KUALA LUMPUR (March 24): Aeon Credit Service (M) Bhd shares gained as much as 66 sen or 4% after the company proposed a bonus issue of 72 million new shares on the basis of one bonus share for every two existing units.

Shares of financial services provider Aeon Credit however, erased gains, possibly on earnings dilution concerns. This is because the company had at the same time proposed a renounceable rights issue of three-year minimum 3.5% irredeemable convertible unsecured loan stocks (ICULS), which can be converted into Aeon Credit shares.

Aeon Credit said the rights issue would involve 432 million ICULS on the basis of two ICULs for one existing share held. The exercise aims to raise RM432 million for the company, according to Aeon Credit.

At Bursa Malaysia, Aeon Credit shares rose to their highest so far today at RM17.22, before falling to the stock's lowest level at RM16.50.

At 11:12am, the stock was traded unchanged at RM16.56, with 286,300 shares traded.  

Affin Hwang Investment Bank Bhd downgraded Aeon Credit shares to “sell”, following the announcement of the bonus and rights issue. 
Affin Hwang, however, maintained its Aeon Credit share target price at RM14.70.

"It is a relatively inexpensive way for Aeon Credit to borrow money from shareholders, while avoiding dilution in EPS until the maturity period of the ICULS. 

"However, should we take into account the dilution on EPS (from the ICULS conversion), the fully-diluted impact is quite significant at 18%. Shareholders are better-off to take profit at current price," Affin Hwang said.