AEON: Higher high formation?

To gain further limelight? We see potential renewed interests in the consumer sector ahead of the tabling of Budget 2025 on 18 Oct. Overall, we expect the overall budget to bode well for the consumer sector, including potentially higher cash handouts. In light of the ongoing subsidy rationalization and improved revenue channels for the government, we believe these savings and increased revenue will support the government’s targeted subsidies, such as cash handouts via BSH and Budi Madani. Moreover, the impending civil servants' pay hike and the consumption boost from the EPF Account 3 should augur well for the domestic retail sales outlook. Additionally, market speculation regarding an increase in the minimum salary from RM1.5k to RM1.7k-2k could further boost retail spending if it materializes.

Earnings bump in FY24. To recap, AEON’s 1H24 core earnings of RM85.2m exceeded our expectation, led by growth in the PMS segment following improvement in occupancy and rental rates. Going forward, we expect PMS segment to hold up healthily with the group’s target of increasing occupancy rate to 94% by year end, coupled with the better rental renewal rates. Additionally, the four planned refurbishment of Aeon malls this year would be a further catalyst for growth. Note that the two new refurbished malls (Aeon Ayer Keroh and Aeon Cheras Selatan) generated +20% YoY revenue increase after the renovation. All in, we project AEON’s earnings to jump by 40% in FY24, followed by a further 6% growth in FY25. If this FY24 forecast materializes, it would represent the company’s strongest earnings since FY15.

Trading near uptrend support region. AEON is currently trading near its uptrend support zone of RM1.41-1.42, with additional strong support at RM1.39 (EMA100). A successful breakout above the RM1.50 resistance could drive the share price toward RM1.55-RM1.62-RM1.65, forming a higher high pattern.Cut loss at RM1.34.

Collection range: RM1.39-1.40-1.43

Upside targets: RM1.55-1.62-1.65

Cut loss: RM1.34

Source: Hong Leong Investment Bank Research - 10 Oct 2024