AEON

Investors want more dividends having noticed that AEON has sizeable tax credits to frank them. They also want AEON – which is 51% owned by Japan’s AEON Co Ltd (AEON Japan) – to increase the free float of its shares and follow its parent in explosring the benefits of injecting its many shopping malls into a REIT.

However its executive director said the group is still in growth stage. A reason why a REIT is not materialized anytime soon is due to AEON has rm400 million cash. He declined to comment on whether the board will consider a stock split to broaden its investor base or a share placement to raise cash for expansion.

Whether its cash needs change could depend on how well its negotiations with third parties to set up the first AEON shopping mall in Sabah and Sarawak go. The East Malaysia mall will likely be built and owned by a third party and leased to AEON.

In deciding whether or not to go ahead with a REIT, AEON will need to balance the conflict between maximizing profits as a retailer and master tenant of its properties with the role of REIT owner seeking higher rent. It will also have to weigh the potential dilution of income from property management which currently (June 2013) accounts for a sizeable 43% of pre tax earnings.

There is a value in the AEON brand and its earnings have steadily grown at about 15% per annum in the past four years prior to 2013.

Sentiments are likely to be upheld by the group’s strong franchise value, stable growth momentum and expanding base of stable recurring revenue from mall management.

Its parent AEON Japan has embarked on a stock split and seems open to the idea of REIT.

Right now (June 2013), AEON Big is managed independently by AEON Japan and is not part of AEON Malaysia. There is no overlap between AEON and AEON Big in Malaysia due to their different target markets.

AEON Malaysia is first a retailer and then a property manager.