Affin Hwang adopts more positive outlook on Aeon Credit

KUALA LUMPUR: Affin Hwang Capital Research maintained its buy rating and upgraded its target price on Aeon Credit Service (M) Bhd to RM18.40 from RM15.30 as the company is on track to deliver a more solid performance over FY19-21E.

The research hoouse said there are concrete results from the initiatives undertaken by Aeon Credit over the last one to two years, which include a value-chain transformation exercise that enhances the bottomline, receivable portfolios and credit recoveries.

"We saw a continuous pick-up in credit card spending and personal financing growth, lower operating expenses, improved collection and firmer margins - better than we initially anticipated. The potential adoption of AI and automation processes will lower overheads, in our view," it said.

Affin Hwang added that Aeon Credit is looking to expand its target market further beyond the B40 or bottom 40% of Malaysian households.

"Though this will be positive for AC to outperform that of FY18E’s receivables growth of 11% yoy, the lower risk concentration receivables however will not justify for returns higher
than its average yield of circa 18% in FY18. 

"Nonetheless, a sound receivables book will underpin a steady credit cost level (our estimates ~315-336bps for FY19-21E vs. 327bps FY18) under MFRS 9 adoption."