INVESTMENT HIGHLIGHTS

• Earnings within expectations

• Growth in sales and fee income remain strong

• Higher gross financing receivables

• Maintain earnings forecast

• Maintain NEUTRAL with TP of RM16.50

In line with expectation. Aeon Credit recorded FY19 net profit grew +18.2%yoy. Accordingly, this translated to 101.3% and 97.7% of ours and consensus' estimates respectively.

Another strong quarter in revenue growth. The FY19 net profit growth was contributed by continued strong revenue growth in 4QFY19. Interest income grew +13.3%yoy in 4QFY19 while fee income expanded +42.0%yoy in the same period. This was due to increase in total transaction and financing receivable of +48.9%yoy to RM1.45b leading to a cumulative +31.8%yoy to RM5.33b in FY19. Bulk of the growth in FY19 came from its three main contributors; credit card, personal financing and motorcycle financing which grew +27.6%yoy to RM1.59b, +56.0%yoy to RM1.35b and +41.1%yoy to RM1.35b respectively. Meanwhile, auto financing chipped in +18.8%yoy to RM721m.

Double digit growth in main segment of gross financing receivables. Gross financing receivables expanded +18.8%yoy to RM8.69b. It was not a surprise that this was contributed by strong growth in personal financing, motorcycle financing and auto financing book, which grew +26.6%yoy to RM2.45b, +24.1%yoy to RM2.57b and +13.5%yoy to RM2.51b. In terms of collection, the collection ratio was stable at 97.97%.

Asset quality remains good. Non-performing loans ratio as at 4QFY19 improved further, by -1bps to 2.04% when compared against 3QFY19. This was also an improvement of -29bps year-on-year.

Efficient cost structure. The opex to revenue ratio improved 58.2% from 60% a year ago despite +8.0%yoy increase in opex. This was due to the strong increase in revenue, which indicated greater efficiency.

Unchanged earnings forecast. We are maintaining our earnings forecast.

Source: MIDF Research - 26 Apr 2019