RHB Research: AEON Credit's nine-month performance within expectations

KUALA LUMPUR: AEON Credit Services' first nine-month financial year 2024 (9MFY24) results met expectations, according to RHB Research.

In a note today, the firm said that despite increased bad debt write-offs in the third quarter of the financial year 2024 (3QFY24) impacting the bottom line, the overall performance was buoyed by robust income growth.

AEON Credit reported a net profit of RM300.1 million for 9MFY24, reflecting a five per cent year-on-year (YoY) decrease but aligning closely with both RHB Research and Street full-year estimates at 73 per cent and 72 per cent respectively.

"The performance was influenced by a robust 18 per cent YoY surge in total operating income, attributed to a 12 per cent growth in receivables.

"However, higher credit costs at 3.7 per cent, compared to 2.5 per cent in 9MFY23, offset some gains, particularly due to increased write-offs in the third quarter of fiscal year 2024," the bank said.

RHB Research added that AEON Credit's YoY growth of 12 per cent and a quarter-on-quarter (QoQ) increase of 3.0 per cent have exceeded the targeted level of about 10 per cent for the year.

"The growth predominantly came from objective financing and personal financing, while growth was deliberately slower for motorcycle financing due to its weaker asset quality tendencies.

"We foresee the group surpassing its 10 per cent target for the full year, particularly as its strategic marketing campaigns have generated decent success at garnering financing applications among higher credit-score customers.

"Coupled with its digital credit assessment and onboarding initiatives, disbursements could accelerate and keep the receivables growth momentum going for longer," it added.

The research firm said the increase in AEON Credit's credit costs to 4.7 per cent in 3QFY24, up from 2.6 per cent in the second quarter (2Q), was primarily driven by a 12 per cent QoQ surge in write-offs related to legacy bad debts.

"ACSM's focus on higher credit score customers appears to be bearing fruit, and credit costs could stabilise to the pre-pandemic average of 3 to 4 per cent in the near future," it added.

RHB Research maintains its 'buy' recommendation for the company and continues to uphold its projections and a target price of RM7, which incorporates a 2.0 per cent ESG premium.

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