Aeon Credit Service (M) Bhd
Outperform. Target price: RM8.55
hosted its FY24 results briefing to provide updates as well as to elaborate on its targets. Targeting a more modest loans growth. In spite of achieving 13% financing growth for FY24, AEONCR is earmarking 10% growth in FY25 for now. We opine that the group could just be opting to be prudent given potential inflationary risks in 2HCY24. That said, the group continues to eye opportunities in the M40 segment with its new digital onboarding process for personal financing able to quicken turnaround time.
Asset quality could improve. The group had implemented its merchant management framework in Oct 2023 to improve the quality of new motor and objective financing accounts with apparent success. This is paired with AI credit scoring and preassessment mechanisms which could be attributed to the improving NPL in Q4’24 of 2.57% (Q4’23: 2.89%).
Comprehensive ecosystem to boost customer acquisition. The group is working towards consolidating its services into a single platform, dubbed the Aeon Living Zone. It aims to connect its Aeon Mall platforms, AEONCR as well as the upcoming digital bank, Aeon Bank.
Medium-term strain for longer term digibank rewards. With regard to its 50%-owned Aeon Bank, the group had reported its first impact to P&L of RM16.6 million in associate losses. Aeon Bank could likely continue to incur up to RM120-140 million/year in fixed expenses as it progressively builds up its presently lacking revenue streams. The group is targeting to break even within its first four years of operations.
Near-term ROE may narrow. Given the abovementioned losses from associate, the lower earnings prospects may hamper ROE with the group eyeing 13% for FY25.
We maintain our OUTPERFORM call and GGM-derived PBV TP of RM8.55.