RHB Research has maintained its Buy recommendation on AEON Credit Service (M) Bhd (ACSM) with a target price of RM6.80, citing an expected earnings recovery in the coming quarters despite the consumer financier reporting slightly weaker-than-expected first-quarter results.
The target price implies an upside potential of about 18%, while the stock is expected to deliver an FY2027 dividend yield of around 6%.
ACSM posted a net profit of RM93 million for the first quarter ended May 31, 2026 (1QFY27), up 20% from a year earlier but down 35% quarter-on-quarter.
The earnings accounted for 21% of RHB’s full-year forecast and 23% of consensus estimates, falling slightly short of the research house’s expectations due to higher-than-anticipated credit costs.
RHB said pre-impairment operating profit (PIOP) remained resilient, rising 9% year-on-year and 5% quarter-on-quarter, supported by continued expansion in gross financing receivables.
However, annualised credit costs came in at 4.64%, exceeding RHB’s full-year assumption of 4.3%. The increase was partly offset by lower expected credit losses compared with the previous year, although write-offs were higher.
Associate losses also widened slightly, contributing to the earnings shortfall.
The research house noted that the quarter-on-quarter decline in earnings largely reflected higher credit costs following a one-off expected credit loss model refinement exercise undertaken in the previous quarter.
Despite the softer earnings, financing growth remained healthy.
Gross financing receivables expanded 10% year-on-year to RM16 billion, with annualised growth of 9%, surpassing management’s full-year growth target of 8%.
The growth was primarily driven by strong demand for superbike financing, which surged 51.5% year-on-year, supported by seasonal demand during the Aidilfitri festive period.
Asset quality also remained broadly stable.
The non-performing loan (NPL) ratio stood at 2.60% compared with 2.61% in the preceding quarter and 2.57% a year earlier.
Management acknowledged that rising living costs have begun to affect certain customer segments, particularly younger and lower-income borrowers, although this has yet to materially impact overall asset quality.
Meanwhile, the loan loss coverage ratio remained healthy at 195%, largely unchanged from the previous quarter, although lower than the 217.1% recorded a year earlier.
RHB said it would maintain its earnings forecasts and RM6.80 target price pending further guidance from the company’s analyst briefing.
While the research house continues to expect earnings to improve as credit costs moderate over the remainder of the financial year, it cautioned that the weaker-than-expected first-quarter performance could result in downward revisions to its FY2027 earnings estimates.
RHB also noted that management may adopt a more cautious outlook in light of ongoing geopolitical uncertainties and persistent inflationary pressures, which could continue to weigh on consumer spending and credit quality.
