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Saturday, December 24, 2011

AEON, Parkson rightly command higher valuations

KUALA LUMPUR: AEON Co (M) Bhd and Parkson Retail Asia (PRA)'s solid price to earnings (PE) ratio shows that good consumer companies in the region rightly command higher valuations.

In its report, OSK Research Sdn Bhd has tagged AEON, which runs the Jusco retail stores, at a higher PE of 15 times to RM8.23.

PRA, which was recently listed on the Singapore Stock Exchange (SGX), currently trades at a 18 times forward PE, it added.

"Although the group posted two consecutive quarters of top and bottom-line year-on-year contractions, AEON still logged in positive revenue and net profit growth in Q3 after reopening its department store in 1 Utama. Since August, the company has been delivering positive profit growth since 1998," it said.

Hence, OSK Research has recommended the stock as a "buy", at a fair value of RM8.23.

It said AEON has new stores in the pipeline. The retailer plans to open two to three outlets next year alone.

"In the next two years, we expect AEON to open one outlet each in Kedah, Johor and Penang, for which the land was acquired in early 2011 (in Kedah and Johor) and in December in Penang," it said.

AEON also plans to penetrate Sabah and Sarawak, where it has no presence, next year. At the same time, the group will maintain its strategy as a residential area mall and will only penetrate small towns.

OSK Research likes AEON's unique business model as a department store-cum-shopping mall operator, which locates its outlets near residential areas and targets the mass market.

It said PRA's higher forward PE than AEON's reflects the former's regional presence and faster growth.

By Business Times

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