RHB Investment Bank has maintained a “buy” call on AEON Credit Service (M) Berhad, raising its target price to RM6.80 from RM6.70, implying a 27% upside alongside an expected 6% dividend yield for FY2027.
The positive outlook follows stronger-than-expected fourth-quarter results for the financial year ended February 2026 (4QFY26), driven primarily by lower credit costs after a one-off adjustment.
Earnings Beat on Lower Credit Costs
AEON Credit posted a net profit (PATMI) of RM144 million for 4QFY26, up 10% year-on-year and 57% quarter-on-quarter, bringing full-year earnings to RM386 million, a 4% increase from the previous year. The results exceeded both RHB’s and consensus expectations by around 10% to 12%.
The outperformance was largely attributed to a lower credit cost of 2.2% during the quarter, following a one-time expected credit loss (ECL) model refinement exercise.
Pre-impairment operating profit rose 13% year-on-year to RM1.2 billion, supported by solid income growth, while associate losses widened due to continued investments in technology, personnel and marketing to support its business banking expansion.
The group proposed a final dividend of 15.75 sen per share, along with a special dividend of 2 sen, bringing total FY26 dividends to 30.75 sen — above expectations and translating into a payout ratio of 41%.
Loan Growth Remains Resilient
Gross financing receivables grew 11% year-on-year, driven by strong expansion in personal financing, as well as robust growth in credit cards and superbike financing, albeit from a lower base.
The non-performing loan (NPL) ratio edged up slightly to 2.61% from the previous quarter but remained lower compared to the prior financial year. A one-off reclassification of debt management programme loans led to a temporary adjustment in provisioning levels, with loan loss coverage easing to 196%.
Cautious Outlook Amid Geopolitical Risks
For FY2027, AEON Credit is guiding for more moderate growth, with key performance indicators including loan growth of around 8%, return on equity of about 12%, and a dividend payout ratio exceeding 30%.
RHB noted that the more conservative targets likely reflect uncertainties stemming from ongoing geopolitical tensions, particularly in the Middle East, which could impact consumer sentiment and asset quality.
Despite this, the research house believes much of the risk has already been priced in, with the stock trading at 0.83 times its FY2027 price-to-book value.
Valuation and Outlook
RHB made minor adjustments to its earnings forecasts for FY2027–FY2028, maintaining expectations of steady performance supported by prudent growth and stable asset quality.
The revised target price of RM6.80 is based on a Gordon Growth Model-derived valuation, incorporating a modest environmental, social and governance (ESG) premium.
“Investors are likely to keep a close watch on asset quality in the current environment, but valuations remain attractive,” the report said.
