KUALA LUMPUR: While there is growing concern that Bank Negara Malaysia’s prudent lending policy would affect banks’ loan growth, AEON Credit Service (M) Bhd seems unfazed.
Its share price climbed to a historic high of RM9.18 last Friday after the company announced its record net profit of RM95.6 million for FY12 ended Feb 29 compared with RM63.43 million a year ago. The stock has soared 87% over the past five months from a low of RM4.90 in early November.
Analysts, who track the stock, still see the growth potential of AEON Credit despite the sharp gain in the share price.
Kenanga Research has raised its loan growth forecast to 30% from barely 10% previously. The research firm said the 30% loan growth target for FY13 is “achievable” with the favourable outlook on its credit card, personal finance and motorcycle financing divisions.
Kenanga Research is anticipating earnings growth of 39% for FY13, which translates into a net profit of RM133.3 million or RM1.11 per share (versus 79.7 sen for FY12).
OSK Research has tweaked its earnings growth forecast after AEON Credit delivered the good set of financial results.
“We are taking the opportunity to bump up our FY13 revenue and earnings forecasts by 14.5% and 24.5% respectively, largely due to robust growth in its durable consumer financing and personal loan business,” it said in a note.
OSK Research anticipates a net profit of RM119.8 million or 99.8 sen per share for FY13 and RM153.7 million or RM1.28 per share for FY14.
HwangDBS Vickers Research revised its loan and funding growth to 23% for FY13 from 19% previously. “Growth for personal financing and credit card loans should remain robust, while Easy Payment (general and vehicle) will grow at a moderate pace due to a larger base,” said HwangDBS.
According to analysts, the management has indicated that AEON Credit plans to capitalise on the segments that the bigger banks do not traditionally compete in. HwangDBS believes that micro-loans to small and medium enterprises and the financing of super bikes and used cars would provide the new impetus for loan growth.
OSK Research said the two segments will be the new growth area. “We think that AEON Credit can focus on growing market share in these two segments while maintaining its asset quality given its solid risk containment measures, which have helped keep its non-performing loans [NPL] low,” said OSK Research.
It added that AEON Credit’s asset quality is still intact. However, its capital adequacy ratio (CAR) fell to 21.8% from 24% in the previous year, but it is still well above the 16% requirement and thus able to maintain its asset quality.
The group’s NPL was down 14 basis points to 1.8% compared with 1.94% previously, slightly below the 1.9% average industry, it said.
AEON Credit uses the Central Credit Reference Information System (CCRIS) and an internal credit-scoring model, designed to model consumer behaviour and spending patterns to ensure it engages those with favourable payment histories. This helps the company to screen the good prospective customers from bad ones.
Its collaboration with AEON Co is bearing fruit. AEON Credit could leverage AEON Co’s 900,000 strong, loyalty member programme.
AEON Credit is making use of this opportunity to persuade customers to sign up for its credit cards at renewal counters.
Analysts said another advantage is that AEON Co does not allow other credit card operators to set up booths at its shopping centres, giving AEON Credit a leg up compared to other financial institutions.
Apart from churning out strong earnings growth, AEON Credit pays steady dividend annually, which has climbed steadily in line with its earnings. The company has declared a 16.8 sen single tier final dividend, bringing the total dividend to 30 sen for FY12 — the highest payment so far.
OSK Research pegs its dividend per share (DPS) forecast at 36.4 sen and 46.4 sen for FY13 and FY14 respectively. Hwang-DBS expects net DPS of 34.5 sen for FY13 and 41.4 sen for FY14.
This article appeared in The Edge Financial Daily, April 23, 2012.
