Review

• AEHB reported FY22 net profit of RM6.4mn, down 70.2% YoY from  RM21.5mn in FY21. Despite that, results came above expectations, with  net profit accounting for 107% and 110% of ours and consensus full-year  forecast.

• FY22 revenue fell by 59.3% YoY due to lower brokerage income on the  back of lower securities transactions. As a result, PBT decreased to  RM6.8mn vs. RM27.1mn in FY21. By segment, trading activities in the stock  and futures broking softened due to weak investor confidence and risk  appetite. Meanwhile, the 92.5% decline in PBT in the property holding and  property development division was due to the gain on disposal of land  amounting to RM4.4mn recorded last year. On a positive note, PBT from  money lending improved to RM2.4mn due to an increase in secured loans  disbursed to clients.

• Sequentially, revenue improved by 8.8%, mainly due to loan interest  income from the money lending business. Nevertheless, the 4Q PBT  decreased by 54.2% QoQ to RM0.59mn, attributed to the higher operating  expenditures incurred.

• The group’s net cash and bank balances, including short-term funds, stood  at RM104mn as at 31 December 2022. Meanwhile, AEHB has total bank  borrowings amounting to RM5.0mn.

Impact

• Incorporating the FY22 results, we tweaked AEHB’s FY23 net profit  forecast to RM8.6mn from RM8.0mn previously. No change to our FY24  net profit estimates of RM9.1mn. We foresee FY25 net profit to grow by  5% to RM9.6mn in FY25.

Outlook

• We continue to envisage modest earnings growth AEHB in FY23,  underpinned by the more stable securities transactions, as we foresee  ongoing efforts by Bursa to strengthen the ecosystem, grow market  vibrancy and to attract more foreign participation should help spur trading  activities and market volumes. Our forecast also assumes that the trading  velocity in the market will remain steady at 30% for FY23-25.

Valuation

• Tagging a higher P/B ratio of 0.75x, based on peer’s average, to AEHB’s  FY23e BV, we revise the fair value to RM1.13 from RM0.96/share.  However, we reiterate a SELL recommendation on AEHB.

Source: TA Research - 28 Feb 2023