Aeon Co. (M) Bhd

$AEON / 6599 (AEON CO. (M) BHD)
Research by TA

$AEON / 6599 (AEON CO. (M) BHD)
Research by RHB

$AEON / 6599 (AEON CO. (M) BHD)
Research by MAYBANK

$AEON / 6599 (AEON CO. (M) BHD)
Research by KENANGA

$AEON / 6599 (AEON CO. (M) BHD)
Research by TA

$AEON / 6599 (AEON CO. (M) BHD)
Research by HLIB

*IBs Budget 2025 Reports Summary*

*Report Titles*:
- *HLIB*: A Mixed Budget Bag
- *Kenanga*: No Sashimi, No Biggie
- *MIDF*: Turning Fiscally Conservative
- *Affin Hwang*: Moving Towards Fiscal Responsibility
- *TA Securities*: Pragmatic Budget to Sustain Economic Resilience
- *UOBKH*: Embraced Stricter Fiscal Consolidation
- *CIMB*: New Dividend Tax
- *Phillip*: Building Stronger Foundations
- *RHB*: Revitalising The Economy, Driving Transformation, Advancing Public Well-Being
- *Maybank*: Fortifying MADANI Economy
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*Overall Tone*:
- *HLIB*: Cautiously positive, with a focus on fiscal consolidation but concerned about higher costs and new taxes.
- *Kenanga*: Cautiously optimistic, appreciating the government's focus on fiscal discipline and green initiatives.
- *MIDF*: Balanced, highlighting the government’s fiscal prudence and continued support for key sectors.
- *Affin Hwang*: Cautiously positive, reflecting optimism for long-term fiscal consolidation, tempered by concerns over subsidy rationalization and higher wage costs.
- *TA Securities*: Positive, viewing the budget as pragmatic and focused on sustaining economic resilience.
- *UOBKH*: Neutral to slightly negative, noting stricter fiscal discipline but modest expansionary measures that set the foundation for sustainable growth.
- *CIMB*: Neutral to slightly negative, due to new taxes on dividends and increased labor costs for certain sectors.
- *Phillip*: Neutral, with a cautious outlook and minimal excitement for equities.
- *RHB*: Neutral to slightly positive, highlighting fiscal discipline, subsidy rationalization, and key infrastructure investments.
- *Maybank*: Positive on fiscal consolidation and pro-growth, with no major surprises for businesses.
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*KLCI Target*:
- *HLIB*: 1,700 (no revision)
- *Kenanga*: 1,760 (no revision)
- *MIDF*: 1,750 (no revision)
- *Affin Hwang*: 1,730 (no revision)
- *TA Securities*: 1,690 (no revision)
- *UOBKH*: 1,735 (no revision)
- *CIMB*: 1,732 (no revision)
- *Phillip*: 1,700 (no revision)
- *RHB*: 1,700 (no revision)
- *Maybank*: 1,720 (2024 no revision), 1,840 (2025 no revision)
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*Winners*:
- *HLIB*: Construction (Gamuda, IJM), consumer (AEON, PADINI), ESG (Solarvest, Samaiden), REITs (SunREIT).
- *Kenanga*: Consumer (MR DIY, AEON, Padini), ESG (BURSA, SLVEST), property (Mah Sing), construction (Gamuda).
- *MIDF*: Construction, consumer, healthcare, renewable energy sectors.
- *Affin Hwang*: Construction (Gamuda, IJM), consumer (MR D.I.Y.), ESG sectors (SLVEST, Press Metal).
- *TA Securities*: Construction (Gamuda, IJM), consumer (AEON, PADINI), healthcare (Duopharma, KPJ), insurance.
- *UOBKH*: Consumer (Mr DIY, 99 Speedmart), construction (flood mitigation projects, Penang LRT), and green/ESG sectors (carbon tax).
- *CIMB*: Construction, healthcare, property, and gaming sectors.
- *Phillip*: Technology, gaming (GENM), renewable energy (Solarvest, PEKAT), EMS (NationGate), and healthcare (KPJ).
- *RHB*: Construction (Gamuda, Sunway Construction), property (Sime Darby Property, Mah Sing), consumer (Mr DIY), and REITs (omission of luxury goods tax).
- *Maybank*: Construction (Penang LRT, East Malaysia projects), property (JSSEZ, Forest City), consumer (B40 benefit from subsidies), renewable energy (solar, carbon initiatives), aviation, gaming.
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*Losers*:
- *HLIB*: Labor-intensive sectors like EMS and gloves due to wage cost pressures.
- *Kenanga*: Tech and glove sectors due to higher labor costs.
- *MIDF*: Labor-intensive industries facing challenges with subsidy rationalization.
- *Affin Hwang*: Labor-intensive industries like plantations and technology may face margin pressures due to wage increases and upcoming carbon taxes.
- *TA Securities*: Labor-intensive sectors like plantations and manufacturing due to wage hike pressures.
- *UOBKH*: Labor-intensive sectors (plantations, technology) and steel, iron, and energy sectors (carbon tax impact in 2026).
- *CIMB*: Plantation, technology, and rubber glove sectors due to higher minimum wage and foreign worker costs.
- *Phillip*: EMS, plantation, and manufacturing sectors face challenges from labor costs.
- *RHB*: Utilities (TNB, Malakoff, PetGas, and MISC due to carbon tax), Oil & gas (PetDag on targeted subsidy of RON95), plantation (higher foreign worker levies), and technology sectors facing cost pressures from higher labor costs.
- *Maybank*: Technology (OSAT and EMS face margin compression from labor costs), plantation (higher labor cost), oil & gas (potential capex deferrals).

