AEON Credit Service (M) Bhd
(Sept 22, RM5.74)
Maintain buy at RM3.82 with target price of RM4.35: Revenue and net profit for 1HFY11 rose 2.9% and 9% year-on-year (y-o-y) respectively, mainly bolstered by: (i) stable revenue growth from easy payment schemes (+5.7%) backed by general easy payment (GEP: +8%); and (ii) continuous strong growth in other income by 20.8%. This was in line with its growing trade receivables, which were higher by 6% y-o-y.
Other income recorded a sterling 20.8% growth, largely underpinned by better bad debt recovery (+49%) and strong growth in insurance commission fee income (+33%) y-o-y. However, revenue from its credit card and personal financing segments registered negative growth of 5% and 8.2% y-o-y respectively.
Due to its prudent lending policy and effective credit management, AEON Credit’s non-performing loans ratio moderated marginally to 1.73% (1QFY11: 1.80%). CAR is stable at 24.9% (FY10: 24.8%). The company has declared an interim gross dividend of 11.5 sen per share (net dividend per share of 8.6 sen), and therefore is on track to meet our FY11 gross DPS forecast of 25.5 sen.
As we expect stronger 2HFY11 results in conjunction with the upcoming major festive seasons, we are maintaining our ‘buy’ call on AEON Credit, with a target price of RM4.35 (based on a historical two-year PER band of 8.5 times over FY2011 EPS. — OSK Investment Research, Sept 22
This article appeared in The Edge Financial Daily, September 23, 2010.
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