AEON Credit Service jumps to one-year high on strong quarterly results

AEON Credit Service jumps to one-year high on strong quarterly results
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KUALA LUMPUR (April 9): AEON Credit Service (M) Bhd surged as much as 98 sen or 7.9% to RM13.38 this morning, its highest in over a year, after posting a stellar set of fourth-quarter results.

At 11.23am, the counter had pared some gains at RM13, but was still up 60 sen or 4.84%. The counter was the second top gainer this morning.

The group announced yesterday that its net profit for the fourth quarter ended Feb 28, 2021 (4QFY21) rose 28.66% to RM113.72 million from RM88.39 million a year ago despite lower revenue as it recorded lower operating expenses.

Quarterly revenue slipped 1.68% to RM406.35 million from RM413.28 million, AEON Credit's bourse filing today showed, due to lower transactions and financing volume amid the movement control order (MCO).

The group proposed a final dividend of 20 sen for the latest quarter, which will be paid on July 15.

For the full FY21, however, the group’s net profit was down 19.89% to RM233.96 million from RM292.05 million a year earlier, mainly due to a lower annual revenue of RM1.56 billion — down 2.32% from RM1.6 billion — and a higher allowance of RM58.11 million for impairment losses caused by the impact of Covid-19.

Affin Hwang Capital analyst Tan Ei Leen said in a note today AEON Credit’s FY21 results surpassed her and the consensus estimates by 34% and 24% respectively, driven by reversals in impairment provisions on the back of favourable delinquency movement.

According to Tan, AEON Credit’s receivables growth remained subdued (down by 3% year-on-year; lower by 1.4% quarter-on-quarter) as at 4QFY21, in line with the management’s stringent approvals as well as due to the impact of write-offs.

“Given a challenging year, it was not a surprise to see AEON Credit’s asset quality in terms of the gross non-performing loan ratio rise to 2.46% from 1.92% in FY20. We expect asset quality to improve in FY22 to FY24 as we look forward to a recovery in business and consumer sentiment, in line with a pickup in economic activities,” she said.

Tan reiterated her "buy" rating of AEON Credit, and raised her target price (TP) to RM14.50 from RM13.50, based on a price-to-earnings (P/E) target of 14 times revised 2021 estimated earnings per share (EPS) of 104 sen from 96.5 sen.

“The change in the 2021 EPS assumption was driven by the impact of a better profit outcome in 1Q21 (the first quarter of 2021),” she added.

Meanwhile, Kenanga Research analyst Ahmad Ramzani Ramli said AEON Credit’s FY21 results came in slightly lower at 93% of his expectations.

“While the top line was still challenging, a better product mix in 4QFY21 resulted in a gradual improvement in margins as it remained focused on the better yielding motorcycle, personal and auto financing [business],” he said.

He looks forward to broad-based improvements ahead on easing pandemic risk.

While he maintained his "market perform" call on AEON Credit, he raised its TP to RM13.05 from RM11.60.

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AEON Credit's 4Q net profit climbs 28.66% on lower operating expenses  

Lam Jian Wyn