3 per cent y-o-y financial year 2011 net earnings growth.

“We like Aeon’s unique business model as a department store-cum-shopping mall operator which locates its outlets near residential areas and targets the mass market,” said OSK Research.

It also added that the group was capable to weather through tough economic times as witnessed through its resilient earnings during the less encouraging periods experienced this year.

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