$GAMUDA / 5398 (GAMUDA BERHAD) $IJM / 3336 (IJM CORPORATION BERHAD) $AEON / 6599 (AEON CO. (M) BHD) $MRDIY / 5296 (MR D.I.Y. GROUP) $SLVEST / 0215 (SOLARVEST HOLDINGS BERHAD)

$AEON / 6599 (AEON CO. (M) BHD)
Research by RHB

$AEON / 6599 (AEON CO. (M) BHD)
Research by Kenanga

$AEON / 6599 (AEON CO. (M) BHD)
Research by TA
BUY – TP RM1.68

" Promising FY24”

Post Aeon’s 2Q24 investors briefing, we are maintaining our earnings estimates and Buy recommendation on the stock, with an unchanged target price of RM1.68/share, based on DDM valuation (k: 7.1%; g: 3.0%). We remain optimistic about the outlook for the 2H24, anticipating continued resilience in the property segment and improved profitability in the retail segment due to ongoing cost management initiatives.

Analyst:
Liew Yi Jiet
yjliew@ta.com.my

$AEON / 6599 (AEON CO. (M) BHD)
Research by RHB
Buy - TP RM1.75

"Decent Showing Despite Soft Seasonality; U/G To BUY"

Upgrade to BUY from Neutral, new MYR1.75 TP from MYR1.35, 17% upside. AEON Co M’s 1H24 results exceeded expectations, driven by stronger-than-expected performance in the property management segment (PMS). Current below mean valuation is attractive, with AEON’s retail segment well-positioned to capitalise on positive sector developments. PMS is expected to remain resilient, supported by strong rental reversion, while the hybrid rental model is poised to benefit from improved tenant sales amid better consumer sentiment.

Analysts:
Tai Yu Jie
tai.yu.jie@rhbgroup.com
Soong Wei Siang
soong.wei.siang@rhbgroup.com

$AEON / 6599 (AEON CO. (M) BHD)
Research by Maybank
Buy - TP RM1.86

"2Q24 beat expectations"

AEON’s 2Q24 results surpassed expectations. Robust PMS segmental earnings are expected to drive group earnings growth in sequential quarters despite potentially sluggish retail sales without festivities to drive consumer spending. No change to our earnings estimates. Rolling forward our valuation base year to FY25E, our TP is raised to MYR1.86 (+12sen), based on 17x FY25E PER, mean.

Analyst:
Jade Tam
jade.tam@maybank-ib.com

$AEON / 6599 (AEON CO. (M) BHD)
Research by Kenanga
Underperform - TP RM1.21

"Bracing For A Soft 3Q"

AEON's 1HFY24 results were in line with our estimates but below the street's expectations. A weak 3Q is anticipated due to seasonal factors. While sustained elevated inflation is likely to continue constrain consumer spending, the upcoming
progressive pay rise for civil servants effective from December 2024 could offer some relief. We maintain our FY24-25F forecasts and TP of RM1.21 but downgrade the stock to UNDERPERFORM (from MARKET PERFORM previously) as the current share price has exceeded our valuation.

