AEON Co (M) Bhd can similar expect earnings recovery momentum observed in its 3Q FY2020 to persist moving forward, premised on the gradual normalisation in retail footfall for its retailing segment.
This follows the easing of movement restrictions which is likely to be further boosted by the year-end festive promotions, according to Kenanga Research.
“While we gathered that the mall occupancy rate remains lacklustre at circa 80% (vs pre-pandemic of circa 90%), the property management services segment should continue to be buoyed by gradual recovery in rental collections ahead as businesses slowly recover post-lockdown,” wrote analyst Nikki Tang in a results review.
For its 3Q FY2020, the group recorded a 4% top-line growth which prompted it to swing back to a net profit of RM16.4 mil (vs 2Q FY2020 net loss of RM9.6 mil).
For the 9M FY2020 period, however, revenue slipped 7% on the back of: (i) weaker revenue from retailing (-6%), no thanks to lower general merchandise sales as non-essential retail was not allowed to operate amid the movement control order (from mid-March to mid-May) as well as (ii) softer property management services (-11%) attributable to rental rebates given to tenants and reduced sales commission from the lower occupancy rate during COVID-19.
All-in, Kenanga Research maintained its “outperform” rating on AEON with an unchanged target price of RM1 as it continues to like the group for (i) its undemanding 13 times FY2021E price-to-earnings valuation; (ii) attractive dividend yield of circa 5% as well as (iii) anticipation of strong earnings rebound in FY2021.
MIDF Research is also bullish on AEON as evident by it maintaining a “trading buy”’ on the company with a revised target price of RM1.01 (from RM1.07 previously) in-line with a change in its earnings estimates.
“We attribute the discount to the (i) saturated retail landscape in the country; (ii) impact of COVID-19 on the economy including shifting to shopping on digital platforms; and (iii) extended cautious consumer sentiment,” opined analyst Ng Bei Shan.
Looking beyond FY2020E, MIDF Research expects AEON to stage reasonable recovery in the medium to longer term.
“At current juncture, valuation also appears much more attractive now. It is trading below its net asset per share of RM1.17. Dividend yield is estimated at 3.9%,” added the research house.
At 11.05am, AEON was up four sen or 5.26% at 80 sen with 3.17 million shares traded, thus valuing the company at RM1.12 bil. – Nov 25, 2020
