KENANGA Research has retained its “outperform” rating on AEON Credit Service (M) Bhd on the back of its financing portfolio benefiting from improving economic and income prospects while its upcoming digital bank is widening its outreach to prospective depositors and borrowers.
Moreover, the research house deemed the financial service provider’s FY2/2024 net profit of RM424.0 mil was within both its full-year forecast and that of consensus full-year estimates.
“Meanwhile, a final dividend of 14.0 sen (full-year payment of 28.25 sen post-bonus issue) was above our expectations of 26.0 sen due to a higher payout of 34% from our anticipated c.30%,” commented analyst Clement Chua in a financial results review.
Maintaining its “outperform” stance on AEON Credit with a slightly higher target price of RM8.55 (from RM8.48 previously) over its yesterday’s closing price of RM6,61, Kenanga Research expects AEON Credit to likely see sustained growth in its financing books as economic prospects are expected to pick up.
“We opine its key segments of motorcycle, auto and personal financing could see support from better disposable income outlook,” noted the research house.
“This could also translate to fewer delinquencies going forward. Meanwhile, the group has also been outsourcing its collection processes to ensure better returns.”
Given that its digital bank (AEON Bank) is set to be launched to the public soon, Kenanga Research reckoned that AEON Credit may have access to cheaper funds in the near-term albeit constrains by Bank Negara Malaysia’s (BNM) RM3 bil asset limit during its foundational phase.
“As the digital banking space grows, we believe investors may see such license holders (ie. AEON Bank) to possess more value propositions that may embolden the stock attractiveness,” projected the research house.
“Specifically with micro-lending in mind, it could see strong traction in an eventual strong economic growth environment.”
However, Kenanga Research listed the following as risks to its call: (i) lower-than-expected receivables growth; (ii) extension of moratorium; (iii) higher-than-expected impairment losses; and (iv) lower-than-anticipated write-backs.
At 10.55am, AEON Credit was up 10 sen or 1.51% to RM6.71 with 459,700 shares traded, thus valuing the company at RM3.43 bil. – April 9, 2024
