
Aeon boosts edge with strong property management, mall upgrades
Hong Leong Investment Bank Bhd (HLIB Research) said renovation works have commenced at several Aeon stores and malls, reinforcing the group's continued commitment to strengthen its competitiveness and relevance in an increasingly dynamic retail landscape.
It added that these will also include better tenant management through effective tenancy renewals and tenant mix optimisation to ensure continued success of the PMS business.
"We recall the two refurbished malls (Aeon Ayer Keroh and Aeon Cheras Selatan) generated a 20 per cent year-on-year (YoY) revenue increase after the renovation.
"PMS earnings before interest and taxes (EBIT) grew commendably by 28 per cent YoY. We note PMS formed the bulk of operating profit, averaging about 78 per cent in the past three years.
"On the retail front, Aeon is broadening its product offerings with a focus on private labels, positioning itself to tap into the shifting consumer trends," it said in a note today.
HLIB Research has maintained a "Buy" call on Aeon with a target price of RM1.82.
The firm are confident with Aeon's sales trajectory and reckon that the group's strategy would enable them to further benefit from recent government initiatives such as the Employees Provident Fund (EPF) Account 3, civil servants pay hike and minimum wage increase.
Meanwhile, RHB Investment Bank Bhd (RHB Research) expects near-term sales softness due to seasonal factors, with festive spending largely frontloaded into the first quarter (Q1).
"Looking beyond the immediate term, Aeon is well-positioned to execute its expansion plans (KL MidTown and AEON Seremban 2) supported by healthy gearing (8.7 per cent) and a lower Kuala Lumpur Interbank Offered Rate (KLIBOR) environment amid global rate cuts.
"Its organic growth outlook remains intact, underpinned by strong occupancy and high single-digit rental reversions, driven by ongoing refurbishment efforts that continue to attract popular tenants," it added.
Furthermore, RHB Research said Aeon's retail segment should benefit from resilient consumer spending, supported by rising wages and increased cash assistance to lower-income households.
The firm noted that Aeon is also expanding its private brand portfolio (currently accounting for 17 per cent of sales), offering margin uplift and improving customer retention through exclusive offerings.
RHB Research has maintained a "Buy" call on Aeon with a target price of RM1.75, citing solid growth prospects in its property management segment, supported by an active expansion strategy and ongoing asset enhancement initiatives.
It added that the retail segment should remain supported by resilient consumer spending and margin expansion from cost-control efforts.
Both HLIB Research and RHB Research noted that Aeon's first quarter ended March 31, 2025 (Q1 2025) results were in line with expectations.
Similarly, CIMB Securities Sdn Bhd views Aeon's results as in line with expectations, noting that earnings are likely to soften over the next two quarters (Q2 2025 and Q3 2025).
This is owing to the absence of festivities during the period and lower mall footfall due to ongoing renovation works, which we expect to be completed by the end of Q3 2025.
"We expect earnings to be weaker QoQ in Q2 2025 and Q3 2025, as the strongest quarters for Aeon are typically Q1 and Q4 owing to festive-driven spending.
"Still, we anticipate FY25 earnings to grow by 5.8 per cent YoY, underpinned by mall rejuvenation efforts in FY24 (reopening of five stores/malls between Aug and Nov 2024).
"This includes sustained high occupancy rates in the property management segment, supported by an annual rental reversion of 7.4 per cent in FY25," it added.
With the Q1 2025 results meeting its expectations, CIMB Securities has maintained a "Buy" call on Aeon with a target price of RM1.75.

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