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Tuesday, 1 May 2018

(The Star) Kenanga: Aeon Credit FY18 earnings within forecast

PETALING JAYA: Kenanga Research is maintaining its “market perform” for Aeon Credit Service (M) Bhd with a lower target price (TP) of RM13.40 from RM13.50.

It said it had increased FY19 estimated earnings by 6% to account for higher gross loan growth (12%) while introducing its FY20E earnings (9%).

“With a targeted price-to-earnings ratio (PER) of 11.0 times being ascribed (to reflect its latest five-year average PER), our new TP is RM13.40. Maintain market perform,” it said in a report.

Kenanga Research said that FY18 core net profit for FY ended Feb 28, 2018 came in line as was the total dividend per share of 41.13 sen. “While we see EPS dilution assuming full ICULS conversion, the saving grace would be the cash injection supporting its resilient earnings prospects as well as decent asset quality, limiting its net EPS dilution to 9%,” it said.

The group reported 4Q18 core net profit of RM79.1m (+18% on-quarter; +3% on-year), bringing FY18 core net profit to RM286.4m (+14%) which made up 103%/104% of both its/consensus full-year forecasts.

As expected, a final net DPS of 20 sen was declared, bringing total DPS to 41.13 sen.

On-year, FY18 total income grew by 11%, driven by both stronger net interest income (NII) and other operating income.

Note that NII increased by 14% attributed to higher net financing receivables (+11%) while higher growth in operating income (+3%) was mainly driven by stronger recovery in bad debts, better commission income from sale of insurance products and AEON Big loyalty programme’s processing fees.

Core NP improved by a wider quantum of 14% fuelled by lower cost-to-income ratio of 35.3% and lower credit-charge ratio (CCR) of 4.8%.

While net interest margin continued to decline modestly to 12.3%, asset quality remained decent as non-performing loan ratio remained stable at 2.33% (2.28% in 4Q17), helped by the marginal decline in the CCR to 4.8%(from 5.0%).