Review

• AEHB reported 1QFY24 net profit of RM1.45mn, down 25.8% YoY from RM1.95mn in 1QFY23. While the 1QFY24 revenue and PBT came within expectations, the net profit fell below due to a higher effective tax rate for the current quarter from expenses not deductible for tax purposes and deferred tax assets not recognised for losses incurred. As such, AEHB’s 1QFY24 net profit accounted for only 17% of our full-year forecast.

• 1QFY24 revenue expanded by 21.9% YoY due to higher margin and other interest income from better margin utilisation and interest rates. AEHB also reported a 27.7% YoY improvement in brokerage income due to increased volume and value of stockbroking activities.

• In other segments, the money lending operation, which was reactivated in 3Q22, continued to register encouraging growth. The segment registered healthy revenue and PBT growths of 25.1% and 83.0% YoY to RM2.02mn and RM1.6mn, respectively.

• Sequentially, revenue slipped by 2.5% QoQ as better brokerage income was offset by lower margin and interest income. However, the PBT expanded by 8.5% QoQ due to lower operating expenditures.

• The group’s net cash and short-term funds stood at RM36.8mn as of 31 March 2024, down from RM47.0mn in December 2023. Meanwhile, AEHB's total bank borrowings amount to RM7.1mn.

Impact

• No change to our earnings estimates.

Outlook

• We continue to envisage modest earnings growth for AEHB in FY24, primarily supported by an expected improvement in the securities market. We believe that ongoing efforts by Bursa to fortify the trading ecosystem, enhance market vitality, and attract greater foreign participation will contribute to an upswing in trading activities and market volumes. We assume that the stock and securities segment will account for a sizeable 84% of total revenue, followed by moneylending at around 15%.

Valuation

• Rolling valuation base year to FY25 and tagging a P/B ratio of 0.7x, based on the peer’s average, we maintain AEHB’s TP at RM1.19. However, we downgrade the stock from buy to SELL in light of the narrower riskreward potential resulting from the recent increase in the share price.

Source: TA Research - 28 May 2024