KUALA LUMPUR: Aeon Credit Services (M) Bhd is in the midst of working out a plan to increase its capital base, according to its chairman Datuk Abdullah Mohd Yusof.
“We are always mindful of this issue. Management is making detailed studies to address this issue,” he said after the company’s AGM.
However, he said Aeon Credit had not finalised any plans yet.
According to RHB Research, although the company’s receivables has been on an uptrend, Aeon Credit’s capital adequacy ratio (CAR) stood at 17.4% as at the first quarter ended May 20, 2013, from 17.6% in the previous quarter.
The CAR, which measures Aeon Credit’s capital against its risk-weighted assets, is approaching the regulatory requirement of a minimum 16%.
Bank Negara has said that it planned to strengthen its regulatory and supervisory capacity in the non-bank financial institutions, which include Aeon Credit.
Hwang-DBS Vickers Research said: “We do not discount Bank Negara implementing some tightening measures in the lending activities of non-bank financial institutions.”
Meanwhile, executive director S. Krishnappan said the company’s current debt-to-equity ratio stood at 4.5 times, which is still within its comfort target range of between 3 times and 5 times.
“We note that the debt-to-equity ratio is now at a record high of 4.6 times, near the top end of its target debt-to-equity ratio of 3 times to 5 times, due to additional term loans of RM354mil,” RHB said in a note.
RHB added that declining CAR, coupled with the higher debt-to-equity ratio, could potentially call for a capital-raising exercise in the second half of 2013.
Abdullah said Aeon Credit did intend to increase its capital, which currently stood at RM72mil. “We will need to increase this if we want to continue with our growth of business and profit,” he said.
He added that the company was looking at all options to raise additional capital, including a rights issue.
However, he declined to reveal when the company would kick-start its capital raising initiatives.
Meanwhile, Aeon Credit intended to expand its fee income business, said managing director Yasuhiro Kasai, who added that he expected further growth from the group’s existing businesses such as credit cards, personal loans, and used car financing.
“We want to increase the business in all our units, as well as extend our range of products,” he said.
An analyst said the fee income business would help to be a buffer if the lending market turned sour.
Yesterday, Aeon Credit’s share price surged as much as 7.7% to a high of RM17.88 in intraday trade following Monday’s announcement of its strong financial results for the first quarter ended May 20.