Top Story : AEON – Slower-than-expected SSS growth in 1HFY12/10 Outperform
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- We understand that 1HFY12/10 same-store sales (SSS) growth was around 2%, while management is expecting full-year SSS growth to be similar to 1H10 at around 2-3%. We are thus adjusting our SSS growth assumptions to 2.5% for FY10 and 3.5% for FY11 (from 3.5% and 5% respectively).
- Despite intense competition arising from smaller players such as 99 Speedmart and big hypermarket players such as Carrefour, AEON does not plan to change its business model and expects to maintain its supermarket revenue contribution at 40%, while the rest coming from department stores.
- AEON is expecting to open its Bandar Seri Permaisuri store as well as its Kinta (Ipoh) store at end FY11 the earliest. The reason for the delay in the Bandar Sri Permaisuri store is due to various issues arising from the property developers and a few hiccups in terms of government approvals.
- We have lowered our FY10-12 earnings forecasts by 0.8%, 2.2% and 7.9% respectively after revising our SSS growth assumptions and number of store assumptions.
- We have trimmed our fair value to RM5.72 (from RM6.30) based on target of 13x FY12/11 EPS (from 14x previously). Our lowered target PE is to reflect the weaker outlook caused by the erosion of AEON’s market share given intensifying market conditions. However, as there is still a potential upside of 10.6% to the share price, we are maintaining our Outperform call on the stock.
RHB Equity 360° ( AEON, Amway, CSC Steel; Technical: Lion Corp, Lion Industries) - 10/08/2010
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