CEO Morning Brief

Aeon Credit Rises to Near Two-year High on Dividend Surprise

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Publish date: Wed, 10 Apr 2024, 11:10 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (April 9): Aeon Credit Service (M) Bhd’s shares rose to their highest in nearly two years on a better-than-expected dividend, while analysts continue to urge investors to buy into the consumer finance company’s sustained growth.

The stock rose as much as 3.6% or 24 sen to RM6.85 on Tuesday morning, its highest since Jun 9, 2022. It later pared gains to close at RM6.72, still up 11 sen or 1.66% from its previous close, after 1.38 million shares changed hands. Meanwhile, the country’s benchmark index FBM KLCI fell 0.41%.

The dividend per share of 42.5 sen was above the consensus estimate of 34 sen, while net profit of RM424 million for the 12 months ended Feb 29, 2024 (FY2024) came in within market expectations.

Initial analysis of Aeon Credit’s latest numbers was positive, as receivables growth remained robust across the board, and asset quality appeared to be improving, said RHB Investment Bank. The research house, one of six covering the stock, maintained its ‘buy’ call.

For FY2025, Aeon Credit is aiming for 10% receivables growth and around 13% return on equity, both of which are “modest” targets when compared to FY2024, the house noted. “However, the 10% receivables growth target is still ahead of our more conservative 8% assumption for FY2025,” RHB said.

Shares in Aeon Credit have surged 23% so far this year, outperforming peers in the financial services sector and the country’s benchmark index, thanks to robust earnings on the back of resilient consumer spending.

Analysts are also mostly bullish, with five of six analysts rating the stock ‘buy’ and one on ‘hold’ recommendations. The consensus target price is RM7.62, implying a 14% gain from current prices within the next 12 months.

For Kenanga Investment Bank, Aeon Credit may see sustained growth in its financing books, as economic prospects are expected to pick up. The research house has an ‘outperform’ recommendation for the stock, equivalent to a ‘buy’ call.

“We opine that its key segments of motorcycle, auto and personal financing could see support from a better disposable income outlook. This could also translate into fewer delinquencies going forward,” Kenanga said.

On its part, Aeon Credit said that the company remains cautious about its outlook due to rising geopolitical tensions, inflationary pressures, and prevailing volatility in global financial markets.

"Nevertheless, the group will continue to remain prudent and cautious, placing emphasis on growing quality assets and closely monitoring the inherent credit risks in its financing portfolios," Aeon Credit said on Monday.

Source: TheEdge - 10 Apr 2024

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