AEON’s property management to get better as AEON Kuching Mall gains further traction
KUALA LUMPUR: The financial performance of AEON Co (M) Bhd’s (Aeon) property management has been projected by analysts to improve as AEON Kuching Central Mall gains further traction.
According to the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), historically, the property management segment contributed about 80 per cent to 85 per cent of the group’s operating profit (OP).
MIDF Research noted that excluding the second quarter of financial year 2018 (2QFY18), the segment has recorded commendable OP growth since 2QFY17.
The research arm believed that the 10.3 per cent year on year (yo-y) decrease in 2QFY18 OP was a temporary blip, owing to the start-up cost incurred for AEON Kuching Central Mall which was opened in April 2018.
“Nonetheless, we expect that the OP for the segment to stage a recovery in the second half of FY18 (2HFY18) as AEON Kuching Central Mall gain more traction and stable occupancy rate of approximately 90 per cent for its existing shopping malls,” the research arm said.
As for AEON’s retailing segment, MIDF Research noted that it has continued to contribute positively to group’s earnings since it rebounded in 4QFY17.
The research arm further noted that in 2QFY18, the retailing segment posed an encouraging performance as OP grew more than double year-on-year driven by contribution from the new stores such as AEON Bandar Dato’ Onn, Johor Bahru and AEON Kuching.
“We expect the segment solid performance will continue particularly in the 3QFY18 given the tax holiday spending and low base effect of previous corresponding quarter performance.
“Over a longer term, we expect that the opening of new shopping mall in Nilai in 1QFY19 will contribute positively to earnings.”
Overall, MIDF Research liked AEON despite the continuing challenge facing the departmental store sub-sector and proliferating shopping malls.
There search arm explained that this is because AEON possesses a unique business model as the group positions itself as a neighbourhood shopping mall, making it a preferred choice shopping mall in the suburban areas for middle income families.
“Moving forward, we expect strong 2HFY18 earnings premised on recovery of property management segment, retailing segment to continue recording solid performance and no further impairment or significant share of losses from associates.”
MIDF Research expected no further operating loss to be incurred by associate company Index Living Mall Malaysia Sdn Bhd (ILMM) as its remaining outlets in Malaysia is targeted to be shut downed by 3QFY18.
“Moreover, the management has fully impaired the remaining balance of ILMM’s cost of investment in the 2QFY18.”