AEON is celebrating its 30thanniversary in Malaysia this year. We continue to like the group for its valuable brand name, good fundamentals and robust expansion in the next two years. Since AEON is trading at the higher end of its historical P/E, we downgrade the stock to NEUTRAL (from Buy). We also revise our DCF-based FV to MYR15.60 (from MYR15.80), after revisiting our FY14-15 numbers.

• 30 years in Malaysia. AEON has been close to Malaysians’ hearts for 30 years, enriching lives with new and innovative ideas to enhanceconsumers’ shopping experience. Its year-long 30th anniversary celebration – themed “A New Beginning With You” – will see the group undertaking various initiatives to express its appreciation to its loyal customers. AEON ended 2013 on a good note, recording high single digit earnings growth mainly driven by better overall performance from its existing stores, as well as higher contributions from its new stores.
• Robust expansion in the pipeline. In FY14, AEON will open two new malls measuring: i) ~600,000 sq ft of net lettable area (NLA) in Bukit Mertajam, Penang, in June, and ii) ~440,000 sq ft of NLA in Taiping, Perak, respectively. The Seberang Prai City shopping centre will be closed down and relocated to the new Bukit Mertajam mall. This year, AEON will also be launching a new store at Quill City Mall, Kuala Lumpur, as well as one MaxValuoutlet at Gamuda Walk in Shah Alam, Selangor. Its existing MaxValustore in Kota Kemuning, Selangor, will be relocated to Gamuda Walk. For FY15, the group has two new shopping centres in the pipeline, ie an outlet (NLA of ~500,000 sq ft) in Klebang, Perak, and another mall (NLA of ~600,000 sq ft) in Shah Alam. Currently, the group has 27 AEON outlets and four MaxValustores.
• Downgrade to NEUTRAL. After factoring in the group’s new outlets, closure of old stores and higher capex, we trim our FY14-15 earnings by 1-3%. Our FV is adjusted lower to MYR15.60 (from MYR15.80), based on DCF valuation. Although we like AEON for its solid performance and aggressive expansion, valuations appear fair. The stock is currently trading on par with its historical P/E of 23x, which has appreciated by ~16% since our upgrade on 28 Feb. Downgrade to NEUTRAL (from Buy).

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Company Profile 
AEON operates a chain of superstores and shopping centres.

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Source: RHB