AEON: Retailer Anticipates Strong 4Q Performance, BUY Rating Maintained

TA Securities has reaffirmed its “BUY” recommendation, anticipating a robust fourth-quarter performance for the retailer. This positive outlook is underpinned by the sustained resilience of its property management segment, alongside expected improvements in footfall and transaction volumes, and encouraging momentum from year-end festive spending. The investment bank has maintained its target price of RM1.45 per share, suggesting a potential upside from the last traded price of RM1.15.

Performance Review and 3Q Challenges

The group’s retail segment recorded an operating loss of RM24.3 million in the third quarter of FY25. This weaker performance was primarily attributed to several factors: an approximate 20% year-on-year increase in renovation expenses; a structural shift in consumer spending towards essential foodline products, which subsequently diluted margins; and a softer average basket size (ABS) of RM54.9, representing a 3.0% year-on-year decline, due to the absence of major spending catalysts during the quarter.

Outlook and Key Drivers for 4Q

Despite the challenges encountered in 3Q25, management has observed stronger momentum heading into the year-end festive season. This includes increased footfall and higher transaction volumes noted during significant festive periods such as the Mid-Autumn Festival and Deepavali. TA Securities expects a stronger 4Q performance, which is projected to be fueled by an increase in higher-margin discretionary purchases during festive periods, improved foot traffic following the full reopening of all malls and stores, and an expanded array of product assortments, including private-label offerings. These collective factors are anticipated to bolster the group’s FY25 performance and partially offset the cost pressures experienced in 3Q.

Future Expansion and ESG Initiatives

The retailer is planning significant expansions from FY26 onwards, following several years of refurbishments across its existing malls and stores. Key projects include the opening of a new mall at KL Midtown with a net lettable area (NLA) of 400,000 square feet, and a new-concept Aeon Style Supermarket in East Coast Mall, Kuantan, marking its first presence in the state of Pahang. Additionally, the expansion of its Seremban 2 Mall, with completion targeted for FY27, will nearly double its NLA to 720,000 square feet. These strategic initiatives are expected to enhance the customer experience and reinforce its competitive positioning in the domestic retail sector over the long term.

In tandem with its growth strategy, the group continues to demonstrate a strong commitment to its ESG agenda. It has implemented various environmental and social initiatives, including the installation of solar photovoltaic systems, enhanced recycling programs, and the rollout of EV charging bays across its malls. These efforts were recognized with The Edge ESG Awards and the National Energy Awards in 2025, highlighting its leadership in responsible business practices. Further sustainability initiatives, such as additional solar PV installations across all 28 malls and enhanced waste management, are also planned.

Valuation and Recommendation

TA Securities maintains its earnings forecasts and reiterates its “BUY” recommendation for the retailer with an unchanged target price of RM1.45 per share, based on a Dividend Discount Model (DDM) valuation. The investment bank’s confidence is rooted in the company’s anticipated strong 4Q performance and strategic long-term expansion plans designed to enhance its market presence and customer engagement.