AEON CREDIT SERVICE (M) BHD

By MIDF Research Buy (maintained) Target price: RM21.40

AEON Credit Service (M) Bhd’s net profit of RM75.8mil in the first quarter of financial year 2018 were within expectations as bad debt recovery and commission earned from sale of insurance products partly boosted the company’s earnings, said MIDF Research.

Aeon Credit posted a strong bottom line in the first quarter as its net profit rose by 21% on a year-on-year (y-o-y) basis, on the back of stronger interest income and a fee income of RM35.7mil attributed to higher rate of bad debt recovery.

MIDF Research noted that the non-bank lender’s financing receivables expanded significantly, by 17.4% y-o-y to RM6.7bil. Meanwhile, interest income experienced strong growth driven by the expansion of the company’s loan book, which saw double-digit growth for the first quarter of financial year 2018.

“The positive earnings was also reflected by the improvement in operating expenses which registered at 58.2% against revenue, compared with 60.5% in the corresponding quarter of financial year of 2017.

“We are maintaining our earnings forecast as the results came in within estimates,” said the research unit.

Moving forward, MIDF Research is optimistic on the credit provider’s prospects in tandem with Malaysia’s overall economic growth this year.

“We are positive by the strong growth in Aeon Credit’s earnings. We believe that the positive growth trajectory will continue in the financial year, given the optimistic prospects in Malaysia’s gross domestic product performance this year,” said the research house.

MIDF Research maintained its “buy” recommendation on the Main Market-listed Aeon Credit’s shares and left the target price unchanged at RM21.40.