AEON Co. hits new highs, possibly even higher on better GDP numbers

Aeon Co. (M) Bhd may trend higher after it broke above the RM1.48 resistance and hit a new 52-week high of RM1.54 on Aug 21. Just about a year ago, the counter was trading at a low of RM1.02. Year-to-date, Aeon has surged almost 30% to close at RM1.52 on Aug 21.

Aeon has been actively working on several initiatives this year. It is focusing on revitalising its retail spaces, with renovations nearing completion at AEON IOI Puchong, expected by the end of August.

It will also complete facelifts at AEON Bukit Indah and AEON Tebrau City by the fourth quarter this year. These efforts are expected to boost sales by 15% to 20% year-on-year.

Additionally, AEON is maintaining strong mall occupancy and rental renewal rates, supported by ongoing promotional campaigns for its 40th anniversary.

Analysts have a generally positive outlook on AEON. Maybank Investment Bank has set a target price of RM1.74 and maintained a "buy" recommendation.

It noted that while 2Q24 retail sales may be softer due to the lack of festive events, the company has shown improved sales momentum across various categories.

Analysts are also optimistic about AEON's store renovation efforts, which are expected to enhance sales by 15% to 20% year-on-year following these upgrades.

Aeon reported strong financial performance for the first quarter of 2024, ending on March 31. The company achieved a net profit of RM57.5 million, marking a significant 51% increase from RM38.2 million a year ago.

This surge in profit was driven by robust performance in both the retail and property management segments. The company’s revenue also grew to RM1.17 billion, up from RM1.11 billion in the previous year, with the retail segment contributing RM980.5 million, largely thanks to increased festive spending.

The property management services segment saw a 13% increase in revenue, reaching RM186.9 million, supported by better occupancy rates and effective rental renewals, particularly in rejuvenated malls.

However, RHB Research has maintained a neutral call on the counter with new RM1.35 target price from RM1.26 previously. It remains cautious about Aeon’s prospects due to increasing competition from neighbourhood and niche grocery stores, and an oversupply of retail space.

Overall, Aeon’s positive results reflect effective cost management and strategic focus on enhancing customer experience and digital transformation, continue to draw investors in.