Review

• AEHB reported a dismal set of results. 9M22 net profit declined YoY to  RM4.4mn from RM19.1mn in 9M21 on the back of a 66.3% YoY decline in revenue. Results came below expectations, with net profit accounting for  63% of our full-year forecast.

• 9M revenue fell YoY due to lower brokerage income on the back of lower securities transactions. As a result, PBT decreased to RM6.2mn vs  RM23.8mn in 1H21. By segment, trading activities in the stock and futures broking weakened due to weak investor confidence and risk appetite.  Meanwhile, the 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 RM2.1mn due to an increase in secured loans disbursed to clients in 3Q.

• Sequentially, revenue improved by 13.2%, mainly due to loan interest income from the money lending business. Nevertheless, the 3Q PBT  decreased by 20.2% QoQ to RM1.29mn vs RM1.61mn, attributed to the higher operating expenditures incurred.

• The group’s net cash and bank balances, including short-term funds, stood at RM128mn as at 30 September 2022. Meanwhile, AEHB has total bank borrowings amounting to RM4.0mn.

Impact

• Incorporating the lower-than-expected 9M22 results, we lowered AEHB’s  FY22/23/24 net profit forecast to RM6.0/8.0/9.1mn from RM7.1/8.1/9.0mn  previously. Our revision considers higher growth assumptions for admin and general expenses.

Outlook

• We continue to foresee a softer FY22 for AEHB, underpinned by the lower securities transactions, as market volumes on the Bursa have also fallen YoY. Our forecast also assumes that the trading velocity in the market will gradually normalise. As such, we maintain our earlier trading  velocity assumption of 32/30/30% for FY22/23/24.

Valuation

• Tagging a P/B ratio of around 0.6x to AEHB’s FY23e BV, we arrive at a fair value of RM0.96/share. We reiterate a SELL recommendation on AEHB.

Source: TA Research - 1 Dec 2022