KUALA LUMPUR: Affin Hwang Capital Research is retaining its Buy call for Aeon Credit Service
with an unchanged target price of RM15.30.
It said on Friday this was based on a price-to-earnings (P/E) target of 13 times on CY18E earnings per share.
"We note that Aeon Credit’s share price may potentially re-rate due to the ongoing digital transformation (mobile wallet/ewallet/cashless and paperless branches), marketing initiatives (acquisition of merchants),” it said.
Other factors helping to drive the growth in FY19 includes the 2% income tax reduction for the lower income group (under Budget 2018).
However, the downside risks are the deterioration in consumer sentiment and a decline in credit quality, resulting in higher non-performing loans.
Affin Hwang Research pointed out Aeon Credit’s 9MFY18 profit-after-tax (PAT) of RM207.1mil (+18.7% on-year) was within its and consensus estimates.
Receivables continued to grow at a robust rate of 13% on-year. Asset quality remained steady in 3QFY18, as reflected by a relatively steady gross NPL ratio of 2.48% on a sequential basis.
Credit cost for 9MFY18 was stable on a on-year basis, at 335.4 basis points (bps).
While no dividends were proposed this quarter, the research house anticipates a final dividend of 25.7 sen.
“Maintain Buy, noting that Aeon Credit is a high-growth, high-return financial stock, with a 9MFY18 return on equity at 22%.
“Despite news of Aeon Credit being slapped with a RM96.8mil additional tax bill, management is of the view that the company has strong legal grounds to defend its position, and hence no provision is expected,” it said.
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