AEON: Mixed First-Half Performance as Retail Weakness Offsets Property Resilience

Financial institution TA Securities reports that the company’s core net profit for the first half of FY25 (1HFY25) stood at RM82.6 million, aligning with both the firm’s and consensus full-year estimates at 45% and 49% respectively. However, the second quarter of FY25 (2QFY25) saw revenue dip by 2.1% year-on-year (YoY) to RM999.6 million, primarily due to a softer performance in its retail segment.

Performance Review

The retail segment experienced a challenging 2QFY25, with revenue declining 3.8% YoY to RM805.4 million. This was largely attributed to the absence of significant festive sales compared to the previous year. Operating performance in the retail division deteriorated significantly, shifting from a marginal profit of RM0.2 million in 2QFY24 to a loss of RM28.3 million in 2QFY25, as higher operating expenses weighed on results. Consequently, the retail segment’s Earnings Before Interest and Tax (EBIT) for 1HFY25 fell substantially by 51.8% YoY to RM26.1 million, despite a modest 1.6% YoY increase in sales.

In contrast, the property management segment (PMS) demonstrated resilience. Its 2QFY25 quarterly revenue grew by 5.5% YoY to RM194.2 million, driven by higher occupancy rates and effective rental renewals. While PMS EBIT marginally declined by 2.0% YoY to RM78.2 million in 2QFY25, cumulative 1HFY25 PMS revenue and EBIT improved by 7.4% and 11.7% YoY, reaching RM398.6 million and RM165.1 million, respectively. Overall, 1HFY25 revenue increased 2.6% YoY to RM2.2 billion, buoyed by strong festive sales in 1Q, but core earnings for the half-year period declined by 2.6% YoY, predominantly impacted by the weaker contributions from the retail segment in 2Q. No dividend was declared for the quarter under review.

Future Outlook

Looking ahead, the retail segment is expected to see a quarter-on-quarter improvement in sales volume for 3Q, benefiting from extended operating hours and increased footfall during the school holiday period. The implementation of improved cost control measures is anticipated to enhance operational efficiency in the upcoming quarter. The property management segment is projected to maintain its resilient performance, underpinned by a better tenant mix, optimal occupancy rates, and effective rental renewals.

Investment Recommendation

TA Securities maintains a BUY recommendation, with an unchanged Target Price of RM1.80 per share, based on a Dividend Discount Model (DDM) valuation.