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Strong demand for Aeon Credit expected to be robust

Tuesday, 27 December 2016

AEON Credit

PETALING JAYA: Tougher lending rules for big banks are a boon for smaller financial outfits like Aeon Credit Service (M) Bhd, which is doing brisk business providing personal loan financing and hire purchase.

Analysts expect strong demand from the retail market to sustain the company’s robust loan growth outlook.

“Loan demand from Aeon Credit’s targeted customers retail market is still resilient thanks to its niche market exposure, vis-à-vis most of the financial services providers that are facing tougher times in growing their loan portfolios amid the current economic condition,” said Kenanga Research in a recent report.

Meanwhile, Alliance DBS Research expected Aeon Credit’s receivables to grow at 16%-18% per annum for financial year ending Feb 28, 2018 (FY18) and FY19, led by weakening the motorcycle segment.

“While the lucrative effective interest rate is expected to taper down to between 15.5-16.5% (FY18-19) from 19- 20% back in FY13-14 owing to change in product focus to the to the lower risk segment,” it said in a note to clients on Dec 23.

The first nine-month ended Nov 30, 2016, Aeon Credit posted a 20% growth in its loan book to reach RM6.3bil from a year ago, of which personal financing grew by 39% year-on-year and automobile financing increased by 20% y-o-y.

Aside from Aeon Credit’s healthy loan growth, Kenanga said the firm was its “most preferred name” in the non-bank financial institution” due to decent asset quality with non-performing loan between 2%-3%, healthy capital adequacy ratio of about 19%, high ROE of more than 20% and decent dividend yield of 4.5%-4.8%.

“Its valuation is still undemanding at 8 times FY18 of price-earnings ratio,” it said.

Shares in Aeon Credit closed 12 sen higher at RM14.36 on last Friday, before the Christmas holiday.

Aeon Credit’s net profit for the third quarter ended Nov 30, 2016 rose 25.76% to RM67.05mil from RM53.36mil a year ago, while revenue rose 14% to RM280.35mil from RM245.78mil previously.

For the first nine-month of FY17, its net profit rose 15.5% to RM185mil from RM160mil previously. Revenue increased by 14.7% to RM811mil compared to RM707mil a year ago.

Meanwhile, MIDF Research said that Aeon Credit would continue to explore opportunities to improve its profitability through various initiatives such as value chain transformation project, and digitalisation of branch operations. “We fine-tuned our earnings forecasts numbers to reflect improvement in some key areas. However, we remain neutral on its outlook due to uncertainty in macroeconomic condition that will limit its profitability,” it said.

Source by: Internet

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