 |
| Managing 2014-2015 |
As it envisaged sustained consumer spending, Aeon plans to invest RM 700 million in 2014 capex which is an increase of RM 536 million from FY13.
Aeon remains optimistic about consumer spending though it is apparently described it as "cautious" now.
Aeon will follow-through with its plans to open three outlets this year in Bukit Mertajam, Taiping, and in Quill City, Kuala Lumpur adding that they will be the anchor tenant at Quill City.
The RM 700 million capex planned for this year will include the three new stores, expenses of stores opened last year as well as refurbishments of current stores.
“In the first year of operations, we usually have to contend with start-up costs of between RM 1 milionl and RM 2 million in each store that we open,” Aeon added.
Aeon also mentioned recently how operating costs has increased due to higher electricity tariffs which kicked in this year.
This cost component rise had an impact on the company’s recently announced first-quarter FY14 financial results to end-March that saw bottom line declining by 8.3% year-on-year to RM 46.88 milion despite top-line rising by a similar 8.8% to RM 945.5 million.
“This year, we are witnessing the impact of the increase in electricity tariffs. It is not only impacting us but also the rest of the industry. On a net basis, costs have increased by 17% so far after the tariff hike. This cost (component) needs to be reduced to a certain extent,” an Aeon spokesman said.
But given this is only the first quarter, generally the (financials) tend to grow stronger as we move along into the third and fourth quarters. We are looking at environmentally friendly; power-efficient devices and methods to reduce power consumption to cap these costs." Aeon said.
Such measures will include using LED lighting and installing escalator sensors. It will be done in phases on a store-by-store basis, with the aim of completing it within the next 12-15 months. Aeon does not intend to pass on these new cost increases to consumers.
The company has notably been able to face rising costs in components such as labour, fuel and materials, as net margins have been maintained at a decent 6.5% in the past three years.
Aeon had also over the past five years reported steadily rising top and bottom line figures.
The company also plans to introduce an online shopping portal soon, with the aim of capturing an additional revenue stream from this business segment with a capex allocation of about RM 2 million over two years.
“We recognise the need for online shopping and growth possibilities in this area. This year, we will start developing the online side and are now working with some consultants to try to establish and set up our own website. In the future, we will also consider digital advertising,” Aeon indicated.
“The online business will work hand-in-hand and complement the brick-and-mortar business. I don’t think it will replace it, as Malaysian consumers still like to feel and touch (a product),” the Aeon spokesman informed.
Aeon, which also has a property management service business presently, owns 12 of its outlets, leases 13 and is anchor tenant at five of its outlets.
“We are anchor tenant at Sunway, Bandar Utama, IOI Mall, Queensbay and Mid Valley. We basically manage the whole shopping centre at the ones we own or lease - with Aeon inside and the rest of the space sub-let to other tenants,” Aeon said.
However, Aeon does not have any intention to establish a real estate investment trust at the moment, as there is no need for it.
“It’s an option that we are open to (in the longer term), but there is no necessity to jump into it right now,” Aeon added.
Aeon will open its first furniture outlet called the Index Living Mall in Puchong via its 70%-owned joint venture with the Thai-based Index Living Mall, which is the largest furniture retailer in Thailand. The furniture and wood products will be sourced from Thailand. The initial capital is about RM 10 million.
Index Living Mall has its own manufacturing plant in Thailand and is currently already exporting to other countries with a franchise business as well.
No comments:
Post a Comment