Cash-rich AEON scraps REIT plan

Retailer and mall operator AEON Co (M) Bhd has scrapped its plan to set up a property trust, one of the company's options to raise funds, as it has enough cash to expand.

Managing director Nagahisa Oyama said it has enough money in its coffers to grow its business without having to raise funds.

"AEON has money to open two to three outlets each year ... so we do not need to do a REIT (real estate property trust)," Oyama told Business Times in an interview.

Companies with a lot of assets can form a REIT as a way to raise funds. Typically, they sell some of their assets to the REIT which in turn will raise funds from an initial public offering.
As at June 30 2009, AEON has RM33.3 million in cash. The group has also seen its net profit growing each year for the last five years. For the year ended December 31 2008, it made a net profit of RM120.6 million on revenue of RM3.43 billion.

AEON chairman Datuk Abdullah Mohd Yusof first announced that it was looking at a REIT as an option in April 2007.

However, in 2008 the company said that it was in no rush to set up the REIT as it thought the local property trust market was still in its infancy.

AEON continued to keep tabs on the industry and was also studying the REIT.

It identified seven properties valued at about RM700 million to be sold to the trust vehicle. Four of the properties are located in the Klang Valley namely Alpha Angle Shopping Centre in Kuala Lumpur, Jusco Metro Prima Shopping Centre in Kepong and Aeon Cheras Selatan Shopping Centre and Bukit Raja Shopping Centre in Klang.

Two outlets are in Johor - Jusco Taman University Shopping Centre and AEON Tebrau City Shopping Centre. The seventh outlet is Jusco Melaka Shopping Centre.

In 2008, its property management division made an operating profit of RM62.17 million and a revenue of RM308.86 million.

Today, it operates 25 outlets, four of which are MaxValu supermarkets. About 10 shopping centres, where the 21 Jusco department store-cum-supermarkets operate, are owned by AEON.

It will also own two of the three new confirmed store openings - the Mahkota Cheras and Bandar Permaisuri. It will lease the space in Bandaraya Melaka.

By Business Times (by Vasantha Ganesan)