AEON’s 1QFY13 results were within our and consensus full year forecasts. Its revenue and earnings increased by 11.5% and 35.9% y-o-y respectively, largely driven by stronger performance from its retail and property management segments. We maintain a NEUTRAL rating on the stock, with our FV revised to MYR15.20, as we change our valuation approach to the FCF method.

In line. AEON’s revenue rose 11.5% y-o-y to MYR869.3m on the back of higher turnover from its retail and property management segments. Retail business revenue grew a healthy 10.7%, mainly underpinned by new store openings and a higher number of sales promotion days. Meanwhile, revenue from property management grew by 17.1% y-o-y, supported by new shopping centres (its Ipoh Station 18 and Manjung centres opened in FY12), higher rental rates and a better tenant mix. Net profit grew by a whopping 35.9% y-o-y to MYR51.1m, while PBT from its property management and retail arms surged by 31% and 23.7% y-o-y respectively. Sales and earnings were lower by 0.4% and 40.3% q-o-q due to the high revenue base and year-end trading rebates redeemed by shoppers in 4QFY1.

Margins improve. The company’s EBIT and PBT margins expanded by 140bps and 150bps y-o-y respectively on the back of fatter margins from both segments. PBT margins for its property management division increased to 39% from 34.9%, and from 3.4% to 3.8% for its retail business.

Maintain NEUTRAL. We continue to like AEON’s solid fundamentals, strong branding and expansion. We maintain a NEUTRAL on the stock, with a new FV of MYR15.20 based on a FCF valuation, upped from earlier FV of MYR11.80. We used the P/E in our previous valuation methodology.

Source: RHB