Quick take: Aeon Credit rises 3.9% after earnings beat


KUALA LUMPUR: AEON Credit Service (M) Bhd are among the top gainers on Bursa Malaysia in early trade Wednesday after it reported earnings that beat analysts’ expectations.

The third top gainer on Bursa Malaysia rose 3.9%, or 46 sen to RM12.24, its highest in about two months.

Aeon Credit’s net profit rose to RM163.09mil in the first quarter ended May 31, 2021 (1Q22), from RM26.28mil posted in the same quarter last year. Revenue increased by 5.4% to RM410.97mil from RM389.88mil previously.

Kenanga Research said Aeon Credit’s 1Q22 core net profit (CNP) of RM163mil was above both the house/consensus’ expectations at 59%/60% largely due to higher-than-expected net interest margin (NIM)and lower-than-expected credit cost.

It said the deviation from its estimate was mainly due to higher-than-expected NIM and lower-than-expected credit cost from lower impairment losses.

“While impairment losses should increase sequentially in the subsequent quarters, we think the impact is unlikely to be as severe as in FY21. The opt-in structure of the six-month moratorium should also lessen the impact to top-line.

“After a 9% decline in share price, we think the negatives have been somewhat priced in, ” Kenanga said.

The research house raised FY22-23E CNP by 18-20% on higher NIM of circa 11% and a lower credit cost of 4.6-4.4%.

Kenanga has upgraded Aeon Credit to outperform with a higher target price of RM14 from RM13.05 based on a lower 3-year mean target PER of 11x (from 12x) to reflect impairment uncertainties.

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