Aeon Credit’s 1HFY21 earnings below estimates
KUALA LUMPUR: Aeon Credit Service (M) Bhd’s (Aeon Credit) first half of financial year 2021 (1HFY21) earnings have come in below estimates but analysts expect lower Impairments ahead.
According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), Aeon Credit’s 1HFY21 core net profit (CNP) of RM73 million accounted for 26 per cent and 32 per cent of its and market estimates, respectively.
Kenanga Research noted that it was dragged by the large impairment losses of RM286 million.
“This was further exacerbated by Day 1 Modification losses of RM28 million relating to AEON Relief Programme launched in June 2020,” the research arm gathered.
Kenanga Research highlighted that on a more positive note, receivables collection trend normalised, approximately 95 per cent from 99 per cent in the first quarter (1Q), with D1 and D2 (Delinquency collection ratio) falling to 78 per cent and 76 per cent respectively.
It further highlighted that this lower ratio led to lower Impairment losses (IL) (RM112 million versus RM174 million in 2Q).
“As expected, we see delinquency ratios coming down leading to a lower IL.
“Recall that the higher delinquency in 1Q led to higher provisioning due to impact from the Movement Control Order (MCO) and we expect further improvement in IL in the coming quarters.
“The weak financing receivables is a concern, but we expect improvement ahead underpinned by rebound in Auto and small and medium enterprise (SME) financing.
“The slowdown in the economy does not seemed to impact its Bottom 40 per cent (B40) customers as Motorcycle segment saw growth in both receivables and Transaction and Financing Volume.”
Meanwhile, Aeon Credit’s 1HFY21 net profit was a shade below the research arm of MIDF Amanah Investment Bank Bhd’s (MIDF Research) full year forecast at 44.6 per cent.
“However, it was well below consensuses at 32.9 per cent,” MIDF Research said.
“We believe that provisions will continue to be a weigh to the ACSM’s earnings especially post loan deferment period.
“This will also put a dampener to revenue as well.
“Furthermore, lower current collection ratio suggests that delinquencies might be trickling in.”
That said, the research arm believed that asset quality will likely remain stable.