Review

• Aeon 1HFY24 core earnings of RM84.8mn came in within our expectations at 50% but exceeded consensus’ estimates at 59%.

• 1HFY24 core earnings rose 19.8% YoY, while revenue increased by 2.3% YoY to RM2.2bn. The better earnings in 1HFY24 were driven by higher customer spending and effective cost management. As a result, PBT margin rose by 1.2%-pts to YoY 6.4%.

• For 2QFY24, revenue dropped marginally by 1.2% YoY to RM1.0bn, due to the timing of the festive season (early Ramadan sales in 2024). Meanwhile, core earnings declined by 13.2% YoY to RM26.9mn, attributable to the weaker top line.

• Sequentially, quarterly core net profit dipped by 53.5% QoQ, while revenue decreased by 12.5% QoQ. The weaker QoQ results are largely due to the stronger performance in 1QFY24.

• Retail Segment. 2QFY24 EBIT plunged by 94.6% YoY to RM0.2mn, attributed to a 1.2% YoY decline in festive sales to RM836.8mn. Cumulatively, 1HFY24 revenue grew by 0.7% YoY to RM1.8bn, while EBIT rose by 29.4% YoY to RM54.2mn, thanks to higher consumer spending and improved cost management.

• Property Management Segment. 1HFY24 EBIT increased by 16.7% YoY to RM147.8mn, in tandem with a revenue growth of 10.9% YoY to RM371.0mn. The improvement was driven by an 8.8% rise in tenant sales following renovations of Aeon malls. Separately, 2QFY24 revenue rose by 8.9% YoY to RM184.1mn, while EBIT climbed by 16.8% YoY to RM79.8mn. The growth in 2QFY24 was due to higher occupancy rates and successful rental renewals.

• No dividend was declared for the quarter under review.

Impact

• Maintain our earnings estimates at this juncture, pending further insights from an analyst briefing today.

Outlook

• In 2HFY24, Aeon will focus on boosting consumer spending by offering a diverse product range and enticing promotional deals. As a result, we maintain a positive outlook for 2HFY24, supported by effective cost optimisation and ongoing reward programs designed to stimulate the topline growth for the group.

Valuation

• We have put our BUY call Under Review pending an analyst briefing today while keeping the target price unchanged at RM1.68/share, based on DDM valuation approach (k: 7.1%; g: 3.0%).

Source: TA Research - 30 Aug 2024