AEON: Strong Property Management Drives Earnings Beat, Rating Upgraded

A recent investment bank research report indicates that AEON Co M’s financial performance for the first nine months of 2025 (9M25) was largely in line with expectations, showing a gradual recovery in consumer sentiment. The company’s core net profit of MYR95 million for 9M25 accounted for 64% of full-year estimates, consistent with historical trends.

Performance Review

The positive results were primarily attributed to robust contributions from the Property Management Services (PMS) segment, which benefited from positive rental reversions and stable occupancy rates. This strong performance in PMS helped to offset weaker retail earnings that resulted from softer discretionary spending. While the retailing segment’s revenue remained relatively flat at +0.3% year-on-year, the PMS segment grew by a notable +7.1% year-on-year.

Quarter-on-quarter, the third quarter of 2025 (3Q25) saw a significant improvement, with core net profit rising 18.7% to MYR14.6 million. This increase was driven by stronger PMS earnings, which successfully counterbalanced a MYR24.3 million loss reported by the retail segment during the same period.

Future Outlook and Strategic Expansion

Looking ahead, rental reversions are anticipated to remain robust. Despite earlier concerns regarding the sales & service tax (SST) expansion on rentals, management is confident in securing high single-digit reversions, supported by effective footfall strategies and consistently high occupancy rates exceeding 95%, which bolster bargaining power.

Several strategic expansion projects are on schedule, including the KL Midtown project (400,000 sq ft NLA) set for completion by end-2026, AEON Kinta City (220,000 sq ft NLA by 2028), and AEON Seremban 2 (350,000 sq ft NLA by 2027). On the retailing front, the fourth quarter sales are expected to improve, particularly for discretionary categories, driven by the upcoming year-end festive period. The macro backdrop in 2026 is also viewed positively, with potential benefits from fiscal stimulus, an interest rate cut, a stronger Malaysian Ringgit, and increased tourist arrivals.

Investment Recommendation

Given the solid performance and positive outlook, the investment bank has upgraded its recommendation for the stock from “Neutral” to BUY, maintaining a target price of MYR1.46, which implies a 22.4% upside. The stock is currently trading at an attractive valuation compared to its historical average. Key risks include prolonged weak consumer sentiment and potential delays in new asset completion.