Friday, April 29, 2011

What I managed to decipher from AEON's Annual Report

Aeon's annual report for FY2010 was out recently. I allowed myself some time to read through the CEO's report as well as looking at the numbers. Here are some of the summaries which I think will have impact on Aeon and what I think of them:

- revenue registered a nominal growth with most of its outlets registering between 5.8% and 9.6%;
- Aeon has more than 20 outlets today and some of its new openings did affect its older outlets for example in Jusco Melaka and Jusco Bandaraya Melaka. Similarly, the Jusco Wangsa Maju only had below 1% same store sales growth due to the maturing of the AU2 Setiawangsa outlet;
- it does say that it is getting tougher competitions from its competitors. From my observation, its major competition came from Tesco and Giant. It shows that while there are a handful of players left in this market, the competition among the few players are pretty stiff;
- the increase in food prices towards end of the year which Aeon is selling probably the most may cause them to have reduced margin - this is something no one in the industry can eliminate, but I suspect the better managed ones will be able to pass the costs better;
- an important one to note - Since August 2010, it no longer manages the One Utama Shopping complex (the old wing). Impact to the property management income was 5.3%. Hence I believe that the impact this year which is a full year would be more than 10%. That affects its profit by around RM11 - RM12 million by my calculation. Nevertheless, I believe that this loss of profit will be overcome by new outlets opening from last year and this year.

I have always thought that Aeon is a steady, well-managed and solid stock. The fact that I have managed to get these information from its Annual Report shows that it is a company that respects its shareholders and do not do the normal run of the mill Malaysian type of Annual Report reporting which says about the general economy (c'mon, I can read The Star or CNBC to know how well the economy does) and left one last paragraph to tell about the performance which I can also calculate myself.

From what I have read, it shows that competition is toughening but Aeon will still continue to show growth. At around 12.5x PE and considering its very strong balance sheet, I feel that it is still a very strong company to consider. Note that I have a tendency to like companies that do cash business and Aeon happens to manage that cash business very well.

Serious Investing!

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