There are some competitors faced by the AEON Group such as Dairy FarmInternational Holdings Limited, Isetan Company Ltd, Seven & I Holdings Co, Ltd andThe Seiyu Company.. AEON owns about
Trang 1AEON Co (M) Berhad
Date: 22th July 2014 Current Price: 4.030
Today’s change: +0.07 (1.77%) Recommendation: Buy
Table 1.0: Market Profile
Trang 2Source: Bursa Malaysia, 2014.
As Figure 1.2, the current market share price is RM4.030 in July There were a drasticdrop of the share price of RM15.000 in May and in June the market share price wasRM3.900 This was due to liquidation of the company’s share which is good for longterm by increasing the share volume in the market As in May, the volume of shareswas around 1000 and increased to appropriate 4000 in July
1.0 Highlights
Financial Review
AEON Co (M) Bhd financial year end of 31st December 2013 had achieved arecord revenue of RM3.514 billion which is 7.9% higher compared to 2012 ofRM3.256 billion [ CITATION AEO13 \l 1033 ]
Profit after tax is RM231.0 million which is a 8.5% growth over 2012performance [ CITATION AEO13 \l 1033 ]
Their financial position remains healthy by not having any borrowing at 31stDecember 2014 and a new assets value per share of RM4.68 which 2012 wasRM4.19 [ CITATION AEO13 \l 1033 ]
Acquirement of lands
Trang 3 Agreement with Genting Property Sdn Bhd of one piece of freehold land forshopping mall development at Mukim Simpang Kanan, Batu Pahat, Johor on
10th July 2014 [ CITATION Ken14 \l 1033 ]
This acquisition is fully satisfied by cash and funded by internally generatedfunds and would provide AEON the opportunity to expand their presence inBatu Pahat, Johor [ CITATION Ken14 \l 1033 ]
Viewed as positive in long term and in company’s future prospects [CITATION TAS14 \l 1033 ]
Future Expansion
New Outlets in MaxValu stores in smaller town such as Bukit Mertajam inPenang, Taiping in Perak, Klebang in Melaka and in East Malaysia [ CITATION Ken14 \l 1033 ]
New outlet from new venture with Thailand’s furniture company located inShah Alam by 2015 [CITATION TAS14 \l 1033 ]
Joint Venture
Joint Venture with Thailand’s Index Living Mall Company Ltd to make forayinto the home and office furniture market on September 2013 [CITATION TAS14 \l 1033 ] Positive new earnings and diversification into new businessterritories
Team up
AEON BIG (M) Sdn Bhd, branded hypermarket is planning to team up AEON
Co (M) Bhd in 2016 to open shopping centres for grabbing a bigger market[ CITATION Vas14 \l 1033 ]
Risk
Caution on GST that will be implemented beginning April in 2015 that therewill be a fluctuation in consumption volume before and post implementation
of this GST [CITATION TAS14 \l 1033 ]
The increase and rise of foreign retailor to enter as competitors against AEON
Co (M) Bhd such as Tesco that announced they will be adding 3 more storesthat in total of 52 outlets in Malysia [ CITATION TAS14 \l 1033 ]
Expected a lower spending power outside of Klang Valley [ CITATION TAS14 \l
1033 ]
Trang 42.0 Company and Industry Overview
AEON Co.,Ltd was first founded by Sozaemon Okada in 1758 Sozaemon Okadalaunched Shinoharaya in Yokkaichi and starts their business in kimono fabrics andaccessories (AEON, 2014) AEON Co., Ltd is the holding company of AEON Groupand now is ranked the largest retailer in Asia AEON is headquarters in Chiba, Japanand the main industry for AEON Group is retailing
Okadaya Co Ltd has longest pedigree which was built in 1758 Until World War II,
it is starts dealing clothing, including kimonos After the war, it was restarted byTakuya Okada built-in single-site devastated buildings and only hired five employees
It grows into a chain of 14 stores in Mie Prefecture, but it is still consider as a bigamount in the late 1960s
Many specialty chains are launched by AEON including The Body Shop and LauraAshley stores in Japan AEON has a joint venture in Japan and also operates SportsBureau HapYcom which is the Japan's leading drugstore chains Other activitiesinclude shopping center development and financial services It operates AEON andJusco chains of merchandise stores and Japan supermarket chain stores Due to thepopularity and good brands image for the company, they can expand their business toChina and other Asian country (Hoover, 2014) The company has launched widevariety of consumer product stores For example, general merchandise stores (GMSs),supermarket, convenience stores, department stores, specialty stores, discount stores,drug stores, finance services, food stores and so on
AEON is the leading retailer in Malaysia with total revenue of RM 3.26 billion for thefinancial year ended 31 December 2012 (aeonretail, 2014) The company isincorporated on 15 September 1984 with the company mission ‘international-scaleretailing group’ which mean that not excellence only in Japan, but also in othersnations We are trying to achieve international recognition in terms of size, growthand profitability They hope to be success in intangible aspects, such as customersatisfaction and corporate social responsibility worldwide They also agrees on
"quality management" concept in order to further enhance their capabilities Otherthan that, the vision is to build a strong competitive position and achieve continuous
Trang 5growth Another vision is AEON member rely on ‘customer first’ which need to meetcustomer expectation Therefore, are able to raise more further expectation
