PETALING JAYA: Consumer financial services provider Aeon Credit Service (M) Bhd
may see improved debt collection leading to an improved impairments outlook from wage measures to be rolled out under Budget 2027, says Kenanga Research.
It pointed out that this should help provide a shot in the arm towards collection efforts, which should improve the impairments outlook and drive impairments in the second half of financial year ending Feb 28, 2027 (FY27) lower compared to the same period in FY26.
The brokerage, which resumed coverage of the stock, maintained an “outperform” call but slashed the target price to RM5.60 after AEON Credit’s management guided that challenges remained in meeting return on equity (ROE) of 12% after 10% ROE attained in FY26.
“The current guidance of 8% loan growth for FY27 (versus the 9.1% attained so far) also takes into some consideration tightening efforts. We foresee ROE of 11.3%,” it said, explaining that the dividend yield at current share price made it attractive to keep the “outperform” call.
The company shared that it would endeavour to keep dividend per share (DPS) comparable to FY26’s 29 sen, implying a yield of 6% and a margin of safety given a 7.4% price-to-earnings for FY27.
Kenanga Research expects 30 sen DPS for FY27. An interim dividend of 13 sen was declared for the second quarter ended Aug 31, 2026.
After creeping up to 2.6% in 1Q27, non-performing loan (NPL) formation has been well behaved, with the NPL ratio easing marginally to 2.55% quarter-on-quarter.
“Further evidence of management being prudent is that loan-loss coverage inched up slightly to 199%. Delinquency ratio (pre-NPL) trends are relatively stable,” it noted.
“Operationally, loan growth momentum remains on track, with total transactions of new loans underwriting in 2Q27 being at an 8.4% growth clip year-on-year (y-o-y).
“Outstanding loans were up 9.1% y-o-y, with expansion highest in payment business (11.3%),” it said. The research house expects a 25-basis point hike in the overnight policy rate in 2027.
It shared that the company expects an improvement in overall credit quality in terms of write-offs into the second half of FY27 aided by the improvement from managing pre-NPL delinquencies, and collections in deploying artificial intelligence (AI) for tele-collections.
It added that AI assists in about a third of such work. It continues to be “slightly cautious” on the impairment outlook as credit cost remains challenged by pockets of cost-of-living pressures, but a boost comes from revenue and cost initiatives.
