Ended FY21 with a bang!
Raised TP to MYR2.20; maintain BUY
4QFY21 results outperformed both our and consensus expectations on higher-than-expected core segment margins. As the pandemics adverse effects on consumer consumption gradually subside, we expect earnings growth momentum to continue in FY22. Our FY22-FY23E earnings are lifted by 18%-19% and we introduce FY24E. We raise TP to MYR2.20 (+60sen) on a higher 25x FY22E PER (mean; 22x PER previously on -0.5SD to mean) reflecting earnings recovery to pre-pandemic levels in FY22.
Above expectations
4Q21 core net profit of MYR77m (+147% YoY, 3Q21 core net loss: MYR18m) brought FY21 core net profit to MYR94m (+62% YoY), reflecting 216%/188% of our/consensus estimates. The beat was due to higher-than expected retail and property management services segment EBIT margins. AEON also positively surprised on dividends, with a final DPS of 3sen, against FY20 DPS of 1.5sen.
Margin expansion in retail and property segments
4Q21 group revenue grew 8% YoY driven by (i) retail sales growth (+10% YoY) as eased movement restrictions propelled sales from its hardline and softline categories, but (ii) partially offset by weaker property management services contribution (-2% YoY) on lower rental rates after transitioning to higher variable rental structures to stifle decreasing occupancy rates. 4Q21 group EBIT also jumped 64% YoY due to stronger margins from both retail (+7 ppts YoY) and property management services’ segments (+11 ppts YoY). Notably, 4Q21 effective tax rate of 25% was also markedly lower versus 32% in 4Q20 (-7 ppts YoY).
FY22 outlook remains positive
Our FY22/FY23 earnings estimates are raised by 19%/18% after adjusting for higher segmental EBIT margins (retail: c.+1 ppt p.a., property management services: c.+2 ppt p.a) and lower effective tax rates of 35% p.a. (from 48%/45% previously) based on AEON’s latest run rates. Further business disruptions (eg. lockdowns) appear unlikely in FY22 given high vaccination rates in Malaysia; hence, we expect robust retail segment earnings recovery while better shopping mall traffic will also help sustain its property management services’ contribution.