Review

• AEHB reported 1Q23 net profit of RM1.95mn, down 9.8% YoY from  RM2.17mn in 1Q22. Despite that, results came within expectations, with net profit accounting for 23% and 26% of ours and the consensus full-year forecast.

• 1Q23 revenue grew by 6.6% YoY due to loan interest income of  RM1.61mn (vs nil in 1Q22) and a slightly higher interest income of  RM3.066mn (1Q22: RM3.09mn). The increase in revenue was, however,  muted by lower brokerage income of RM4.54mn (1Q22: RM6.12mn) due to lower securities transactions. As a result, PBT decreased to RM2.58mn  vs RM3.03mn in 1Q22. By segment, trading activities in the stock and futures broking softened due to weak investor confidence and risk appetite. Meanwhile, the 69.2% increase in PBT in the property holding and property development division to RM0.22mn was due to lower operating expenditures. PBT from money lending stood at RM0.88mn.

• Sequentially, revenue improved by 9.98%, mainly due to loan interest income from the money lending business. 1Q PBT also broadened by  >100% QoQ to RM2.58mn vs RM0.59mn as money lending activities  accelerated.

• The group’s net cash and bank balances, including short-term funds, stood at RM91.3mn as at 31 March 2023. Meanwhile, AEHB has total bank borrowings amounting to RM4.0mn.

Impact

• No change to our earnings estimates.

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 28% for FY23-25.

Valuation

• Tagging a P/B ratio of 0.75x, based on peer’s average, to AEHB’s FY24e  BV, we maintain the TP at RM1.13. We reiterate a SELL recommendation on AEHB.

Source: TA Research - 25 May 2023