AEON CO. (M) 2Q12 broadly in line

MARKET PERFORM

Target Price: RM10.70

Period  

2Q12 

Actual vs. Expectations  

The 1H 12 net profits (NP) of RM75.9m was broadly in line with estimates, making up 34.8% and 34.0% of the street's estimate and our forecast of RM223.2m. The 1H is seasonally slower than the 2H and typically contributes around 34%-45% of the full year earnings. 

Dividends  

No dividend was declared in the quarter. 

Key Result Highlights  

• YoY, 2Q12 revenue increased 10.5% on the back of better growth rate from the retail segment (+9.5% YoY) and property management services (+16.9%). The better performance from the retail segment was due mainly to new stores openings, reopening of Jusco 1 Utama (which was temporarily closed for an upgrade for six months from February 2011) as well as a higher number of loyalty members' sales days during the quarter. Meanwhile, the strong growth from property management services was attributable to a new shopping centre that was opened end of last year and benefits gained from tenants revamp in some of its existing shopping centres.  
• The 2Q12 NP also improved 32.7% YoY on the back of better sales. However, 1H12 NP was actually pretty flat with only a 0.6% YoY growth due to a one-off recognition of net proceeds from an insurance claim of RM10.9m in respect of business interruption and damages arising from the fire incident in one if its shopping centres in Melaka in 1Q11, resulting in flattish profit.  
• 2Q12 sales performance meanwhile declined QoQ by 2.7% as the company made higher sales during the festive season in 1Q12. Meanwhile, the NP QoQ grew slightly by 1.6% due to a lower tax bracket for the quarter. 

Outlook  

With the rising number of shopping outlets in the Klang Valley, the company is now aiming on areas outside the Klang Valley to capture the rising group of middleincome earners in these areas. For example, following the opening of its outlet in Ipoh recently (March 2012), we are expecting another new outlet in Seri Manjung, Perak at the end of this year and then another three more in FY13-14. Change to Forecasts Sales in the second half of the year should be better due to the festive season. Thus, we are maintaining our earnings estimates of RM223.2m and RM251.8m for FY12-13E. 

Rating 

MAINTAIN MARKET PERFORM 

Valuation  

We are rolling over our valuation basis to FY13 and with it, our TP has been revised upwards to RM10.70 from RM9.54 previously. Our TP is based on Fwd PER of 15x, which represents a +1.5 SD to the 5-year average PER of 12x. 

Risks  

Risk to our call is a slowdown in the global economy, which will cut down the purchasing power of consumers.

Source: KenagaResearch