Aeon expects recovery with vaccine roll-out
We reiterate the earnings recovery momentum will gradually build into 2021 in tandem with the vaccine roll-out, premised on the anticipated gradual normalisation in retail footfall for its retailing segment following the easing of movement restrictions, which is likely to be further boosted by the year-end festive promotions by the end of the year. Kenanga Research
KUCHING: Aeon Co (M) Bhd’s (Aeon) recovery momentum is expected to gradually build into 2021 in tandem with the vaccine roll-out, analysts observed.
“We reiterate the earnings recovery momentum will gradually build into 2021 in tandem with the vaccine rollout, premised on the anticipated gradual normalisation in retail footfall for its retailing segment following the easing of movement restrictions, which is likely to be further boosted by the year-end festive promotions by the end of the year,” Kenanga Investment Bank Bhd’s research team (Kenanga Research) said in a report.
It also pointed out that with the recent partnership cemented with US-based Boxed, digital technology is expected spearhead Aeon’s expansion into ecommerce targeting to contribute 15 to 20 per cent of topline over the next five years.
“While we gathered that the mall occupancy rate remains lacklustre at circa 80 per cent (versus pre-pandemic of circa 90 per cent), the property management services segment should continue to be buoyed by gradual recovery in rental collections ahead, in our view, as businesses slowly recover postlockdown,” it added.
On Aeon’s performance during the financial year 2020 (FY20), Kenanga Research said its FY20 was impacted by the MCO and resurgence of the Covid19 pandemic in 4QFY20, with topline declining by 11 per cent.
“Both revenue from the retailing segment and property management services contracted by 10 and 14 per cent respectively to RM3.4 billion and RM0.7 billion respectively.
“Revenue from retail segment was impacted from lower nonessential category sales as a result from the impact of Covid19 pandemic and Movement Control Order, whereby general merchandise (GMS) and specialty stores business were not allowed to operate for almost of two months during the period under review,” it explained,
However, the research team said it was being offset by slight increase of revenue generated from the foodline segment.
“The shortfall in property services revenue was mainly due to lower occupancy rates as tenants sought for non-renewal or early termination of tenancy agreements.
“Income from temporary space rental was also affected by the absence of events and activities as it was being prohibited by the Movement Control Order. The sharp (-62 per cent) decline in net profit was also exacerbated by a higher tax rate by 15ppts to 59 per cent due to deferred tax expense,” it added.
On a quarterly basis, Kenanga Research said Aeon’s turnover was lower than the preceding quarter by 7.4 per cent due to reimplementation of CMCO in most states prompted by the surge of Covid-19 cases for the quarter under review.
“Despite the decline in topline, PBT improved by 11 per cent achieved by improvement in merchandise gross margin, changes in marketing mechanics and stringent cost control measures,” it added.