Analyst:
Cheow Ming Liang
cheowml@kenanga.com.my

$AEON / 6599 (AEON CO. (M) BHD)
Research by HLIB
Buy - TP RM1.82

"Impressive performance by PMS"

Aeon chalked in 1H24 core PAT of RM85.2m (+25% YoY) which best estimates at 57%/59% of our/street full year forecast. Overall retail sales eased off from the festive spending last quarter. PMS saw good results (+17% QoQ) which benefitted from the improvement in occupancy rate and rental rate renewal. Note that PMS formed the bulk of operating profit, averaging about 78% in the past three years. We increase our FY24 forecast by 7%. Reiterate BUY, with higher TP RM1.82 (from RM1.60) as we roll forward our valuation year to FY25 (from FY24) based on unchanged 15x PE multiple. We are confident with its sales trajectory and reckon that Aeon’s strategy would enable them to further benefit from recent government initiatives such as the third EPF account and civil servants pay hike.

Analyst:
Syifaa’ Mahsuri Ismail
syifaa@hlib.hongleong.com.my

$AEON / 6599 (AEON CO. (M) BHD)
Research by TA
Under Review - TP RM1.68

"Growth Remains Intact"

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%).

Analyst:
Liew Yi Jiet
yjliew@ta.com.my

$AEON / 6599 (AEON CO. (M) BHD)
Research by MIDF
Buy - TP RM1.67

"Promising Outlook"

• Within expectations
• Muted 2QFY24 sales amid only Raya festive promotion and traffic
• Earnings forecast; Maintained
• Maintain BUY call with a higher TP of RM1.67 (from RM1.60)

Analyst:
MIDF Research Team
research@midf.com.my

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD

$AEON / 6599 (AEON CO. (M) BHD)
AEON's 2Q24 retail segment is expected to experience seasonally softer sales compared to the previous quarter due to the absence of festive events, which typically drive higher sales volumes. However, the company has seen an improvement in sales momentum across all categories (foodline, softline, and hardline) month-over-month, particularly following the commencement of EPF Account 3 withdrawals on 12 May. To further boost sales during this historically quieter period, AEON has launched various promotional campaigns as part of its 40th-anniversary celebrations, aimed at increasing foot traffic to its stores.

Looking ahead, AEON has set a targeted mall occupancy rate of 94% for FY24, with an anticipated rental renewal rate of 90% and a rental reversion rate of 9%-10%. The company’s ongoing efforts to enhance its stores and shopping malls are progressing well, with the renovations of AEON IOI Puchong expected to be completed by the end of August 2024, and the facelifts for AEON Bukit Indah and AEON Tebrau City scheduled to finish by 4Q24. These rejuvenation efforts are projected to result in a year-over-year sales uplift of approximately 15%-20% from the refreshed malls.

For FY24, AEON is projected to achieve a modest earnings growth of +4.8% year-over-year, driven by expected EBIT margins of 2.5% for the retail segment and 38% for the Property Management Services (PMS) segment, in line with the company’s guidance. Additionally, AEON has installed solar PV panels at 14 of its 28 malls, though only 4 have received approval from TNB to operate. Once fully operational, these solar panels are expected to reduce electricity consumption per mall by 5%-7%.

$AEON / 6599 (AEON CO. (M) BHD)
Research by Maybank
BUY – TP RM1.74

" Attractive valuations”

Despite expectations for seasonal weaker QoQ earnings in 2Q24, we are encouraged by early signs of consumer spending improvements following added inflows of disposable income from EPF Account 3. AEON’s resilient PMS segment and rejuvenation/expansion plans also showcases its medium-term earnings growth prospects. No changes to our earnings estimates. At 13x FY24E PER, valuation is undemanding, below its 5-year mean of 17x. Maintain BUY with a TP of MYR1.74 (17x FY24E PER, mean).

Analyst:
Jade Tam
jade.tam@maybank-ib.com

Top 3 gainers for Thursday (01/08/2024), indicating the counters that experienced the highest changers. Here's a more detailed look at the top three:

$KLSE-NESTLé (NESTLE): This stock saw the largest gain, with an increase of +0.40. Nestlé is a well-established multinational company known for its vast portfolio of food and beverage products.

