• Maintain BUY and MYR7 TP, 6% upside and c.3% FY25F (Feb) yield. Aeon Credit Service’s FY24 results came in ahead of our estimates on stronger- than-expected NII. Our initial read-through of the numbers was positive – receivables growth remained robust across the board, and asset quality appears to be improving. We maintain our forecasts and TP for now, pending the results briefing today.

• Results review. ACSM’s FY24 net profit of MYR414.0m (+2% YoY) beat our estimates, but came in line with Street’s. The deviation from our numbers mostly stemmed from better-than-expected interest income. YoY profit drivers were NII (+18%) and non-II (+9%), whereas opex (+13%) and impairment allowances (+45%) were the key YoY drags. QoQ, 4QFY24 saw 2% NII growth helped by robust receivables growth, while impairment allowances halved thanks to a net write-back of provisions. However, the bottomline was softened by the maiden recognition of associate losses from the much-anticipated digital bank amounting to MYR16.6m, bringing net profit for the quarter to MYR114m (+33% QoQ). A final DPS of MYR0.14 was declared, bringing FY24 total payout to 34.0% (FY23: 30.3%).

• Robust receivables growth. ACSM saw its financing receivables grow +13% YoY in FY24, which beat management’s guidance of a c.10% growth for the year. Robust credit demand from higher credit quality customers, along with successful marketing campaigns, ensured YoY growth was strong across the board. Personal financing (+22%) and credit cards (+11%) were expectedly good, while motorcycle financing also grew a decent +5% despite the group having tightened its credit scoring requirements earlier during the year.

• Benefitting from tighter credit requirements. ACSM’s sequentially lower NPL ratio of 2.57% (3QFY24: 2.73%) potentially reflects an improvement in the underlying asset quality post the aforementioned tightening of credit scoring requirements for motorcycle financing facilities. As a result of having a higher proportion of better-credit-quality customers and improved collection performance, the group was able to write-back c.MYR59m in provisions in 4QFY24. Looking ahead, we do not expect provision write- backs to recur, but think a credit cost run rate of 2.5-3% is possible (4QFY24/FY24 credit cost: 2.3%/3.4%).

• FY25 guidance. In FY25F, the group will aim for 10% receivables growth and c.13% ROE – we view both targets as modest, as it implies a softening from FY24 figures. However, the 10% receivables growth target is still ahead of our more conservative +8% assumption for FY25F.

• No changes to our forecasts and TP pending the results briefing later today. However, we see upside risks to our estimates, given the results beat. Our TP of MYR7 includes a 2% ESG premium.

Source: RHB Research - 9 Apr 2024