AEON ... Apr12

There is little upside catalyst at this stage and low dividend yield as support.

There is room for expansion into the east coast and East Malaysia. Currently, all stores and shopping centres under the group are located in the west coast of Peninsular Malaysia. The markets in Sabah and Sarawak are not entirely underserved, with the dominant players and first movers being Parkson, Giant and The Store.

AEON's foray into these two East Malaysian states will put it in direct competition with existing and upcoming shopping centres, given the first-mover advantage by its competitors. Parkson Holdings already has a presence in the biggest mall in both Kota Kinabalu and Kuching.

Nevertheless, AEON has the advantage of the strong branding of its Jusco stores as well as proven management capabilities. Although the group has not yet set any specific timeline for expansion, market evaluation and feasibility studies have been carried out.

The company is in the midst of acquiring land in Sungai Petani (Kedah), Bukit Mertajam (Penang) and Kulai (Johor). With construction taking typically 1.5 to two years to complete, these stores may open only in 2014 to 2015.

For 2013, two stores will be opened but the respective locations have yet to be identified.

The group should able to fund new store expansions without raising additional funds. It has zero debt, net cash of RM341mil (as at end-Dec 2011), and annual operating cashflow of more than RM300mil.

If it expands into East Malaysia, the strategy would be to buy land and construct its own malls rather than rent space in existing ones.