AEON looks East, doesn't plan to enter Asean markets yet

KUALA LUMPUR (May 25): AEON Co (M) Bhd is looking to penetrate Sabah and Sarawak or the east coast of Peninsular Malaysia, by opening at least one shopping mall in each of these areas in the next three to five years, said managing director Nur Qamarina Chew.

Currently, all of AEON's stores and shopping centres are located on the west coast of the peninsula.

"We are exploring and surveying the Sabah and Sarawak and east coast markets, which have very much potential. I believe that AEON could contribute to modernising the retail shopping convenience there," Chew told reporters after the company AGM on Thursday.

She said AEON has a target to open two new malls every year, on average. By 2014 or 2015, she said AEON could be opening malls in Bukit Mertajam, Penang, Sungai Petani, Kedah, or Kulai, Johor, following land acquisitions in those areas.

"We are moving in our expansion strategy very much in the northern and southern [regions], to stay dominant," she said.

According to executive director Poh Ying Loo, the investment for each mall is about RM200 million to RM250 million, and each will have an average net lettable area of 450,000 to 550,000 sq ft, depending on the concept.

This year, AEON launched a mall in Ipoh and plans to launch another mall in Perak at Sri Manjung by the end of the year, Poh said.

Chew said AEON also plans to renovate two or three malls this year. "Every five years, as the customers' lifestyle changes, stores need to keep up to date [to their] expectations," she said.

Poh said AEON will spend about RM80 million to RM100 million on renovations, but this amount could be more if major renovations are involved, such as at Jusco Bandar Utama in 2011.

For this year, Poh said the company has allocated a capital expenditure of RM350 million, which includes store renovations, opening of new malls and land acquisitions.

AEON chairman Datuk Abdullah Mohd Yusof said there are currently "no developments" for AEON to enter emerging markets such as Cambodia, Indonesia, and Vietnam. Nor does the company plan to start a real estate investment trust.

With 26 general merchandise stores in Malaysia, Chew said AEON is the leading player in the department store/supermarket category in the country. "We aim to sustain that positioning," she said.

According to Abdullah, AEON is the largest contributor outside of Japan to its parent company AEON Co Ltd, which holds a 51% stake in AEON. For FY11 ended Feb 28, AEON Co Ltd registered a net income of ¥59.6 billion (RM2.36 billion) on revenue of ¥5.1 trillion.

In 2011, AEON's net profit rose 18.2% to RM195.35 million from RM165.3 million in the previous year, while revenue rose 3.1% to RM2.99 billion from RM2.89 billion previously.

AEON on Thursday announced that its 1QFY12 ended March net profit  fell 19% to RM37.64 million from RM46.61 million a year ago, while revenue rose 8% to RM779.46 million from RM720.65 million a year ago.

AEON said the lower 1Q profit was due to the recognition of net proceeds from an insurance claim of RM10.9 million in respect of its business interruption and damages loss in the previous corresponding period.

For 1Q, its retail business segment's revenue rose 7% to RM678.6 million, driven mainly by contributions from its new store openings as well as a higher number of loyalty members sales days. However, higher operating costs including initial costs associated with new stores opening impacted the division's earnings.

Revenue from its property management services segment grew 12.9% to RM100.8 million from a year ago, due to contributions from a new shopping centre opened in December 2011, higher rental rates and the revamp of tenants in some of its shopping centres.

As at March 2012, AEON held RM289 million cash with zero debt. It didn't declare any dividend for the quarter, but in 2011 it paid dividends of 19 sen per share or RM51.77 million, representing about 26.5% of its FY11 net profit and close to a yield of 2% based on its closing price on Thursday.

AEON on Thursday closed seven sen higher to RM9.65 with 231,400 shares traded.

YTD, its shares have appreciated by 33.3% and have traded between a 52-week high of RM10.20 on May 4 and low of RM6.36 on May 24, 2011.

This story appeared in The Edge Financial Daily on May 25, 2012.