AEON : A little festive cheer?

Market Perform

3QFY09 Results

- 9MFY12/09 net profit of RM77.8m (+2.7%) was slightly above our expectations but within consensus, accounting for 67% and 63% of forecasts respectively. Key variances were mainly due to higher property management EBIT margin in 9M09 of 21% vs. our conservative full year assumption of 19%.

- Whilst AEON is on track to opening its new Melaka mall next month and its two Cheras “MaxValu supermarkets together with part-Jusco departmental stores” concept malls in FY10, this is below its average of 2-3 new Jusco stores p.a. in the past four years, which implies a potential slow down of its earnings growth in the near-term. We have yet to input any potential loss in property management income from 1U, which could potentially bring FY11 earnings down by 5.4% from our revised forecasts.

- To tackle any potential slow down in earnings momentum, AEON is looking at two options of expanding i.e. taking up a stake in its parent’s expansion plans in Vietnam, and expanding into East Coast, Sabah and Sarawak. Expansion plans take a year or two to materialise, and given possible gestation period of two to three years, more positive earnings stream would only be realised from 2014 onwards，

- We raised our FY09-11 forecasts by 6.2-8.6%. Fair value is raised to RM5.30 (from RM5.00) based on unchanged 14x FY10 EPS. Maintain Market Perform.