Both MIDF Amanah Investment Bank Bhd (MIDF Research) and Maybank Investment Bank Bhd (Maybank IB) have maintained their BUY call for $AEON (6599.MY)$ following a positive third quarter of 2024 (3Q24) briefing.

Both research houses have also maintained AEON's target price (TP) at RM1.67 and RM1.95 with MIDF Research's TP based on a price-earnings ratio (PER) of 15.5 times pegging to FY25F earnings per share of 10.8sen while Maybank IB's TP is based on 17 times FY25E PER and long-term mean.

Despite facing softer demand in discretionary categories due to inflationary pressures, MIDF Research said the company continues to perform well, particularly within its food line segment, which contributed 55.7% of year-to-date sales.

"The company's private-label products have shown promising growth, with sales rising over 30% year-on-year, although they still make up less than 5% of total retail sales.

"Additionally, AEON plans to expand its private-label offerings by increasing stock-keeping units. On the property management side, AEON's malls recorded an impressive occupancy rate of 95.1% in 9M24, boosted by mall rejuvenations and a well-optimised tenant mix," MIDF Research said in a note, adding that AEON remains committed to renewing tenant agreements, having already renewed 65% of agreements by 3Q24, with a target of 90% for the full year.

At the same time, MIDF Research shared that AEON will also continue its focus on sustainability initiatives, including solar panel installations across 11 malls, which are expected to reduce utility costs by 5%-7%.

"The company has also expanded its electric vehicle charging infrastructure and waste management systems.

"Furthermore, AEON anticipates minimal impact from Malaysia's planned minimum wage hike to RM1,700, estimating that it will affect less than 1% of total operating expenses (opex)," the research house said.

Commenting further on the minimum wage, Maybank IB said the impact of the minimum wage increase (effective Feb 1, 2025) on AEON's opex will also be minimal as foreign workers make up less than 5% of its total workforce.

Looking ahead, AEON is optimistic about the retail outlook, supported by a stable job market, government initiatives and strong consumer spending.

The company's focus on expanding private-label products, enhancing digital capabilities and developing AEON Living Zones is expected to drive further customer engagement and loyalty.

With the Lunar New Year season approaching, AEON anticipates a stronger retail performance in 4Q24.