Aeon Credit Service; Hold; RM15.42
Price Target: RM18.40; ACSM MK

ACSM has obtained the approval from the Securities Commission for a proposed perpetual private debt securities programme of up to RM400m. The perpetual notes can be treated as an equity instrument and can be included as capital for the computation of capital adequacy ratio (CAR).

We estimate ACSM would need to raise approximately RM190m to increase its capital ratio to 22% based on its shareholders funds as of Aug 2013. Bank Negara has imposed a minimum threshold of 16% CAR. Assuming the full amount of RM400m is eventually raised by end FY15F, we estimate the subordinated perpetual notes programme could lift its CAR to 27% (from 16.3% as at end Aug-13).

With the debt programme in place, ACSM would now be able to continue its business growth traction - 2Q14’s loans grew 14% q-o-q and YTD-6M at 28%. We have a Hold call on ACSM with RM18.40 TP (based on 0.55x PEG and implies 13.5x CY14 EPS).

Source: HwangDBS Research - 31 Oct 2013