PETALING JAYA: RHB Research is maintaining its hopeful outlook on Aeon Credit Service
Malaysia Bhd (ACSM), after having gleaned further details into its digital bank ACS Digital Bhd (ACSD), which is scheduled to be launched by the first quarter of 2024.
Analysts from the research house, having met with a representative from ACSD – which is jointly owned by ACSM and Aeon Financial Service Japan Co Ltd (AFS) – were briefed on the bank’s prospective products and acquisition strategies, along with the initial expected startup losses of RM50mil to RM60mil during its first year.
“We are still confident that an expansion of product offerings via the digital bank is positive for ACSM’s long-term growth trajectory,” said RHB Research in a note yesterday.
The note reported that an initial capital injection amounting to RM350mil will be made by the parent consortium, of which ACSM will contribute 50% of the total amount, with the remaining half, or RM175mil, to be paid in by AFS.
The securities firm revealed that to date, the Japanese parent firm has already injected RM140mil into ACSD, which has largely been spent on core systems and talent acquisition.
“At present, ACSM has yet to inject any capital into the digital bank, but will do so in due time via internally generated funds,” said RHB Research.
The digital bank will launch with a simple savings account as the maiden product, the research unit said, with the first lending product to be put in place soon after, which should be a personal financing offering capped at RM5,000 with a tenure of up to six months.
RHB Research commented that the risk of cannibalisation is limited, as ACSM’s personal financing products have a larger ticket size of between RM15,000 to RM20,000; as well as longer tenures of up to six to seven years.
Moving forward, it said ACSD will also launch general insurance and micro investment products, mostly tailored for its retail customers.
“Strategy-wise, the digital bank will leverage on its unique position within the Aeon ecosystem to obtain both retail and business customers.
“Existing retail customers of the Aeon group will be cross-sold ACSD products on the existing Aeon financial mobile application.
“Meanwhile, ACSD will also offer tailored financing solutions for Aeon group’s merchants and clients, most of which fit into ACSD’s customer profile of small business owners underserved by incumbent financial institutions,” noted RHB Research.
Notably, the research outfit said with ACSM owning a 50% stake in ACSD, it will therefore report net profits or losses from the digital bank under associate contributions, with losses expected to narrow from the anticipated RM50mil to RM60mil estimation during the first year and breaking even in the fourth year.
RHB Research is maintaining its “buy” call on ACSM, with a target price of RM14, presenting an approximate 18% upside from its current trading price.
