Stock Name: AEONCR
Company Name: AEON CREDIT SERVICE (M) BHD
AEON Credit Service (M) Bhd
(Sept 22, RM 4.70)
Upgrade to buy with target price raised to RM5.70 (based on CY12 price-earnings ratio of seven times): AEON Credit's 2QFY12 net profit surged 59% year-on-year (y-o-y) to RM23.5 million, representing 52% of our initial full-year forecast of RM82.5 million. This was on the back of 28% growth in revenue to RM83 million, mainly driven by credit card (CC: +74% to RM15.2 million) and personal financing (PF: +85% to RM10.3 million).
General easy payment (GEP) and motorcycle easy payment (MEP) remain the breadwinners, contributing 69% to group revenue. Earnings before interest and tax (Ebit) margin improved eight percentage points y-o-y and five pps quarter-on-quarter (q-o-q) to 50.6% (against 2QFY11: 42.5%; 1QFY12: 45.5%) lifted by better operating efficiencies. AEON Credit declared a first interim net dividend per share of 13.2 sen (54% of our full-year expectation of 24.3 sen), which implies a 2.9% yield.
We have tweaked our FY12F to FY14F earnings up by 1% to 7% to factor in stronger loan growth. AEON Credit's 1HFY12 new loans grew 60% y-o-y to RM805 million against our previous assumption of +9.4% y-o-y. Stronger lending momentum was seen in three key segments: MEP (+41.2% y-o-y to RM186 million), CC (+93% y-o-y to RM363 million) and PF (+132% y-o-y to RM83 million). However, given the growing uncertainties on global credit issues, in our revised forecasts, we have factored in 28% y-o-y growth in new loans to RM1.5 billion in FY12F as we expect loan growth to be slower in 2HFY12.
AEON Credit is a defensive play backed by its 5% to 6% net dividend yield in FY12F/FY13F with undemanding price-earnings ratio of less than seven times and low foreign shareholding (about 10%) which should help to limit share price downside risk. We upgrade AEON Credit to 'buy' (from 'hold') with a higher target price of RM5.70 based on seven times CY12 (from FY12) earnings per share as we roll over our valuation window. We like AEON Credit for its niche in micro credit consumer financing, riding on rising domestic credit demand. ' Hwang DBS Vickers Research, Sept 22
This article appeared in The Edge Financial Daily, September 23, 2011.
Company Name: AEON CREDIT SERVICE (M) BHD
| Research House: HWANGDBS | Price Call: BUY | Target Price: 5.70 |
AEON Credit Service (M) Bhd
(Sept 22, RM 4.70)
Upgrade to buy with target price raised to RM5.70 (based on CY12 price-earnings ratio of seven times): AEON Credit's 2QFY12 net profit surged 59% year-on-year (y-o-y) to RM23.5 million, representing 52% of our initial full-year forecast of RM82.5 million. This was on the back of 28% growth in revenue to RM83 million, mainly driven by credit card (CC: +74% to RM15.2 million) and personal financing (PF: +85% to RM10.3 million).
General easy payment (GEP) and motorcycle easy payment (MEP) remain the breadwinners, contributing 69% to group revenue. Earnings before interest and tax (Ebit) margin improved eight percentage points y-o-y and five pps quarter-on-quarter (q-o-q) to 50.6% (against 2QFY11: 42.5%; 1QFY12: 45.5%) lifted by better operating efficiencies. AEON Credit declared a first interim net dividend per share of 13.2 sen (54% of our full-year expectation of 24.3 sen), which implies a 2.9% yield.
We have tweaked our FY12F to FY14F earnings up by 1% to 7% to factor in stronger loan growth. AEON Credit's 1HFY12 new loans grew 60% y-o-y to RM805 million against our previous assumption of +9.4% y-o-y. Stronger lending momentum was seen in three key segments: MEP (+41.2% y-o-y to RM186 million), CC (+93% y-o-y to RM363 million) and PF (+132% y-o-y to RM83 million). However, given the growing uncertainties on global credit issues, in our revised forecasts, we have factored in 28% y-o-y growth in new loans to RM1.5 billion in FY12F as we expect loan growth to be slower in 2HFY12.
AEON Credit is a defensive play backed by its 5% to 6% net dividend yield in FY12F/FY13F with undemanding price-earnings ratio of less than seven times and low foreign shareholding (about 10%) which should help to limit share price downside risk. We upgrade AEON Credit to 'buy' (from 'hold') with a higher target price of RM5.70 based on seven times CY12 (from FY12) earnings per share as we roll over our valuation window. We like AEON Credit for its niche in micro credit consumer financing, riding on rising domestic credit demand. ' Hwang DBS Vickers Research, Sept 22
This article appeared in The Edge Financial Daily, September 23, 2011.
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