Aeon registered 1Q22 revenue of RM1.0bn (QoQ: +1.0%; YoY: -1.2%) and core PAT of RM28.1m (QoQ: -60.4%, YoY: +27.5%). This was in line with our and consensus expectations, accounting for 27% and 25% of respective full year forecasts. Property Management Services (PMS) recorded sales improvement (QoQ: +4.8%; YoY: +7.4%) on the back of recovery in consumer sentiment coupled with effective variable rent structure. Despite stable sales, c ore PAT staged +27.5% increase YoY on the back of (i) improved sales commission; (ii) higher temporary space rental received and; (iii) expansion in EBIT margin for PMS segment (+7.9ppt). Maintain BUY with unchanged TP of RM1.78 pegged to an unchanged 19x PE multiple of FY23 earnings.

In line. Aeon registered 1Q22 revenue of RM1.0bn (QoQ: +1.0%; YoY: -1.2%) and core PAT of RM28.1m (QoQ: -60.4%, YoY: +27.5%). This was in line with our and consensus expectations, making up of 27% and 25% of respective full year forecasts.

Dividend. None Declared. (1Q21: None).

QoQ. Revenue chalked in modest improvement by 1.0% to RM1.0bn mainly lifted by the increase in revenue from Property Management Services (PMS) segment (+4.8%). The better revenue recorded in PMS was on the back of (i) higher sales commission; (ii) higher temporary space rental and; (iii) rental income from tenants following the recovery in consumer sentiment in returning to physical malls. Retail segment recorded an increase of 0.4% attributable to higher consumer spending during CNY festive season in the quarter. Core PAT, on the other hand, fell by -60.4% to RM28.1m. This was on the back of (i) lower EBITDA margin recorded (-5.0ppt); (ii) higher effective tax rate for the quarter of 48.7% vs 25.0% in 4Q21 and; (iii) seasonal year end annual rebate recognition in previous quarter.

YoY. Top line eased by -1.2% dragged by weakness in retail segment (-2.5%) that more than offset the hike in revenue from PMS segment (+7.4%). Retail sales were affected as activities normalized with more consumers spent time outdoor and dine out rather than buying groceries for cooking at home. Despite muted sales, core PAT staged growth of +27.5% attributable to (i) improved sales commission; (ii) higher temporary space rental received and; (iii) expansion of EBIT margin for PMS segment (+7.9ppt).

Outlook. We opine that subsequent quarters would chalk in improvement leveraging on (i) full reopening of economy; and (ii) implementation of minimum wage increase that would boost the consumer disposable income. To capture the consumer spending in the coming months, the group has laid out strategy to (i) accelerate and evolve its digital shift especially to grow adoption of myaeon2go; (ii) integrating both online and offline shopping engagements with Aeon Living Zone; (iii) ramping up offering related to health and wellness; and (iv) deepening its customer experience via Aeon loyalty program and iAeon app.

Forecast. We updated our model for FY21 audited accounts and introduce FY24 forecasts.

Maintain BUY, TP: RM1.78 pegged to unchanged 19x PE of FY23 EPS. We are confident in the group’s agile approach in adapting through with changes in marketing mechanics and sustainable cost reduction structures which would provide support to margins moving forward.

Source: Hong Leong Investment Bank Research - 19 May 2022