RHB Investment Bank has upgraded AEON to a “buy” from “neutral”, with an unchanged target price of RM16.20.
PETALING JAYA: Consumer finance company Aeon Credit Service
Bhd’s recent share price weakness is an attractive entry point for investors to capitalise on, given the healthy improvement in underlying operations, brokerage firms say.
After the recent profit-taking following AEON’s receipt of a digital banking licence, RHB Investment Bank said the stock was currently trading at 1.54 times price-to-book value for the financial year ending Feb 28, 2023 (FY23), which is around a minus 0.5 standard deviation from its five-year mean.
“The current share price provides an attractive entry point to capitalise on a possible share price rerating,”it added.
That said, RHB Investment Bank has upgraded AEON to a “buy” from “neutral”, with an unchanged target price of RM16.20.
The research house is keeping its forecasts unchanged till the management briefing, which was held yesterday.
Its net profit for the first quarter ended May (1Q) was flat, but improved quarter-on-quarter. Its net profit stood at RM163.06mil in 1Q. Meanwhile, its revenue fell 5% to RM390.57mil for the quarter compared to RM410.96mil a year ago.
MIDF Research said AEON’s performance in 1Q was commendable, noting that the worst was behind the company.
“But we are wary of unforeseen circumstances which may affect its impairments in the coming quarters,” it noted.
Despite the better-than-expected earnings, MIDF Research said it would not make changes to its FY23 forecast due to the current economic uncertainty and worries of inflation which may see the rise of impairments in later quarters.
“Nevertheless, we believe that AEON will maintain its upward earnings trajectory.
“With the recent share price weakness, we believe that there is a trading opportunity for AEON,” it added.
As such, MIDF Research has upgraded AEON to a “trading buy” from “neutral” with an unchanged target price to RM15.
Similarly, Kenanga Research believes there are better times ahead for AEON, as its more-than 10% loan growth target could see some relief as consumer spending returns.
As such, it said AEON’s digital efforts to allow more seamless onboarding were a key growth strategy and to also drive a larger recurring fee income base. “A higher degree of automation would also improve credit processing, which in turn could lead to a leaner operating environment,” it said.
Post-1Q results, Kenanga Research has raised its earnings estimates by 15% and 5% for FY23 and FY24, respectively, mainly arising from lower credit cost assumptions in lieu of recent financing recoverable.
