KUALA LUMPUR, Malaysia (July 7): After the company announced that its net profit increased by 521 percent year-on-year to RM163.09 million for the first financial quarter ended May 31, 2021, analysts covering AEON Credit Service (M) Bhd raised their target prices and upgraded calls for the stock (1QFY22). RHB Research upgraded its TP for AEON Credit to RM14.80 from RM14.50 as it maintained its “buy” call. Kenanga Research upgraded the stock to a “buy” and raised its target price (TP) to RM14.00 from RM13.05.
AEON Credit was upgraded from “neutral” to “trading buy” by MIDF Research, which kept the stock’s target price at RM12.90.
RHB Research said in a report today that AEON Credit is still its “pick for the recovery theme” because its current valuation (below -1SD) indicates the market hasn’t priced in the recovery yet.
On lower credit cost assumptions, it increased the company’s FY22F (Feb) earnings by 7%. (given net write-backs in 1QFY22).
The company’s 1QFY22 “results were beat on surprise net write-backs from improved delinquency movement,” according to the report.
“Though the full lockdown impact has yet to manifest,” RHB Research noted, “management is considering possible targeted relief measures for borrowers.”
“Although the full lockdown’s impact has yet to be felt, management anticipates a more difficult situation in 3QFY22F (Sep-Nov 2021) as a result of the full lockdown. Relief measures (such as a moratorium) are being considered, but they will be targeted to minimize the impact on profitability. Despite the reimposition of MCO 3.0, the collection trend has been healthy, owing to various cash handouts and consumer-friendly relief measures by the government “It was also added.
Meanwhile, Kenanga Research upgraded AEON Credit to a “buy” rating, citing a higher-than-expected net interest margin as well as lower-than-expected credit costs due to fewer impairment losses.
“While impairment losses are expected to rise sequentially in the following quarters, we believe the impact will be less severe than in FY21. The six-month moratorium’s opt-in structure should also reduce the impact on the bottom line “According to the research firm.
“We believe the negatives have been priced in after a 9 percent drop in the stock price. Meanwhile, total transaction and financing volume increased 11.5 percent quarter-on-quarter (q-o-q) in 1QFY22, indicating that growth is on the way. Motorcycle financing (+10 percent q-o-q) and personal financing are the key reasons behind this (24 percent q-o-q). As movement limitations ease in the coming months, we expect credit card volumes to improve “It was also added.
MIDF Research has upgraded AEON Credit to a “buy” call, with a target price of RM12.90. It believes that AEON Credit’s “strong 1QFY22 result will provide a solid base for earnings growth this year, and it will be one of the beneficiaries once the economy reopens,” and that it will be one of the beneficiaries once the economy reopens.
“Given the impact of the Phase 1 PPN and the EMCO, we believe that the worst may be over for AEON Credit. While these short-term headwinds may have a short-term negative impact, such as perhaps increased credit costs in 2QFY22, we believe they will not last long because the national vaccination program is speeding up “it was stated
The non-performing loan ratio improved by -71 basis points quarter-on-quarter and -17 basis points year-on-year to 1.75 percent, according to the report.
This was attributable to improved credit management and the rationalization of AEON Credit’s financing book, according to MIDF Research. It also stated that the company’s current collection ratio of 98.3 percent “remains high.”
At the time of writing, AEON Credit is the third best performer, with the stock up 44 sen, or 3.74 percent, to RM12.22./n
