The group posted impressive financial results for the year ended Feb 28, 2023. Net profit for FY2023 rose to RM417.69 million from RM365.42 million in the previous year.
FY2023’s net profit of RM417.7 million came in within Kenanga Investment Bank Bhd’s expectations, at 95% of their full-year forecast and 102% of consensus’ full-year estimate.
To address possible strains on asset quality from inflationary pressures, the group’s credit criteria will be tightened mainly for its motor segment, which has a high concentration of B40 customers.
Meanwhile, Aeon Credit is working towards digitising its back-end operations with a digital onboarding platform.
However, the investment bank was unimpressed by the company’s dividend payout.
“(The) final dividend of 21 sen disappointed, pushing the full-year dividend of 49.5 sen (30% payout) below our anticipated 62 sen,” it said in a note yesterday.
The gap is caused by slightly lower earnings and Kenanga’s higher expected payout of 35% (based on historical average).
Forecasted earnings for net profit in FY2024 remain unchanged at RM510 million, while Kenanga forecasts a net profit of RM523 million for FY2025.
“(The FY2025 number) reflects a 2.6% growth in bottom line as we anticipate eroding interest margins to offset growth in the group’s financing books,” it said.
Expecting Aeon Credit to outperform
The research house maintained an ‘outperform’ call on the stock with a target price of RM16.95.
“Against conventional banking institutions, Aeon Credit commands a leading ROE (return on equity) of (more than) 20%, albeit with more modest dividend yields (5%),” added Kenanga.
Sentiment for the stock is expected to improve with subsequent updates, while Aeon Credit’s Islamic digital banking licence extends new value propositions to customers.
Key risks include lower than expected receivables growth, moratorium extensions and higher than expected impairment losses.
At the close of trade, Aeon Credit’s share price was up 0.33% or four sen at RM12.14, giving it a market capitalisation of RM3.1 billion.