Along the way the price will drop or up.That is how the market forces work. 2.But looking at the Technical Price Chart the stock is well supported.There is more upside to come. 3.The Moving Average(MA) chart is trending nicely upwards. 4.The MACD and RSI support the bullish trend to come.In the offing.
No worry- just temporarily.Cheers and have a good day:-)))
One thing im worried about is how borrowings have increased so much every year. As at the latest quarter its at 5.9 billion. One can argue that borrowings is needed to fuel growth, but since 2012, revenue have gone up 2.8 times from RM344mil to RM965mil. While profit have gone up by 2.38 times from RM95mil to RM228mil.
In the meantime, borrowings have gone up from RM1.1bil to RM4.9bil or 4.5 times.
This seems highly inefficient to me, or is there something about the financing industry i dont understand?
Here's my question, since 2008, this company have every single year posted a negative operating cashflow, from 113m negative operating CF in 2008 to 833 million negative operating cashflow in 2016.
Since 2007, they have never a posted a positive operating cashflow. This is highly unusual and very worrying.
And it is trading an more than 2 times book when most banks only trade at 1.1 or so.
All term loans and borrowings are bullet payments, which means they must be paid in full upon maturity. This means that the company must obtain more loans to pay off. Since at the current profit of 230m (lets ignore the negative operating cashfow for now) they will need more than 20 years (with no dividend payments) to pay off the loan.
Now we can say that this is a finance company, they take loans to give loans to the public. Fair enough. I can accept a high growth in borrowing then, but, increasing negative cashflow for every year since 2007 (earliest i can get). This is very worrying.
This feels a bit ponzi (probably an overstatement). Constant dividends and rev plus profit growth is covering up this matter. But there must a come a time when the party must stop.
jon....operating cash flow is profits add back depreciation and some minor adjustments ....how can it be negative cash operating cash flows?
You are not referring to negative operating cash flows but to changes in cash balances including working capital and capital expenditures..........a growing finance company with ever increasing working capital...just the way it is supposed to be.
1. As Aeon Credit grows its business by giving out more loans, its accounts receivable and working capital increase. These are funded mainly by borrowings.
Its working capital increases substantially more than its NI + D&A, (refer equation # above).
Therefore, not surprisingly its CFO and FCFF are usually negative.
FCFF is the cash flow available to all the firm's providers of capital and these include the common shareholders, lenders and bondholders.
2. However, if you look at the FCFE, this should be positive.
This is the cash flow available to the firm's common shareholders.
Thus, it is able to pay its yearly dividends, the quantum of them have been increasing over the years.
3. As long as its return on capital is > than its WACC, Aeon Credt is doing fine.
The health of a finance company / bank is measured by its liquidity ratios , capital ratios, maturity analysis, provisions and what nowadays are called stress test.
I think a proper stress test will reveal to you that AEON CR is far ahead of most commercial banks in Malaysia ...it has huge amounts of very long term liabilities , $ 500 million is hedging assets from which it lost $ 34 million in 2015, proofing it is a very conservative place, 90% of debts overdue more than 3 months have specific provisions.
I really don't know what happened but charts shows that this share peaked in 2013 at $ 19 and then keep dropping to a low of $ 11 early 2016 and then started recovering...all this while the fundamentals and profits keep improving in these years and PE ratios keep dropping until its recovery....if its PE recovers to old high, this will be a $ 30 stock.
Ok, so if we net off the "Net cash used in operating activities" with the "Net cash generated from financing activities". Since loans is in more than one a kind of trade payable for this company.
you cannot use tools invented for manufacturing companies and use for banks and finance companies.
Jon Choivo > Apr 30, 2017 03:46 PM | Report Abuse
Ok, so if we net off the "Net cash used in operating activities" with the "Net cash generated from financing activities". Since loans is in more than one a kind of trade payable for this company.
dropping previously from a high in 2013 coz of QE tapering and foreign funds selling pressure especially from Aberdeen. Guess their managers r thinking tat it's better to shift funds towards other markets, ie.US. which actually might be a better option if u look at it now in hindsight
a negative free cash flow company won't give a retained earning growth from 233M in year 2012 to 866 M today. I think for financial stock is better to use FCF to equity holder ( FCFE) rather than FCFF. Bcos so long AEONCR management can pay its debt on time then I have no issue for them to use debt to fund growth. And they are issuing rights to raise fund, their debt level will drop significantly , which also giving them more capital to fund future growth.
Aeoncr main business is involved in car, motorcycle, credit card, personal and consumer durable loan. Motor, car and personal loan make up the largest portion of their lending.
High ROE comes from high margin because motorcycle loan typically carries 7-9% interest rate, unless the motorcycle is 500cc and above, which is rare in M'sia anyway. Motor loan is their main line when they started many years ago. Personal loan carries high interest rates as well, around 10-18% depends if you are an Aeon card member or not. So these factors contribute to high ROE.
Future ROE is likely to come down as car loan continue to grow faster than other segment, and car loan only carries 4.8-5.5% interest, depending on the age of the car. Therefore, net interest margin for Aeon continue to shrink just like over the past 3 years when car started to occupy a larger portion of their assets, current sitting at 29% of total receivables. Net interest margin for the past 3 years has came down from 13% to around 11% now. But compare this to big banks NIM of average 2.2%, it is still extremely good.
agreed with Ricky Yeo. I think Aeoncr strategy was fine, to obtain more market shares. As long as its profit can keep on growing, still a 5 stars stock for me.
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Posted by PlsGiveBonus > 2017-04-26 09:57 | Report Abuse
PER is lowest among all banking sector
Definitely good to buy