KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB) research has maintained its Buy call and target price on Aeon Co. (M) Bhd, confident on its sales trajectory after third quarter ended September 30, 2023's earnings came broadly within expectations.
Aeon recorded third quarter ended September 30, 2023 core net profit of RM13.8 million (-54 per cent quarter-on-quarter (QoQ); +27 per cent year-on-year (YoY)) which brought nine-month period core net profit to RM82.2 million (-5 per cent YoY). The figures account for 62 per cent/66 per cent of HLIB research's/consensus' full year forecasts.
The fourth quarter of Aeon's financial year ending December is historically the strongest quarter for the group averagely making up about 44 per cent, owing to the festive and holiday season.
HLIB research has a RM1.48 a share target price for the company.
"We are encouraged by the performance from property management system (PMS) that charted growth with the improvement in occupancy rate and rental rate renewal. PMS performed well, with earnings before interest and tax (ebit) growing by +12 per cent QoQ/ +33 per cent YoY," it said in its note.
PMS formed the bulk of operating profit, averaging about 78 per cent in the past three years.
HLIB research said retailing registered softness due to the highly competitive nature of the business.
"We expect the resumption of business from the reopenings of Aeon Ayer Keroh and Aeon Cheras Selatan to support growth. Amidst the challenges ahead, the group is leveraging on efforts in enhancing its product assortments, particularly in fresh food and private labels," the firm said.
The group has laid out its strategy to accelerate digital shift; establish private brands; integrating both online and offline shopping engagements with Aeon Living Zone; and accelerate sustainability efforts with installation of solar photovoltaic (PV) systems and effective waste management practices.
"We are confident with the sales trajectory and reckon that Aeon strategy would enable them to weather challenges in the high cost of living and softer consumer sentiment," the research firm said.
-ends-