Affin Hwang Capital Research Highlights

Author: kltrader   |   Latest post: Tue, 20 Oct 2020, 4:52 PM


AEON Credit - a Recessionary Year in FY21E

Author:   |    Publish date:

Overall, FY20 results were below our expectations by 7.9% (variance in higher funding cost), though within street estimates. Meanwhile, for FY21E, we expect net earnings to decline by 24.2% yoy due to higher provisions (353bps in net credit cost) and a 4% yoy decline in outstanding receivables. Recently, the company had offered a 1- month deferment period in April 20 for objective, personal, motorcycle and auto financing customers (who are not >90 days overdue) in order to ease cashflows burdens. Maintain SELL with a PT at RM6.30.

FY20 Results Came in Below Affin’s Expectations

Aeon Credit (AC)’s FY20 PAT (to ordinary shareholders) declined by 19.5% yoy to RM274.4m, subsequent to higher operating expenses (in particular higher receivables impairment in 2QFY20) while overall funding cost also jumped (+30% yoy) as receivables grew by 19.6% yoy. FY20 EBIT margin declined yoy from 53% to 44.8% (due to higher opex). For FY20, AC saw a 46% yoy increase in provisions (credit cost 341bps in FY20 vs. 216bps in FY19), due to seasonal factors (during the Raya Festival), write-offs and for new receivables accounts secured. In 4QFY20, PAT (ordinary shareholders) rose +14.5% qoq as receivables provisions were lower while the 4QFY20 operating profit improved (+11.8% yoy; +17% qoq), in-line with receivables growth (+3.6% qoq).

How Aeon Credit Fared in 4QFY20 and FY20?

AC’s key receivables growth drivers were from motorcycle-financing (+40% yoy), auto-financing (+18.7% yoy) and personal financing (+17% yoy). FY20’s average receivables yield declined marginally from 15% in FY19 to 14.7% in FY20 as AC focuses on expansion towards the M40 group (charged slightly lower interest rates vs. the B40 group). The NPL ratio saw an improvement to 1.92% (4QFY20) from 2.04% in 4QFY19.

Reiterate SELL, Price Target at RM6.30

Reiterate SELL on AC, with our PT unchanged at RM6.30 (based on a P/E target of 6.8x on CY20E EPS of 92.5 sen). We anticipate a recessionary year in 2021E (Affin’s GDP forecast at -3.5% for 2020), arising from the negative impact on business activities, following expectation of a prolonged COVID-19 outbreak. We foresee AC’s receivables to decline by 4% yoy and a higher net credit cost at 353bps Upside risks: improvement in credit quality, stronger receivables growth.

Source: Affin Hwang Research - 10 Apr 2020

Share this
Labels: AEONCR

Related Stocks

Chart Stock Name Last Change Volume 
AEONCR 9.97 -0.17 (1.68%) 4,100 

  Be the first to like this.

I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
View Trading Signals and run Live Backtest
MQ Affiliate
Earn rewards with MQ Affiliate Program

222  230  547  1448 

Top 10 Active Counters
 IRIS 0.30-0.005 
 SENDAI-WA 0.10+0.095 
 DSONIC-WA 0.255-0.005 
 ESCERAM 0.77+0.04 
 DSONIC 0.58-0.005 
 HWGB 0.795+0.05 
 EFORCE 0.50+0.03 
 DGSB 0.19+0.005 
 SALCON-WB 0.145+0.005 
 AAX 0.045+0.01 


1. The Equity Market Index Benchmark in Malaysia CMS
2. Trading Scenarios of Derivatives Bursa Derivatives Education Series
3. Derivatives 101 Bursa Derivatives Education Series
4. Why Trade FKLI? Bursa Derivatives Education Series
5. MQ Trader - Introduction to MQ Trader Affiliate Program MQ Trader Announcement!