Investment Highlights

• 3QFY17 earnings increased +71.6% to RM9.3m but lagged our and consensus expectations

• 9MFY17 profit margin rose by +0.1ppts

• Retailing segment posted a loss

• Property management recorded encouraging results

• We maintain our NEUTRAL stance with a revised TP of RM2.02

Lagged our and consensus expectations. Aeon Co’s 3QFY17 earnings increased by +71.6% yoy to RM9.3m. Nevertheless, the earnings declined by -63.2% qoq. While the cumulative 9MFY17 earnings increased by +7.6% yoy to RM57.3m, this lagged our and consensus expectations at 57.4% and 52.1% of full year FY17 forecasts respectively.

9MFY17 profit margin increase. The group’s 3QFY17 revenue decreased marginally by -0.3%yoy to RM962.7m. In contrast, the group’s 3QFY17 earnings increased significantly by +71.6% yoy to RM9.3m mainly due better operating profit margin achieved of 2.8% (an increase of +0.5ppts yoy).

Retailing segment posted a loss. Retailing segment revenue for the quarter registered at RM816.5m, which was lower by -1.7% yoy due to the reduction of members’ day promotion. Consequently, the segment recorded a loss of RM12.2m. Nonetheless, this is an improvement from the RM14.1m loss recorded in the corresponding quarter. The improvement is a result of the group’s cost efficiency efforts.

Property management recorded encouraging results. Revenue from its property management segment recorded a growth of +7.6% yoy to RM160.2m mainly due to contributions from new shopping malls that were opened last year. Consequently, earnings increased by +4.1%yoy to RM53.3m mainly due to the opening of these new malls.

Prospects. The retail segment performance fell into the red again in the 3QFY17 after the encouraging performance recorded in the last quarter which was mainly due to the festive season.

Source: MIDF Research - 24 Nov 2017