There are some competitors faced by the AEON Group such as Dairy FarmInternational Holdings Limited, Isetan Company Ltd, Seven & I Holdings Co, Ltd andThe Seiyu Company AEON owns about 19.9% of stake in Daiei and want to takecontrols of Daiei which have many outlets in major cities such as Kanto Kansai areas
in order to expands the customer base and strengthen the business in big urban areas.The company buys the share of Daiei from Marubeni Corporation which is the biggestshareholders and hold largest stake in Daiei with 44.6% This deal will make AEONGroup be the single dominant force in the nation’s supermarket business (fleshplaza,2014) Aeon will renovate the old Daiei stores while expanding their own supply ofprivate-brand products By bringing together the Aeon group and Daiei group, willhave beyond six trillion yen in sales will be born (Yuri, Kageyama, 2007) MotoyaOkada said that they are facing a difficult operating environment and an intensecompetition
For the future plan of AEON Group in Malaysia is to open three new outlets insmaller towns by investing RM 700mil Two of them will in the new shopping centre
in Bukit Mertajam, Penang and Taiping, Perak which AEON Group will launch (LizLee, 2014) They also aimed to expand their business in Kedah, Kelantan,Terengganu, Sabah and Sarawak for the next five years
3.0 SWOT Analysis
As general, we have known that AEON is a big retail store is establishes at Japan, and
it has acquisition with Carrefour Malaysia form as JUSCO in Malaysia Therefore,their organization has a lot of chance to expansion their business Although Nelson iswilling to take more risky in his investment, but the approach ways to help investorsmake decision are do a lot of analysis, get more and more information related toreduce the investment risk Our group need to do some SWOT and industry analysisbefore suggest AEON to Nelson There are strength, weakness, opportunity andthreat
Trang 63.0.1 Strength
Based on the information, we found that AEON has good reputation in the market.They is the first company are getting new SMBC Environment Assessment Loanproduct offered by SMBC in Malaysia This can help AEON make enhancement forcompany’s future eco-management AEON also makes a lot of Corporate SocialResponsibility activities, like reduce harmful effected to environment through theirbusiness operation and initiative in various tree planting in Malaysia This can helpthe investor get positive future prospects on AEON share
The other strength for AEON is the expansion and broad credit service, which isincluded variety of the financial service like Easy payment scheme, insurance ofCredit Cards, Personal Financial Scheme and others Their financial services are able
to meet customers’ need and expand their business not just a global retail business butalso global financial services group The AEON Financial Service Co., Ltd Japan(AFSJ) is listed in the First Section of Tokyo Stock Exchange
Based on the AEON Financial Annual Report for 2013, we can see the revenue aftertax is keep rising from year 2009 to 2013 There are RM48, 757,000 in year 2009 toRM134, 126,000 in year 2013, which is more than double up within 5 years Since,AEON is keep develop and expand their business in future, their revenue will keeprising and follow by the increasing of share price The earning per share has increasedfrom 73.30 sen in year 2012 to 102.84 sen in years 2013 The dividend is recommend
by their Bard of Director is pay for 19.50 sen per share, and the payout ratio is 38.1%
of net the profit, which is higher by 42% from previous year as the dividend for year
2013 Nelson as an investor on AEON share will get great expected return in thefuture
3.0.2 Opportunity
Based on the forecast of Malaysian economic will growth, AEON has moreopportunities to sustain their business performance AEON will continue to expandtheir products schemes to highly fulfill the customers and merchants’ need, like e-money and e-commerce solution They also will to more focus on expansion the
Trang 7equipment and asset financing to small businesses AEON also want to expand theirnetwork of branches and merchants to offering their product and service
Besides that, AEON also intends to enhance the card benefits in AEON GroupShopping Center in Malaysia They plan to launch e-money product able to use atAEON Some additional branches are plan to open in nationwide by AEON in 2014will facilitate to higher customer services
Based on the Kenanga Research, we know that AEON has a Sale and PurchaseAgreements with Johor Land Berhad to acquisition a freehold land with “Building-Commercial Shopping Centre” The key purpose of this agreement is to accelerate theexpansion of the retail business through opening new shopping center and outlets It isalso an opportunity for AEON to expand its presence in the growing area of Kempas,Johor Therefore we believe that the new mall will help AEON to enhance their retailbusiness going forward There are more and more new outlet will openings in year
2014 like Bukit Mertajam They also opened a first new AEON mall in Cambodia, tosupporting their rapidly growing per capital (GDP) It is a positive future prospect forAEON Company In additional, AEON also the only company in the Japanese retailbusiness sector to be awarded for excellent in climate change information disclosetwo years running
