AEON Credit poised to reach ROE target level

PETALING JAYA: RHB Research expects stronger recoveries for AEON Credit Service (M) Bhd in the second half of financial year 2026 (2H26), having seen improved collection productivity in recent months following targeted initiatives taken.

“AEON Credit’s collection ratios showed a strong rise in July and August 2025, partly as a result of the group’s targeted initiatives to raise collection productivity.

“As such, management sees an improvement in credit costs ahead, coming from better recoveries and/or reversal from accounts that went impaired between April and June,” it explained.

RHB Research also saw smaller slippages of performing accounts.

Post-results, it raised its financial year 2026 (FY26) credit cost assumption to 4.3% from the previous 3.8%, implying a charge of 3.5% in 2H26.

Additionally, the research house has kept its “buy” call on the counter but lowered its target price to RM6.70 from RM7.60.

It highlighted that an uncertain credit cost trajectory is the key risk to its call – each 0.1 percentage point rise in credit costs lowers its net profit projection by 3%.

“At AEON Credit’s second quarter of FY26 results briefing, management cited better credit costs in 2H26 as the key driver to lift return on equity or ROE to its 12% target level,” it added.

The research house has cut its FY26 to FY28 earnings by 13%, 11% and 12% respectively as it raised its credit cost assumptions.