RHB Research has reiterated its BUY rating on retail and property giant AEON Co (M) Bhd with an unchanged target price of RM1.52, offering a potential upside of 50 percent and a projected FY27 dividend yield of around 6 percent.
The research house noted that AEON’s first-half results for FY26 met expectations, as steady earnings from its Property Management Services division effectively cushioned softer consumer sentiment in its retail business. RHB continues to favor AEON for its predictable property management revenue stream and attractive valuation, with the stock currently trading at approximately 8 times FY27 projected price-to-earnings, close to historical lows and 1.5 standard deviations below its long-term average.
Core net profit for the first half of FY26 reached RM97.9 million, up 21.8 percent year-on-year, fulfilling roughly 62 percent of RHB’s full-year forecast. The core net margin expanded to 4.4 percent from 3.6 percent in the previous corresponding period, primarily driven by lower property expenses following electricity tariff adjustments implemented in July 2025. Total revenue for the second quarter remained broadly flat year-on-year at RM995.4 million.
The Property Management Services division delivered a strong performance in the second quarter, with revenue rising 3 percent year-on-year to RM200.0 million. Segmental profit surged 15.1 percent to RM90.0 million, pushing the EBIT margin up to 45 percent compared to 40.3 percent in the second quarter of FY25. Topline growth in the property division was supported by healthy mall occupancy rates exceeding 95 percent, positive rental renewals, and strategic tenant-mix optimization.
Conversely, the retailing segment reported a 1.2 percent decline in second-quarter revenue to RM795.4 million. The segment remained loss-making during the seasonally weaker quarter, with EBIT margins deteriorating to negative 4.1 percent from negative 3.5 percent a year earlier. RHB attributed the pressure to cautious consumer spending shifting toward essential goods over discretionary general merchandise, alongside the absence of festive season spending during the quarter.
While property management revenue is expected to stay grounded on high occupancy and mid-single-digit rental reversions, RHB cautions that utility savings from the July 2025 tariff restructuring will begin unwinding from June 2026 as automatic fuel adjustments shift from rebates to surcharges amid higher energy prices. As a result, full-year property margins are projected to normalise to around 41 percent, in line with FY25 levels.
Consumer spending in the retail segment faces ongoing headwinds, with management observing a noticeable slowdown since June. RHB expects second-half core earnings to decline by roughly 14 percent year-on-year, though strong first-half contributions will keep full-year FY26 earnings growth at about 6 percent.
On the expansion front, AEON KL Midtown remains on track to open in the fourth quarter of 2026 with a targeted occupancy rate of 75 percent, marking AEON’s strategic shift toward standalone general merchandise store formats and increased third-party tenancy.
RHB’s discounted cash flow-derived target price of RM1.52 includes a 6 percent ESG premium, valuing the stock in line with its long-term mean P/E multiple of 12.3 times for FY27. Key risks identified by the research house include prolonged weakness in discretionary consumer spending, potential delays in net lettable area expansion projects, and a slower-than-expected recovery in retail profit margins.
