AEON yesterday announced to Bursa Malaysia that it has entered into a sales and purchase agreement with Johor Land (JLB, Not Rated) for the acquisition of freehold land in the Johor state measuring about 911,710 sq  ft  (or  20.93  acres)  for  MYR70.2m.  The  company  will  use  the  land  to build and operate a mall with a departmental store cum supermarket.

- Another mall in Johor. The purchase is in line with the Group’s strategy to maintain its market dominance in Malaysia and penetrate the growing township of Kempas in Johor Bahru. The purchase consideration for the land,  located at Bandar Dato’ Onn, Johor  Bahru,  is  MYR70.2m,  which translates  to  MYR77  per  sq  ft.  A  comparison  with  previous  land acquisitions undertaken by the Group and market values for similar lands indicates that the purchase price of MYR77 per sq ft is fair.  We believe the company has no issue funding the  deal as it is sitting on a net cash pile of MYR398.4m (as at March 2013).

- Maintain  NEUTRAL.  Given  that  the  mall,  to  be  erected  on  the  land acquired, would only be opened in the next two years – as construction typically takes about 15-18 months – we are not making any changes to our  forecasts  at  this  juncture.  Maintain  NEUTRAL,  with  an  FV  of MYR15.20  based  on  a  FCF  valuation.  We  believe  this  deal  is  a  good move for the company as it strives to enlarge its footprint in the growing township of Kempas in Johor.

Source: RHB