Aeon Credit on the path to recovery, long-term outlook remains positive

KUCHING: Aeon Credit Services (Malaysia) Bhd (Aeon Credit) is on the path to recovery despite cautious consumer sentiments and analysts retain their views that its long-term outlook remains positive.

In a report, the research team at Affin Hwang Investment Bank Bhd (AffinHwang Capital) said: “We expect a recovery in the financial year 2022 (FY22), with net earnings growth of 70 per cent y-o-y, underpinned by expansion in receivables growth of 8 per cent y-o-y (compared with 3.5 per cent y-o-y projected for FY21), while net credit cost is expected to ease to 370.6bps from 460bps.

“In fact, with the impending rollout of the Covid-19 vaccine in Malaysia, we expect the pandemic to be under control and the economy to have less business interruption while the unemployment rate (October 2020 at 4.7 per cent) is expected to improve. Our economist is expecting a six per cent y-o-y recovery in the country’s GDP.”

It further opined that the company continued to find niche opportunities amidst the pandemic, which has fuelled demand for more motorcycles (given the e-commerce boom), used-cars (better affordability) and personal financing (to meet refinancing needs).

“We maintain our investment thesis on Aeon Credit, though the Covid-19 pandemic had caused economic and business activities disruption, it has however created opportunities in other ways,” it explained.

“With e-commerce (from online shopping websites such as Lazada and Shopee to food/ grocery delivery) becoming even more indispensable, a huge demand for logistics and delivery services has arisen.

“Those who had been laid off during the pandemic and those seeking additional income have taken up the new job opportunity (for express delivery), causing a boom in motorcycle sales.

“This trend is being reflected in Aeon Credit’s motorcycle receivables growth, which had risen by 11.7 per cent year to date as at 3QFY21, though other segments remained weak.”

From its on-the-ground checks, it pointed out that the pandemic has also fuelled higher demand for used cars in smaller towns as a means of safe travel that is more affordable compared to buying a new car.

“Personal financing continued to be an option for refinancing and has been an alternative means for individuals to settle their outstanding credit card debts due to a lower financing rate compared with credit card financing rates, which ranged from 15 to 18 per cent per annum,” it added.