KUALA LUMPUR (May 20): Most analysts have maintained their “buy” calls on AEON Co (M) Bhd as they foresee better outlook for the group after its net profit for the first quarter ended March 31, 2021 (1QFY21) met their expectations.
MIDF Research’s analyst Ng Bei Shan said in a note today that she believed AEON is in a good position to overcome the near-term circumstances.
“Evidently, its operating cash flow is strong at RM282.1 million compared to -RM41.1 million a year ago. Gearing level is at 0.4 times. This is also supported by its agile business strategies to stay relevant. It offers new services and digitalisation initiatives to its customers and tenants,” she said.
She also said AEON’s outlook is likely to improve further in FY22 compared to FY21, as she believed that the management’s prudence in cost management will continue to yield positive outcomes when the business environment improves.
Ng, who maintained a “buy” call and target price of RM1.64 on AEON, opined the recent weakness in its share price presents an opportunity to buy.
Meanwhile, Hong Leong Investment Bank Research analyst Syifaa Mahsuri Ismail opined that AEON’s 1H21 will likely fare better year-on-year as restrictions in movement control order 2.0 (MCO 2.0) were less stringent than last year.
Going into 2H21, she believed that retail sales are poised for a strong rebound as she expects loosening of travel restrictions going forward as vaccine roll-outs pick up at an urgent pace.
She also remained confident on the group’s longer-term outlook with its strategic plans in refurbishing existing malls to attract better foot traffic, expanding presence in online platforms, and introduction of specialist concept stores to drive better margin.
“Despite the looming uncertainties, we expect stringent cost control measures to be sustained, providing support to margins moving forward. We are confident in the group’s agile approach in adapting through with changes in marketing mechanics and sustainable cost reduction structures,” she added.
She maintained “buy” on the stock with an unchanged target price of RM1.32.
TA Securities analyst Jeff Lye Zhen Xiong also expects AEON’s FY21 revenue will mark a year-on-year jump from FY20’s low base although it will be lower than FY19.
“Although re-tightening of movement restriction in Malaysia could affect the footfall in 2QFY21, we maintain our view that a vast roll-out of the vaccination programme would lead to eventual recovery in the retail industry,” he said.
He also highlighted that the group is expected to focus on improving the yield of its managed assets, enhancing retailing’s store format and product assortment alongside rolling out its digital transformation plan of integrating physical mall and virtual mall.
“Moreover, implementation of a shared service platform for back-office, trade and non-trade procurement functions would also drive cost efficiencies,” he added.
He maintained his “buy” call on AEON with an unchanged target price of RM1.45.
Affin Hwang Capital’s analyst Areecca Tan also remains confident in Aeon’s medium- to long-term prospects and the company’s efforts to re-strategize its operational, merchandising, and marketing strategies to align with consumers’ changing shopping habits.
However, she made no changes to her 2021 earnings as she remained cautious on 2Q21 with the resurgence of Covid-19 cases and the nationwide re-imposition of MCO 3.0.
She maintained a “buy” call on the stock and revised up its target price to RM1.39 from RM1.29.
At 10.45am, AEON shares rose three sen or 2.68% to RM1.15, valuing the group at RM1.57 billion.
