AEON Credit set to ride financing growth

PETALING JAYA: Analysts remain upbeat on AEON Credit Service (M) Bhd’s prospects, underpinned by its earnings ability.

Following a meeting with the company’s management, RHB Research said in a report it was assured of the group’s bright prospects for growth in financing and commitment to pay out higher dividends.

“These, combined with improving credit costs and strong momentum from its digital bank, underpin our expectations for a potential earnings rebound in its financial year ending Feb 28, 2026 (FY26).”

The research house said it expects the company to comfortably exceed its 10% financing-receivables growth target for FY25.

“This will largely be driven by personal financing and credit cards, while motorcycle financing growth is also likely to pick up as management is now more comfortable with the credit quality of that segment.

“Looking ahead to FY26, we think the group will continue aiming for double-digit receivables growth, especially as funding conditions are favourable.”

AEON Credit is principally engaged in the provision of easy payment schemes for purchase of consumer durables and vehicles, personal-financing schemes and credit cards.

RHB Research said that AEON Credit’s current net gearing ratio of 3.9 times is still comfortably below management’s ceiling of 4.5 to five times, while its cost of funds has also been largely stable over the past two years.

The research house said the refresh of AEON Credit’s expected credit loss model last December should yield favourable results for its fourth quarter ended Feb 28, 2025.

“As we understand, the refinement was done to the loss given default component for disposals of written-off accounts. Management is confident that post-refinement credit costs should better reflect the group’s improving underlying asset quality.

“However, the group flagged that it is seeing a rising trend of customers opting for government-backed repayment assistance in order to obtain more favourable financing terms, which is not only negative for credit costs, but also for future receivables growth.”

For now, RHB Research said such cases only form a small portion of the group’s total portfolio, adding that AEON Credit’s management is still keeping a watchful eye on developments.

For its third quarter ended Nov 30, 2024, AEON Credit’s net profit dropped to RM62.07mil from RM85.55mil in the previous corresponding period, while revenue rose to RM562mil from RM486.51mil previously.

In a filing on its third quarter financial results, AEON Credit said the higher revenue was mainly attributable to stronger loan and financing growth.

On its prospects, the group said it maintains a cautious business stance due to the prevailing geopolitical tensions, inflationary pressures and ongoing volatility in global financial markets.

“The company will continue to remain prudent, placing emphasis on growing quality assets and closely monitoring the inherent credit risks in its financing portfolios.

“The group will also continuously enhance its information technology capabilities to improve on operational efficiencies while establishing an ecosystem to be built from the AEON group of companies operating in Malaysia to expand on its customer reach.”