AEON Credit shares rise on good dividend showing

Financial services firm’s growth trajectory set to continue

“Robust credit demand from higher credit quality customers, along with successful marketing campaigns, ensured y-o-y growth was strong across the board. In FY25, the group will aim for 10% receivables growth and a 13% return on equity.”

RHB Research

PETALING JAYA: AEON Credit Service (M) Bhd rose as much as 3.6% or 24 sen to RM6.85 in the morning trading session yesterday following a higher-than-expected payout dividend payout for the financial year ended Feb 29, 2024 (FY24).

“A final dividend of 14 sen (full-year payment of 28.25 sen, post-bonus issue) was above our expectations of 26 sen due to a higher payout of 34% from our anticipated 30%,” Kenanga Research said.

It added that AEON Credit’s FY24 net profit, which saw a flat growth of 1.5% to Rm424.02mil from Rm417.69mil in the previous year, was within analyst expectations.

The financial services company incurred higher operating expenses mainly due to higher impairment losses, coupled with an increase in interest expenses.

Full-year revenue increased 16.6% to Rm1.91bil from Rm1.64bil in FY23.

Moving forward, Kenanga Research believes that AEON Credit could 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 a better disposable income outlook. This could also translate to fewer delinquencies going forward.

“Meanwhile, the group has also been outsourcing its collection processes to ensure better returns.

“Given its digital bank (AEON Bank) is looking to be launched to the public soon, AEON Credit may have access to cheaper funds in the near term; albeit this will be restrained by Bank Negara’s Rm3bil asset limit during its foundational phase,” it added.

The research house has maintained its “outperform” call on the counter with forecasts relatively unchanged with a slightly higher target price of RM8.55 from RM8.48.

Meanwhile, RHB Research has maintained its “buy” recommendation with a target price of RM7 after AEON Credit’s FY24 results came in ahead of its estimates on stronger-than-expected net interest income.

“Our initial read-through of the numbers was positive – receivables growth remained robust across the board, and asset quality appears to be improving,” it said.

The research house said AEON Credit saw its financing receivables grow 13% year-on-year (y-o-y) in FY24, which beat management’s guidance of a 10% growth for the year.

“Robust credit demand from higher credit quality customers, along with successful marketing campaigns, ensured y-o-y growth was strong across the board.

“In FY25, the group will aim for 10% receivables growth and a 13% return on equity – we view both targets as modest, as it implies a softening from FY24 figures.

“However, the 10% receivables growth target is still ahead of our more conservative 8% assumption for FY25,” RHB Research added.