AEON Malaysia is set to embark on a new chapter at its KL Midtown mall as it looks to operate under the property management format rather than general merchandise store format. Analysts have viewed this positively based on current success.
RHB Investment Bank has maintained its BUY call on AEON Co (M) Bhd with a target price of RM1.52, implying around 50% upside, despite expectations of softer near-term earnings amid cautious consumer spending.
RHB said AEON is currently trading at about 10 times FY2027 forecast price-to-earnings (P/E), around 1.5 standard deviations below its historical mean and close to its historical lows.
The research house believes much of the near-term weakness in consumer sentiment has been priced into the stock, while AEON’s resilient property management segment (PMS) provides downside support.
RHB expects AEON’s second-quarter 2026 core earnings to decline sequentially as festive demand normalises following a strong first quarter.
It forecasts 2Q26 core profit at RM6 million to RM7 million, representing a 43% to 51% year-on-year decline, mainly due to the absence of Aidil Fitri spending contribution seen in 2Q25 and weaker consumer sentiment following heightened Middle East tensions.
Despite the expected quarterly weakness, RHB estimates 1H26 core earnings at about RM90 million to RM91 million, representing growth of approximately 12% to 13% year-on-year.
The stronger first-half performance is expected to be driven by robust PMS earnings in 1Q26 and firmer consumer sentiment earlier in the year.
However, RHB expects earnings to decline by around 2% to 5% year-on-year in 2H26, as consumer sentiment weakens and PMS margins normalise.
Softer tenant sales could also weigh on variable rental income, while the reversal of earlier Automatic Fuel Adjustment (AFA) utility benefits could add pressure.
RHB noted that AEON’s management had observed more cautious purchasing behaviour since late June, with customers showing lower average ticket sizes and greater price sensitivity — signs of a broader downtrading trend.
RHB said the upcoming KL Midtown development represents a significant departure from AEON’s traditional general merchandise store (GMS) format.
The neighbourhood lifestyle mall, which is scheduled to open in 4Q26, will span about 400,000 sq ft, equivalent to around 3% of AEON’s net lettable area, and is targeting approximately 75% occupancy at opening.
Unlike AEON’s conventional format, KL Midtown will not house a full department store. Instead, AEON will operate a supermarket alongside standalone private-brand concepts.
RHB views the shift positively as it reduces AEON’s exposure to the low-return GMS business while potentially increasing the contribution from its higher-margin and more stable PMS segment.
The research house noted that retail operations generated an EBIT margin of only around 0.7% in FY2025, and generally operated at a loss during low seasons, compared with approximately 41% for PMS.
The standalone format also allows individual underperforming brands to be replaced without disrupting an entire floor, RHB said.
Meanwhile, AEON Mall Seremban 2, adding about 300,000 sq ft, and AEON Mall Kinta City, adding about 145,000 sq ft, are undergoing major expansions, with both projects targeted for completion by end-2027.
RHB maintained its FY2026-FY2028 earnings forecasts and DCF-derived target price of RM1.52, which includes a 6% ESG premium.
At the target price, AEON would trade at around 13 times FY2027 P/E, broadly in line with its five-year historical mean.
RHB also expects the stock to offer an estimated FY2027 dividend yield of about 6%.
The key risks to its recommendation are weaker-than-expected consumer sentiment and higher-than-expected operating costs.
