Review

• AEHB reported 1HFY24 net profit of RM4.62mn, rising 28.6% YoY from RM3.59mn in 1HFY23. AEHB’s results came within expectations, accounting for 53% of our full-year forecast.

• 1HFY24 revenue expanded by 32.1% YoY due to stronger contributions from stock and securities broking (+32.7% YoY). YTD, brokerage income surged 49.6% YoY to RM12.9mn, attributed to the higher volume and value of stockbroking activities. Margin and other interest income climbed by 15.2% YoY to RM8.8mn due to better margin utilisation and interest rates.

• 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 32.2% and 95.7% YoY to RM4.43mn and RM3.62mn, respectively.

• Sequentially, revenue jumped by 16.4% QoQ due to better brokerage income from increased volumes in stockbroking activities along with higher margin and interest income. Money lending activities also expanded by 19.1% YoY to RM2.41mn in 2QFY24. The group's PBT doubled to RM4.93mn from RM2.44mn a year ago.

• The group’s net cash and short-term funds stood at RM33.3mn as of 30 June 2024, down from RM47.0mn in December 2023. Meanwhile, AEHB's total bank borrowings have ballooned to RM39.3mn from RM4.0mn in FY23.

Impact

• No change to our earnings estimates.

Outlook

• We continue to envisage decent 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.

• However, during the quarter under review, management became aware of the potential discontinuation of an ongoing project linked to a loan receivable for which the group had financed RM23.8mn. While we await further clarification from management, we believe that concerns about the project and loan’s viability were previously raised by the external auditor, Crowe Malaysia PLT. However, in our latest update with AEHB in July 2023, management clarified that the loan remains current with a strong history of payments. They did not consider a provision necessary at that time, given the loan's secured status with collateral valued at RM29.5mn.

Valuation

• Tagging a 30% discount to the sector's average P/E ratio of 22x, we maintain AEHB's TP at RM1.35. BUY maintained on the stock, at this juncture.

Source: TA Research - 28 Aug 2024