Aeon’s 1H21 core PAT of RM34.1m (1H20: core LAT of -RM2.1m), was in line with ours but missed consensus expectations at 50% and 38%, respectively. Overall sales were impacted by the closure of malls and stores due to Hotspot Identification for Dynamic Engagement (HIDE) and various MCO3.0/Phase 1 restrictions. To compare, the non-essential stores was closed for 46 days in 1H20 while 1H21 experienced longer store closure of 57 days. Reiterate HOLD, with higher TP of RM1.39 (from RM1.16) after rolling over our valuation year from mid-FY22 to FY22, based on unchanged 19x PE multiple. We reckon Aeon will chart better numbers ahead following government further relaxations on restrictions for fully vaccinated consumers.

Within our expectation but below consensus. Aeon’s 2Q21 core PAT of RM12.0m (QoQ: -45.4%, 2Q20: -RM9.6m) brought 1H21’s sum to RM34.1m (1H20: core LAT of -RM2.1m). This was in line with ours but missed consensus expectation at 50% and 38%, respectively. 1H21 core PAT figure was arrived at after adjusting for loss on disposal of PPE amounting to RM1.1m.

Dividend. None declared. (2Q20: None). 1H21: None (1H20: None).

QoQ. Revenue decreased by -13.7% to RM874.2m dragged by the fall in retailing (- 16.6%) that offset the better revenue from property management services (PMS) (+5.0%). Overall sales were impacted by the closure of malls and stores due to Hotspot Identification for Dynamic Engagement (HIDE) and various MCO3.0/Phase 1 restrictions. Core PAT fell further by -45.4% to RM12.0m attributable to higher effective tax rate by 13.6ppt (2Q21: 60.9%; 1Q21: 47.3%).

YoY/YTD. Top line was lower by -8.4% YoY/-12.0% YTD due to weaker turnover in both retailing (-12.0% YTD) and PMS segment (-11.8% YTD). The decline from retail revenue was due to softer demand during this year Chinese New Year festive season (inter-district travel restrictions) as compared to the SPLY. Additionally, the situation was aggravated by the continual closure of non-essential departments pursuant to the restrictions. To compare, the non-essential stores was closed for 46 days from (18 Mar to 3 May) in 1H20. On the other hand, 1H21 experienced longer store closure of 57 days from MCO3.0/Phase 1 restrictions. On the flipside, bottom line registered improvement of core PAT RM34.1m YTD vs losses of -RM2.1 in 1H20. This was on the back of EBITDA margin improvement by 7.0ppt YTD with the (i) effective products placement and sourcing strategy in retailing segment; and (ii) closer engagement with tenants for PMS segment.

Outlook. As highlighted, compared to the predecessor MCO, we are comforted to witness the less severe aftermath from the current restrictions thanks to the group’s experience and agility in managing through these unprecedented times. Despite that, we think it may not fully recover to the pre-pandemic level and forecast that stronger recovery will only be seen with successful containment of Covid-19. Nonetheless, recent reopening measures by the government for fully vaccinated consumers, including dine-ins and 11 types of business can open doors to them, suggests that reopening momentum is underway.

Forecast. Unchanged.

Reiterate HOLD, TP RM1.39. After rolling over our valuation year from mid-FY22 to FY22, our TP rises from RM1.16 to RM1.39 based on unchanged 19x PE multiple. We reckon Aeon will chart better numbers ahead following government’s further relaxations on restrictions for fully vaccinated consumers.

Source: Hong Leong Investment Bank Research - 30 Aug 2021