PETALING JAYA: Aeon Credit Service (M) Bhd
’s prospects remain positive, particularly on its asset quality, receivables and dividend growth.
According to RHB Research, despite AEON Credit registering higher credit costs in its second quarter of financial year ending Feb 28, 2025 (2Q25), the underlying quality of the financial services provider remains sound.
Notwithstanding the next round of expected credit loss model refresh in 4Q25, management sees credit costs stabilising, the brokerage noted.
“This is underpinned by its stable collection ratios, along with continuous personnel investments to improve collection productivity.
“The group also cited its current loan loss coverage level of 229% as being at a comfortable level,” the research house said.
RHB Research maintains its “buy” call on AEON Credit, but lowers its target price to RM8.40 from RM8.80 previously.
“While we trimmed our earnings forecasts after the 2Q25 results miss, our higher dividend per share assumptions now lift the counter’s yields closer to its peers’.
“Taken together with its multiple growth engines and attractive valuation, we reiterate AEON Credit as a sector top pick.
“We raised our dividend payout assumptions to 40% from 30% for FY25-FY27, thereby arriving at dividend per share assumptions of 29 sen, 36 sen and 41 sen for FY25, FY26 and FY27 respectively (previously 24 sen, 28 sen and 31 sen),” the brokerage added.
RHB Research noted AEON Credit’s management’s optimism that demand for financing would remain strong in the second half of FY25 (1H25) and into FY26.
“The company sees the need to step up marketing initiatives to capture said demand, but AEON Credit should still meet its cost-to-income ratio target of more than 30% (1H25: 29%),” it said.
Elsewhere, the strengthening of the ringgit has no immediate impact on the group, but it should benefit from lower funding costs on new borrowings, the brokerage added.
Meanwhile, Kenanga Research observed that while AEON Credit would likely increase marketing expenditures to support its new customer acquisition efforts for its unit AEON Bank (M) Bhd, the outlook remains positive.
Since its launch, AEON Bank has retained a strong base of 80,000 active users, of which 60% are new customers to the AEON ecosystem. It also opens up opportunities for cross-selling in the near term.
The bank did see a plunge from its peak deposits base of RM800mil to RM300mil, said the brokerage, largely due to yield-seekers expectedly withdrawing their funds following the end of its campaign launch.
Kenanga Research highlighted that this is still above its deposit target of RM200mil.
“AEON Bank is slated to introduce peer products by December 2024, which is also within the expected timeline for the group.”
The research house noted that the wider quarter-on-quarter losses from AEON Bank of RM18.7mil (1Q25: RM11.6mil) was no surprise due to its May launch and the higher introductory rates offered afterward.
“While the recent results add on concerns for near-term earnings on top of protracted losses from AEON Bank, AEON Credit’s long-term fundamentals stand toe-to-toe against conventional banking institutions with return on equity prospects of around 15%, with modest dividend yields (around 5%),” it said.
Kenanga Research reiterated its “outperform” call on AEON Credit, with a target price of RM8.35.
