Kenangan Research has maintained an “Outperform” recommendation with a higher TP of RM16.60 as (from RM14.00) on Aeon Credit Service (M) Bhd as it rolls over our valuation base to FY23E, based on its current 3-year mean PER of 10.6x (previous 3-year mean was 11x).
It said that the key catalysts include normalisation of impairments on improved accounts collection, resumption of total transaction and financing volume/financing receivables, and a potential digital bank license, as AEONCR already serves the underserved.
It said that moving forward, it expects continued recovery in its transaction and financing volume, building on its 11% YTD YoY growth. “We also expect gross receivables to follow suit, fuelled by resumption in consumption and AEONCR’s year-end marketing campaigns.
“The research house said that it was are expecting a weaker 4QFY22 vis-à-vis 3QFY22, mainly on lower write-backs, as we are still expecting receivables growth QoQ.”
It said that it believes management’s stringent asset quality control should allow them to maintain its healthy NPL% of 1.75% and current collection ratio of 98.5%. “That said, we might see NPL inching up and collection inching down marginally due to the floods, but any impact should be negligible,” it said.
On its risks to call, the research house said that lower-than-expected receivables growth, extension of moratorium, higher-than-expected impairment losses, and lower-than-expected write-backs.
