Aeon Credit Service (ACSM MK) Aeon Credit Service’s full year net earnings of MYR407.5m came in at 108% and 100% of our and consensus estimates. With the group’s earnings prospects remaining sound heading into FY24F.
RHB Research believes the recent share price weakness has resulted in a good opportunity to accumulate on the counter at depressed valuations citing that the stock is currently trading near-2SD from its 5-year mean P/BV.
The research house maintains a ‘Buy’ call on a MYR15.20 TP, 28% upside and c.4% FY24F (Feb) yield.
In a note today (April 12), RHB cited ACSM’s FY23 net earnings of MYR407.5m (+14.7% YoY) came in at 108% of our estimates. The positive variance mainly arose from higher-than-expected non-II (+17% YoY) and lower-than-expected operating expenses (-3% YoY). On a quarterly basis, we saw continued momentum in NII (+28% YoY, +4% QoQ) and non-II (+2% YoY, +3% QoQ), helped by easing impairment allowances (-37% YoY, -30% QoQ). FY23.
The ROE stood robust at 18.8% (FY22: 19.2%) – the highest among the nonbank lenders under our coverage. A final dividend of 21 sen/share was declared, bringing the FY23 total to 49.5 sen/share (c.31% payout).
Gross financing receivables of MYR10.8bn (+9.9% YoY) fell just short of management’s >10% target for the year. Key growth drivers were vehicle financing (+7% YoY) and personal financing (+15% YoY). Moving forward, management is positive of achieving double-digit receivables growth in FY24F, to be led by vehicle financing (mainly motorcycles and used cars) and personal financing.
The NPL ratio rose slightly to 2.89% in 4QFY23 (3QFY23: 2.54%, 4QFY22: 2.66%). Moving forward, RHB Said they could see this number normalise downwards, given the current level is still elevated against the pre pandemic average of <2.75%. However, LLC of 251% (up from the pre-2018 average of <110%) is still adequate.
Credit cost eased to 273bps in 4Q (FY23: 257bps, FY22: 147bps), and management expects credit costs to fall further to the c.250bps level in
FY24F.
In addition, total transaction and financing volume grew 31% YoY to MYR6.25bn – this is positive for future interest income growth. The group
remains well capitalised with a capital adequacy ratio of 27.1% at end-Feb 2023 (Feb 2022: 26.8%).
RHB said they maintain the ‘Buy’ call based on the TP is kept at MYR15.20, and includes a 4% ESG premium, in line with RHB’s inhouse proprietary methodology.
“ACSM is our preferred pick among the nonbank lenders given its larger size and reach, strong earnings growth trajectory, and undemanding valuation – it is currently trading at c.1.1x P/BV against a projected FY24F ROE of 17%.”
