Aeon Credit seen rebounding in FY22

PETALING JAYA: Aeon Credit Service (M) Bhd will likely see earnings recovery in FY22 ending May 31, driven by its various digital initiatives, a rebound in receivables growth and lower net credit cost, according to Affin Hwang Capital Research.

It said the group’s investment into digital initatives such as an e-wallet, Aeon PLUS card and digitizing its operations and approval processes, have enhanced its overall turnaround time.

“Its focus to expand receivables growth in the M40 segment would also help lower its overall portfolio risk and capture stronger receivables growth when the economy recovers,” it said.

It noted that Aeon Credit has also stepped up collection initiatives from delinquent borrowers, after the moratorium period came to an end.

“We believe that Aeon Credit fits into a longer-term investment horizon, while in the near term it could be a beta stock due to the sharp correction in share price year-todate,” it added.

That said, the research house is of the view that FY21 will be a lacklustre year for the group, having reported poor earnings for Q1’21.

Net profit declined by 68.5% yearon-year and 67.2% quarter-onquarter, largely due to a higher impairment loss on receivables.

“In our recent discussion with management on the outlook for 2Q’21, we learned that credit collection initiatives post the moratorium period in April-May 2020 have yielded better results. Nonetheless, the net credit cost in FY21 is expected to remain elevated as we expect a potential rise in Aeon Credit’s gross non performing loans level,” it said.

It has revised down its FY21 net earnings forecast by 14% while simultaneously revising up the interest expense by 20% owing to an increased debt level. For FY22, it raised its earnings forecast by 6.3%.

Affin Hwang is maintaining its buy call on Aeon Credit with a higher price target of RM12.70, from RM12.30 previously.

“We remain upbeat on Aeon Credit given its value-chain transformation initiatives, new products and market diversification through its B2C2B model, which are game changers in this digital age in reaching out to more customers,” it said.