RAM Ratings revises AEON (M)’s rating outlook to stable, assigns AA2/Stable/P1 ratings to proposed Sukuk Wakalah Programmes

Published on 02 Jul 2024.

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RAM Ratings has affirmed the AA2 rating of AEON CO. (M) BHD.’s (AEON (M), the Company or the Issuer) RM1 billion Islamic Medium Term Notes Programme (2016/2031), while revising the outlook to stable from positive. Concurrently, we have assigned AA2/Stable/P1 ratings to the Company’s proposed new RM2 billion Islamic Commercial Papers/Islamic Medium Term Notes Programme (Sukuk Wakalah Programmes). 

The outlook revision reflects AEON (M)’s plan to accelerate its mall rejuvenation and expansion plans, thereby incurring a higher debt load than previously expected.  Notwithstanding this, the Company’s projected credit metrics will still stay supportive of its current AA2 ratings. 

In FY Dec 2023, AEON (M)’s financial performance was largely in line with our expectations. Its top line remained stable at RM4.13 billion (-0.3% y-o-y), with property management growing 9.6% y-o-y, offsetting the retail segment (-2% y-o-y). The Company’s operating profit before depreciation, interest and tax (OPBDIT) margin narrowed to 17.14% (FY Dec 2022: 18.30%) on account of higher minimum wage and utilities expenses. The Company recorded a strong festive-driven 1Q fiscal 2024, with both top and bottom lines climbing a respective 5.5% and 52.7% y-o-y. 

Management remains cautious for the near term in view of weaker consumer purchasing power amid inflation pressure. To retain its competitive position as Malaysia’s largest mall owner and a leading retail operator, AEON (M) will focus on rejuvenating existing outlets – AEON IOI Bandar Puchong, AEON Bukit Indah, AEON Tebrau City and AEON Ipoh Station 18 – and opening several specialty stores and a new mall in KL Midtown in FY2024 and FY2025, respectively. 

With these plans, AEON (M) anticipates total debt (excluding lease liabilities) to rise at a faster pace, to a respective RM620 million and RM820 million by end-2024 and end-2025. Consequently, we anticipate projected lease-adjusted debt-to-OPBDIT and funds from operations debt coverage ratios to tick up to 2.58 times-2.82 times and 0.31 times-0.36 times respectively over the next three financial years; levels that are still commensurate with AA2 ratings.

AEON (M) is deemed strategically important to its Japan-based parent, AEON Co., Ltd., as the latter’s largest revenue contributor in Southeast Asia. While this had previously benefited its issue rating, the Company’s robust credit metrics is supportive of the AA2 issue rating on its own. 


Analytical contacts
Tan Yan Choong
(603) 3385 2502

Thong Mun Wai
(603) 3385 2522

Media contact
Sakinah Arifin 
(603) 3385 2500


The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
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