AEON Co to lease new mall
Aeon Co (M) Bhd
(Sept 8, RM5.48)
Downgrade to neutral at RM5.48 with target price RM5.88: The Edge Financial Daily reported that Seal subsidiary Seal Lifestyle Development Sdn Bhd has agreed to lease out its shopping centre building together with car parks in Bayan City, Bayan Baru in Penang, to AEON Co (M) Bhd. Seal Lifestyle will rebuild the property according to the design and specifications of AEON, for a total development cost of RM146 million.
The Bayan Baru mall will expand AEON’s mall portfolio to 24. In addition to Queensbay mall, this will be AEON’s second mall in Bayan Lepas and third in Penang. Bayan Baru is a satellite township located in Bayan Lepas.
The township is one of the most rapidly developed townships in Penang due to its proximity to the Bayan Lepas Free Industrial Zone, a source of employment in Penang.
The shift in population south, out of George Town (18km from Bayan Baru) and towards Bayan Baru and its immediate neighbourhoods, has benefitted the township.
While we note that its mall in Bandar Perda, Bukit Mertajam, has not been performing up to management’s expectations, which could be due to the smaller population size and its location in mainland Penang, AEON in Queensbay mall — situated in Bayan Lepas — has been performing well.
Although there are already two major shopping complexes in Bayan Baru — Sunshine Square (452,000 sq ft) and Bukit Jambul Shopping Complex (999,604 sq ft) — we believe AEON mall will stand out given that it is a well-known name in Malaysia and will be the most modern and newest mall in the township.
We believe there would be minimal cannibalisation risk given the high population density of 1,538.8/km2 in Penang vis-a-vis 651.1/km2 in Selangor, where the group has 14 malls in total.
While we are maintaining our net profit forecasts for FY2010 and FY2011 at RM146.5 million and RM158.8 million respectively, we downgrade the stock to “neutral” given the recent appreciation in its share price and the fact that our target price offers less than 10% upside on its last closing price. We value AEON at RM5.88, which is based on 13 times FY2011 EPS. — OSK Investment Research, Sept 8
Written by The Edge Financial Daily
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