Monday 28 May 2012

AEON CO. (M) - MARKET PERFORM - 25 May 2012


Period    1Q12

Actual vs.  Expectations
 The 1Q12 net profit (NP) of RM37.6m was below the street’s estimate and our forecast of RM218.0m (17%) and RM223.2m (17%) respectively.  

Dividends   No dividend was declared this quarter.

Key Result Highlights
 YoY, the 1Q12 revenue increased 8% on the back of a better growth rate from the retail segment (+7.5% YoY) and property management services (+12.9% YoY). The retail segment saw new stores openings and a higher number of loyalty members’ sales day in the quarter. Meanwhile, the strong growth from property management services was attributable to a new shopping centre that was opened end of last year, higher rental rates and the benefits from tenants revamp in some of its existing shopping centres. 

 However, the NP declined 19% YoY as in 1Q11, there was actually a one-off recognition of net proceeds from an insurance claim of RM10.9m on a fire incident in one of its shopping centres in Melaka.  

 The 1Q12 sales performance declined QoQ by 6% as the company received higher sales and year-end trading rebates in 4Q11 as well as due to the early arrival of the Chinese New Year festival this year. The NP dropped a higher 47% QoQ due to the higher initial costs associated with new stores opening in the quarter.

Outlook   Given the rising shopping outlets in the Klang Valley, the company is now aiming on areas outside the Klang Valley in the hope of capturing a different group of middle-income earners. As such, following the opening of its outlets in Ipoh recently (March 2012), we are expecting another one in Seri Manjung, Perak by the end of this year and three more outlets in FY13-14.

Change to Forecasts
 We are maintaining our earnings estimates of RM223.2m and RM251.8m for FY12-13E for AEON. 

Rating  Downgraded to MARKET PERFORM

Valuation    As the current share price of RM9.65 has met our target price of RM9.54, we are downgrading our rating on the stock from an OUTPERFORM to a MARKET PERFORM with an unchanged TP of RM9.54, which is based on a Fwd PER of 15.0x over its FY12 EPS of 63.6 sen.

Risks   A slowdown in the global economy, which would cut down the purchasing power of consumers.

Source: Kenanga

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