AEON Co (M) Bhd, an ideal bellwether stock to gauge the strength of the Malaysian consumer-cum-retail sector, has to weather restrictive footfalls stemming from lockdown-related concerns before it is able to stage a sustainable rebound.
Amid looming uncertainties, the normalisation in its retail footfall in 2H 2021 is very much premised on a successful vaccine roll-out, according to Kenanga Research.
“Retail earnings in the 2H 2021 will be boosted with the recent partnership cemented with US-based Boxed, kicking its new retail offline to online approach (expected in 2H 2021) which will spearhead AEON’s expansion into e-commerce, targeting to contribute 15-20% of top-line over the next five years,” opined analyst Ahmad Ramzani Ramli in a results review.
“However, earnings recovery might be dragged by the weakness in its property management services given the prolonged pandemic and lockdowns.”
For its 1Q FY2021, AEON posted a 195% year-on-year (yoy) jump in earnings to RM22.03 mil (1Q FY2019: RM7.47 mil) on the back of a lower yoy revenue of RM1.01 bil (1Q FY2019: RM1.19 bil).
All-in-all, Kenanga Research downgraded AEON to “market perform” (from “outperform” previously) with a revised target price of RM1.20 (from RM1.30 previously) given the weakness in its property management segment is adding further woes to its earnings coupled with a high net debt (RM524 mil).
“This increases the downside risk for dividend pay-out,” added the research house.
Meanwhile, TA Securities Research expressed optimism that while the re-tightening of movement restriction could affect the footfall in 2Q FY2021, the vast roll-out of vaccination programme would lead to eventual recovery in the retail industry.
“Overall, we expect Aeon’s FY2021 revenue to mark a yoy jump from FY2020’s low base though will be lower than FY2019,” projected analyst Jeff Lye Zhen Xiong.
“The group is expected to focus on improving yield of its managed assets, enhancing its retailing stores’ format and product assortment alongside rolling-out its digital transformation plan of integrating physical mall and virtual mall.”
Moreover, implementation of shared service platform for back-office, trade and non-trade procurement function would also drive cost efficiencies, according to the research house.
As a whole, TA Securities Research maintained its “buy” rating on AEON with an unchanged dividend discount model (DDM)-based target price of RM1.45.
At 10.35am, AEON was up 3 sen or 2.68% to RM1.15 with 461,200 shares traded, thus valuing the company at RM1.61 bil – May 20, 2021
