Stock Name: AEON
Company Name: AEON CO. (M) BHD
Research House: MAYBANK
AEON Co (M) Bhd
(May 19, RM5)
Maintain hold at RM4.99 with unchanged target price of RM5.10: AEON got off to a good start by posting its best ever 1Q performance. Unfortunately, sentiment may still be subdued because of the uncertainty over future earnings at the pivotal One Utama mall.
We like AEON as a long-term investment but maintain our hold call and RM5.10 target price for now.
AEON's RM41 million 1QFY10 recurring net profit (+58% year-on-year; -26% quarter-on-quarter) was above expectations, accounting for 28% of our and consensus' forecasts.
Net revenue rose 4.7% y-o-y to RM730 million aided by the buoyant Chinese New Year period. The generally better economic conditions and lower costs as a result of only one new store opening (in Melaka), were key drivers in AEON's quicksilver start to 2010.
AEON's continued delivery of double-digit earnings growth despite fewer new store openings in 2009-2010 justifies our expectations of continued earnings growth.
We remain mindful, however, that with the lease to manage the One Utama Shopping Complex in Bandar Utama up for renewal in August 2010, there is a possibility of a step-down in property management earnings in 2010 and 2011. Our current forecasts already reflect this worst-case scenario.
Encouragingly, AEON generated an operating cash flow of RM65 million (1Q09: -RM53 million) and net cash flow of RM38 million in 1Q10 (1Q09: -RM134 million).
It now has 50 sen per share in net cash at end-1Q10, which is a 70 sen per share improvement on its net debt position of 20 sen per share at end-1Q09.
Overall, AEON should be emboldened to begin acquiring new store sites again given the right mix of improving economic fundamentals and strengthened financials.
We maintain our earnings forecasts for now despite a stronger 1Q10. Our RM5.10 target price is based on a 25% discount to its sum-of-parts (SOP) valuation.
Whilst we like AEON's earnings track record, we await a demonstrated willingness to embark on a renewed store expansion plan, before reviewing our call and forecasts. ' Maybank IB Research, May 19
This article appeared in The Edge Financial Daily, May 20, 2010.
Company Name: AEON CO. (M) BHD
Research House: MAYBANK
AEON Co (M) Bhd
(May 19, RM5)
Maintain hold at RM4.99 with unchanged target price of RM5.10: AEON got off to a good start by posting its best ever 1Q performance. Unfortunately, sentiment may still be subdued because of the uncertainty over future earnings at the pivotal One Utama mall.
We like AEON as a long-term investment but maintain our hold call and RM5.10 target price for now.
AEON's RM41 million 1QFY10 recurring net profit (+58% year-on-year; -26% quarter-on-quarter) was above expectations, accounting for 28% of our and consensus' forecasts.
Net revenue rose 4.7% y-o-y to RM730 million aided by the buoyant Chinese New Year period. The generally better economic conditions and lower costs as a result of only one new store opening (in Melaka), were key drivers in AEON's quicksilver start to 2010.
AEON's continued delivery of double-digit earnings growth despite fewer new store openings in 2009-2010 justifies our expectations of continued earnings growth.
We remain mindful, however, that with the lease to manage the One Utama Shopping Complex in Bandar Utama up for renewal in August 2010, there is a possibility of a step-down in property management earnings in 2010 and 2011. Our current forecasts already reflect this worst-case scenario.
Encouragingly, AEON generated an operating cash flow of RM65 million (1Q09: -RM53 million) and net cash flow of RM38 million in 1Q10 (1Q09: -RM134 million).
It now has 50 sen per share in net cash at end-1Q10, which is a 70 sen per share improvement on its net debt position of 20 sen per share at end-1Q09.
Overall, AEON should be emboldened to begin acquiring new store sites again given the right mix of improving economic fundamentals and strengthened financials.
We maintain our earnings forecasts for now despite a stronger 1Q10. Our RM5.10 target price is based on a 25% discount to its sum-of-parts (SOP) valuation.
Whilst we like AEON's earnings track record, we await a demonstrated willingness to embark on a renewed store expansion plan, before reviewing our call and forecasts. ' Maybank IB Research, May 19
This article appeared in The Edge Financial Daily, May 20, 2010.
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