Sunday, February 27, 2011

AEON - One long term investment to consider

I have always been interested with quality management, a board that respects its shareholders, a company that continues to bring value to its customers and stock holders. AEON is to me that company. (For the first look at its business, for the 2nd and 3rd look at its annual report - then you will know what I mean)

Besides consistently showing improved performance every year, it continues to provide higher dividends to its shareholders. I am disappointed that I did not notice this stock until recently.

AEON has no debt - amazingly, it continues to expand (buying land and build the stores) using its cash flow from operations. If you notice, AEON is one company that whenever it decides to operate in your neighbourhood, it enhances the property value in that area - pretty much a McDonald's trait.

It gives out good dividend as well - consistently at 2 - 3% yield depending at the share price during the period.

At the same time, it still finds room for growth. In an industry where the larger players continue to thrive, AEON is that winner. If you notice, in this space where are the Oceon, The Store, Hankyu, Hiong Kiong etc? They are gone or some almost. There are of course several players i.e. Cold Storage, Parkson or the hypermarts such as Tesco, Carrefour and Giant but AEON is one that manages to find its niche.

On the business side, I like AEON (or rather Jaya Jusco) for its neat store. You can basically bring your child and facilities for children that are offered are a lot better than other players especially the hypermarts. In this respect, you often find that it will always manages to find its space in the business. (Of course I like one hypermart out of the 3 in Malaysia, i.e. Tesco and if it is a listed company - it will interest me as well - I suggest looking at Tesco UK if you are willing to explore investment overseas.)

On the financial point of view, PAT grew from RM73 million in 28 Feb 2006 to RM164 million in 31 December 2010 - more than doubled over a 6 years performance. The fact that its performance has been consistent is important i.e. does not experience the ups and downs of a property or any cyclical counter. Having that, you can be pretty sure that it does not have to play around with its numbers as consistency counts in this stock rather than a short term view. (This blog is not about guessing what the owner, CEO and CFO wants to do with their company's stock price.)

This is one investment that you can basically have a sound sleep and do not have to guess where the real estate market is heading over the next 6 months or whether any particular bank is overly exposed to any particular sector - etc. Know what I mean!

Its current price at RM6 is not expensive and as in buying anything, you will pay decent money for a good company.

Serious Investing!

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