AEON: Analyst Upgrades Rating to BUY on Attractive Valuation and Positive Outlook
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM1.45 (+21.8%) |
| Last Traded | RM1.19 |
| Recommendation |
TA SECURITIES has upgraded its recommendation from Hold to BUY, maintaining a target price of RM1.45 per share. The investment bank cites recent share price weakness as an attractive entry point, with the new target price offering a potential upside of 21.8% from the last traded price of RM1.19.
Performance Review
The company reported a core net profit of RM96.3 million for the first nine months of fiscal year 2025 (9M25). This performance accounts for 63% of TA SECURITIES’ full-year forecast and 62% of consensus estimates, a result deemed “in line” with expectations for seasonally stronger performance in the fourth quarter. Historically, 9M core earnings have contributed 58-65% of full-year core net profit.
While 9M25 core earnings saw a 7.0% year-on-year decline, primarily due to softer retail performance in the third quarter, the impact was partially offset by a lower effective tax rate and robust contributions from the property management segment. The property management segment’s EBIT for the third quarter of 2025 surged by 13.5% year-on-year to RM80.8 million, driven by a 6.4% increase in revenue, effective rental renewals, and sustained occupancy rates. Cumulatively, 9M25 EBIT for this segment climbed 12.3% year-on-year to RM245.9 million on a 7.1% rise in revenue.
Operational Challenges
Conversely, the retail segment continued to face challenges. Third-quarter operating losses for the retail division widened by nearly threefold year-on-year to RM24.3 million. This downturn was attributed to a lower average basket size and increased operating costs, including expenses related to mall and store refurbishments. The cumulative 9M25 EBIT for the retail segment consequently plummeted by 96.1% year-on-year to RM1.8 million, despite stable revenue of RM2.6 billion. No dividend was declared for the quarter.
Future Outlook
Looking ahead, the company is poised for improved performance, particularly in the upcoming fourth quarter. Refurbishment works at selected stores and malls, completed in 3Q25, are expected to enhance the shopping experience. Notably, Aeon Bandaraya Melaka and Aeon Shah Alam reopened in October 2025, with renovation work at Aeon Bukit Indah scheduled for completion in November. These strategic reopenings and enhancements are anticipated to significantly boost footfall and support year-end festive spending.
Valuation and Recommendation
TA SECURITIES maintains its target price of RM1.45 per share, derived from a Dividend Discount Model (DDM) valuation. The upgrade from Hold to BUY reflects the analyst’s view that the recent weakness in the share price presents an attractive entry point, offering significant upside potential ahead of expected stronger fourth-quarter performance driven by festive spending and operational improvements.
