AEON Credit - MARKET PERFORM - 19 June 2012

Period   1Q13

Actual vs.  Expectations

Within expectations. ACSM reported 1QFY13 net profit of RM28.1m (21% of ours) but marginally above the consensus (28%).  

Dividends  No dividend declared but proposed a bonus issue on the basis of 1 bonus share for every 5 existing ordinary shares.  

Key Result Highlights

The 1QFY13 revenue of RM110.3m was up 33% YoY, driven mainly by higher gross receivables (+40% YoY) with a stable interest spread of 19%. 

The group’s 1QFY13 loans growth was mainly underpinned by higher contributions from the personal financing (+189% YoY), vehicle easy payment (+72%) and general easy payment (+27%) divisions while the credit card segment recorded a flat 0% growth. The net NPL remained low at 1.68% (vs. 4Q12: 1.80%).  

The group’s RM38.4m 1Q13 pretax profit meanwhile increased by 49% YoY on the back of higher revenue and better cost management.  

Its motor-cycle financing now contributed 34% to the group’s total revenue, followed by 16%, 26% and 17% from the credit cards, general easy payment and personal financing segments respectively.  

Annualised ROE meanwhile was at a solid 32.9% vs. FY12’s 33.9%.

Outlook  The group’s loan growth and credit quality outlook remain intact according to management, underpinned by its strong merchant distribution platform. Going forward, we view a 30% loan growth target in FY13 as achievable with a favourable outlook for its (i) Credit Card, (ii) Personal Finance and (iii) Motorcycle Financing divisions.  This should result in an impressive 39% earnings growth in FY13. However, we think the current share price could have priced in the strong earning growth already.

Change to Forecasts

No changes in our forecast.

Rating  Downgrade to MARKET PERFORM

At the current level, the stock offers a potential capital downside of 5% but is expected to be offset by a dividend yield of 3.2%, which brings the potential total return to a negative 2% over the next 12 months.

Valuation   We are maintaining our target price of RM10.00based on a targeted PER of 9.0x over its FY13 EPS of 111.1sen.  

Risks  Potential higher loan growth in 2012.

Source: Kenanga