AEON Credit (ACSM MK, Maintain BUY, FV RM9.98, Last Close RM8.74)

AEON Credit’s (ACSM) FY12 earnings beat consensus and our full-year forecasts by 17.5% and 10.1% respectively. Revenue and net profit surged 27.7% and 50.7% y-o-y on better  showing in  all its business segments.  Asset quality was  largely preserved although the CAR declined to 21.8%  from 24.0% in the previous year –but still well above the required 16.0%  - while NPLs dipped 14 bps to 1.80%. The company has proposed a 16.8 sen single tier final dividend, bringing the FY12 dividends to 30.0 sen. Maintain BUY, with a higher fair value of RM9.98, pegged to 10x FY13 EPS vs  9x previously,  on ACSM’s  consistent growth and bright prospects ahead.

Better than expected. ACSM’s FY12 revenue and net profit surged 27.7% and 50.7% y-o-y  respectively, largely due to: i) stronger revenue growth in its credit card segment (+68.7% y-o-y), ii) stable revenue growth from general easy payment (+12.6% y-o-y) and vehicle easy payment segment (+14.2% y-o-y), iii) a solid 83.6% y-o-y growth in revenue from its personal financing business, and iv) stronger other income (+44.5% yo-y) spurred by transaction fee income relating to a higher financing transaction volume (+40.8% y-o-y). Financing receivables climbed 34.5% y-o-y supported by strong growth in the personal financing (+102.9% y-o-y) and credit card (+52.2% y-o-y) segments, while total financing receivables stood at RM1.52bn vs RM1.13bn in the preceding year.

Solid sequential performance. On a q-o-q comparison, ACSM’s 4QFY12 revenue and earnings grew 5.0% and 9.7% respectively, underpinned by a robust 19.2% q-o-q growth in personal financing and 11.7% q-o-q growth in other income. Revenue from the credit card segment, however, grew at a slower 1.0% q-o-q due to the lower number of credit cards issued in tandem with new Bank Negara’s new regulations on credit cards.

Asset quality intact. NPL ratio edged down by 14 bps to 1.80% compared with 1.94% in the previous quarter,  slightly above below the  1.9% industry average. However, the company’s  capital adequacy ratio dropped to 21.8% from 24.0% in the previous year, although still well above the requirement for 16.0%.

Maintain BUY.  We are taking the opportunity to bump up our FY13 revenue and earnings forecasts by 14.5% and 24.5% respectively, largely due to robust growth in its consumer durable financing and personal loan business. This also raises our fair value from RM7.20 to RM9.98, pegged to  a  10x FY13 EPS  vs  9x previously. We  deem the higher valuations  vis-à-vis  current levels justified, as the  scope for further domestic market share gains is likely due to the management’s focused strategies, marketing and branding efforts, and the stock’s attractive dividend yield of 4.2% and 5.4% for FY13 and FY14 respectively.

Source: OSK188