These kinds of implementation and development will help AEON get morecompetitive advantage to stand strong in the marketplace for attracting morecustomers and leading high sales AEON is always awareness to understanding theproduct value proposition and customer needs It is able to get high performance ofcustomer service, strong brand name and great reputation for long term businesssustainability in the market Therefore, we recommend Nelson can make investment
on AEON share
3.0.3 Weaknesses
After that, besides the strength we had discussed on above, AEON has its ownweaknesses had been happened in the previous cases After we had analyst AEONCompany we found that AEON had several limitation in the past, which are less stockand capacity, weak management and customer service problems There are theproblems in the internal control of AEON
Trang 8Firstly, AEON has encountered the complaint from their customers as staff attitudeproblem Customers are complaint about the staff attitude and behavior AEON staffhas lack of training and knowledge of serving the better way to their customers Aportion of the staffs are even had the bad attitude on serving their customers Besidesthat, customers had complaint about the staffs lazy on working and provide servicevery slow There are slacking on their job and refuse to do their job In additional,staffs in JUSCO does not checking the products before selling, some of the productsdoes not states price tags and some of it do not update the price tags, the price tagsmisleading customers to pay a wrong price on the products they had purchased.Because of these factors that I had discussed on above, AEON had poor reputationamong customers
Next problem is limited stock and capacity in their warehouse AEON has many field
of business as well as many different industries From the research we had found that,AEON has involved in tea industry
AEON has sold several types of tea; one of the examples is Dayou Fine Puer Tea.Dayou Fine Puer Tea is the most popular and healthy green tea in the world AEONhas provided a lot of Dayou Fine Puer Tea to their customers, it is one of the productshelp the company AEON to generate profit and increase market share However, there
is limited stock provided to their customers
AEON has only supplier in China There is limited stock to supply AEON It is onlythe source for Dayou Fine Puer Tea In additional, AEON has a limited space andcapacity to store their stock Therefore, AEON has limited Dayou Fine Puer Teaprovides to their customers In order to resolve the problem and provide more stock toAEON Company, the manufacturer of Dayou Fine Puer Tea is seeking for otherplantation of teas from other countries in the future
3.0.4 Threats
Lastly, we had discussed about the AEON strength, weakness, opportunity on theabove The next point is discussed about AEON threats strategy position in themarket AEON is the largest merchandise stock and hypermarkets AEON hasintegrated with many companies doing business in a shopping complex Besides that,
Trang 9AEON has established a convenience store and grocery store inside the complexselling their products
Although AEON is the largest hypermarket in the market, but there are a lot ofcompetitors in the market AEON not only focuses one particular product to sell, but
it has many different products for sale in a shopping complex, thus it is verycompetitive in the market There are the threats that we had analyst in AEON market.First, AEON has to compete with other hypermarkets Before set up a business,AEON has inventing huge money to set up a shopping complex before doing abusiness Besides that, they need to find many businesses involve in their shoppingcomplex The way AEON doing a business, before setting up a business, they alreadyinvesting huge money AEON need to manage well the shopping mall, they need toadopting strategy to attract consumers There is the high risk for AEON JUSCO to do
a business, because AEON needs to have a good management in order to avoid otherretailer move their business to AEON’s competitors
In additional, AEON has another threat had faced in the market AEON is the largestmerchandise and hypermarket, many products that AEON selling in the hypermarketand grocery convenience is almost similar to other retail shop in a complex or outsidethe complex Thus, it is one of the threats that AEON JUSCO had faced in the market.Although AEON had setting up a big shopping complex to attract consumers,however it has the risk there AEON also invite many retail shop in the shoppingcomplex, at the same time it has the threat because other retail shops have offeredsimilar products as AEON sold in the complex Furthermore, AEON products arewider rather other retail shops, in other word, other retail shops are selling particularproducts only their price might be lower than AEON
In order to overcome the second threat, AEON has to play the role of strategy in order
to attract more consumers, besides that, AEON also need to manage well its ownshopping mall, to attract more consumers to enter in the AEON shopping mall forcompeting other hypermarket business
Trang 101 Operating profit margin = Operating income = 326, 025
Net sales (Revenue) 3,514,418
= 0.09277x
2 Net profit margin = Net income = 1,248,094
Net sales (Revenue) 3,514,418
Trang 114 Total debt to equity ratio = Total debt =1,377,183
Total shareholders’ equity 1,643,637
326, 025
Shareholder ratios
1 Earning per share = Net income available to shareholder = 65.8sen
Number of shares outstanding
2 Dividends per share = Dividends paid to shareholders = 22sen
Number of shares outstanding
3 Price-earnings ratio = Market price per share = RM21.28
Earning per share