Tuesday, November 30

2018 a busy year for AEON, retail earnings set to improve

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KUCHING: AEON Co (M) Bhd’s (AEON) expansion plan is on track with a new mall expected to be opened this year and another is expected to be completed by next year.

Its retail earnings are also expected to improve in the first quarter of 2018 (1Q18), driven by the pre-Chinese New Year festive shopping, analysts observed.

Following a meeting with AEON’s management, the research arm of Maybank Investment Bank Bhd (Maybank IB Research) said it remained positive for a gradual recovery in AEON’s retailing earnings, premised on a gradual improvement in consumer sentiment and better retailing margin.

It also pointed out that AEON’s expansion plan is on track.

“We understand that AEON’s expansion plan is on track whereby AEON Mall Kuching, Sarawak is expected to open in April 2018.

“This will be the only planned new mall in 2018 (opened AEON Mall Bandar Dato’ Onn in Johor in 2017) and AEON is planning for another mall in Nilai, Selangor in 2019,” it said.

Apart from its ongoing major refurbishment of AEON Mall Taman Maluri in KL, which is also on track and expected to be completed in 2019, the research team noted that AEON is looking to refurbish its 1Utama, Sunway Pyramid and Tebrau City stores in 2018.

“Including the cost of the new AEON Mall Kuching, AEON estimates financial year 2018’s (FY18) capital expenditure (capex) at RM500 million,” it said.

Elsewhere, it noted that AEON intends to maintain its active promotions and discounting strategies to remain competitive and to drive sales.

It said, AEON’s FY17 same-store sales growth (SSSG) was down four per cent year-on-year (y-o-y) as compared to down two per cent in FY16. This was mainly dragged by the non-food line segments.

Looking ahead, Maybank IB Research expected a stronger 1Q18 for AEON.

It said, “We anticipate a seasonally stronger 1Q18 y-o-y revenue for the retailing segment, in conjunction with the pre-Chinese New Year festive shopping.

“However, we also expect softer operating profit margin at the retailing segment (0.2 per cent in 1Q17) due to more aggressive promotions and discounts offered during the festive shopping season.”

Overall, the research team maintained a ‘buy’ call on the stock.

It said, “We expect near-term growth to be largely backed by stronger topline at both retailing and property management services segments (from new malls, organic growth) and improvement of Retailing segment’s margin (via lower opex at new malls, better product mix).”