$AEON / 6599 (AEON CO. (M) BHD) Credit Service (AEONCR): Following closely behind, AEONCR gained +0.27. AEON Credit is involved in providing consumer credit and financial services.

$KLSE-UNITED Plantations (UTDPLT): UTDPLT saw a gain of +0.24, placing it third on the list of top gainers. United Plantations is a major player in the palm oil and coconut production sectors.

$AEON / 6599 (AEON CO. (M) BHD)
Research by RHB
Neutral – TP RM1.35

“Coming Off From a 1Q Seasonal Peak”

We recently had a meeting with management to discuss AEON CoM’s outlook and strategies. We remain cautious about AEON’s prospects due to increasing competition from neighbourhood and niche grocery stores, and an oversupply of retail space. We foresee muted earnings growth ahead and choose not to stretch our valuation further.

Analyst:
Tai Yu Jie
tai.yu.jie@rhbgroup.com
Soong Wei Siang
soong.wei.siang@rhbgroup.com

$AEON / 6599 (AEON CO. (M) BHD)
Research by Kenanga
Market Perform – TP of MYR 1.21

“Growth Plan Undeterred by Soft Patch ”

AEON anticipates better YoY growth for 1HFY24 despite a softer 2Q in the absence of major festivities, and due to less favourable product mix as well as elevated inflation. It will deploy a premium lifestyle concept at its KL Midtown mall due for opening by end-2025. We maintain our forecasts, TP of RM1.21 and MARKET PERFORM rating.

Analyst(s):
Cheow Ming Liang
cheowml@kenanga.com.my

CONSUMER
$AEON / 6599 (AEON CO. (M) BHD) $FOCUSP / 0157 (FOCUS POINT HOLDINGS BERHAD) $QL / 7084 (QL RESOURCES BERHAD)
Research by HLIB
Overweight

“Government booster to support consumption”

All in all, we turn more positive on consumer sector on the back of (i) possible margin expansion from moderation in raw material prices; (ii) consumption boosters with the EPF Account 3 and civil servants pay hike; (iii) encouraging macro environment with stable employment levels and uptick in retail spending. With this, we upgrade our sector call from Neutral to OVERWEIGHT. Our top picks are Aeon (BUY, TP RM1.82), FocusP (BUY, TP RM1.14), and QL Resources (BUY, TP RM8.18) given their attractive valuations with earnings backed by their expansion plans and brand equities.

Analyst(s):
Syifaa’ Mahsuri Ismail
syifaa@hlib.hongleong.com.my

OTHERSProposed establishment of an Islamic Commercial Papers ("ICP") Programme ("ICP Programme") and an Islamic Medium Term Notes ("IMTN") Programme ("IMTN Programme") with a combined aggregate limit of up to RM2.0 billion in nominal value based on the Shariah principle of Wakalah Bi Al-Istithmar

(The ICP and the IMTN are collectively referred to as "Sukuk Wakalah" and the ICP Programme and the IMTN Programme are collectively referred to as "Sukuk Wakalah Programmes")

$AEON / 6599 (AEON CO. (M) BHD)
Research by Kenanga
Market Perform – TP of MYR 1.21

“Buying Land to Expand Seremban 2 Mall”

AEON is acquiring 23 acres of commercial land in Seremban 2 for RM103m cash on which it intends to build an extension to its existing mall. We believe the premium land pricing is justifiable given the location next to its existing mall. We are positive on the acquisition as it will increase its scale of operation in Seremban with a growing middle class population. We maintain our forecasts, TP of RM1.21 and MARKET PERFORM rating.

Analyst(s):
Cheow Ming Liang
cheowml@kenanga.com.my

$AEON / 6599 (AEON CO. (M) BHD)

TRANSACTIONS (CHAPTER 10 OF LISTING REQUIREMENTS) : NON RELATED PARTY TRANSACTIONSAEON CO. (M) BHD. ("AEON" OR "the Company") - Sale and Purchase Agreement with Real Attraction Sdn. Bhd.

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD

Changes in Sub. S-hldr's Int (Section 138 of CA 2016) - EMPLOYEES PROVIDENT FUND BOARD