KUALA LUMPUR (May 16): Shares of AEON Co (M) Bhd (KL:AEON) surged to their highest in 20 months as investors cheered the department store operator’s first-quarter results while analysts raised their forecasts to catch up with the stronger-than-expected earnings.

AEON rose as much as 16% to RM1.41, its highest since September 2022. At the closing bell, the stock was at RM1.34, still up 14 sen or 12%, after more than 40 million shares changed hands. The counter was also more active than usual with trading volume at over 26 times its 200-day moving average.

At least two analysts upgraded their recommendations for the stock after AEON reported RM57.4 million net profit for the first three months of 2024 which accounted for 45% of the consensus full-year estimate.

“We turned optimistic on AEON’s outlook” partly backed by solid out-of-home spending, thanks to the stable job market and income prospects, said MIDF Amanah Investment Bank in upgrading the stock to ‘buy’, from ‘hold’ previously.

Further, government cash handouts and Employees Provident Fund (EPF) Account 3 withdrawal could support spendings for value, staple products at AEON while the return of consumers to shop physically will ensure stable occupancy rate and positive rental renewal for the property management services segment, the research house added.

Shares of AEON have soared 27% so far this year, tracking gains of consumer staples and other companies providing essential services as investors bet on stocks with resilient earnings amid subdued consumer sentiment due to rising cost of living.

Still, analysts are divided over further upside following year-to-date rally, with five out of nine rating the stock ‘hold’ and the remaining four with ‘buy’ recommendations, according to Bloomberg.

“We hold the view that the impact of sustained elevated inflation on consumer spending could be partially mitigated by a significant pay rise for civil servants,” Kenanga Investment Bank said in upgrading the stock’s rating to ‘market perform’ from ‘underperform’.

Following the latest analyst revisions, AEON is expected to rake in net profit of RM135.22 million for the full 2024, Bloomberg data showed. Revenue meanwhile may come in at RM4.26 billion for this year. 

On its part, AEON managing director Naoya Okada said the company remains focused on executing its strategic priorities despite anticipating a challenging operating environment due to cautious customer spending.

AEON, which opened its 35th store in Setia Alam, has undertaken several more facelift projects, including at AEON Bandar Puchong, AEON Bukit Indah, AEON Tebrau City and AEON Ipoh Station 18.

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