23 April 2012
AEON Credit net profit jumped 43% y-o-y from credit cards and personal financing, loans grew 35%, target price 9.20 - Hwang-DBS Vickers Research
(AEONCR opening stock price on 24.4.2012 was RM9.62)
FOR the fourth quarter ended Feb 20, 2012, net profit jumped 43% year-on-year and 10% quarter-on-quarter to RM27.7mil. This took full-year earnings to RM95.6mil, 7% above our estimate.
The strong result was driven by higher-than-expected operating income from credit cards and personal financing. Loans grew 35% in the financial year ended Feb 20 (FY12) led by all segments, with credit cards and personal financing registering 103% and 52% growth respectively.
Vehicle Easy Payment made up the largest share at 38%, followed by general Easy Payment at 24%. Non-performing loans improved to 1.8% from 1.83% a year ago.
The average funding cost inched up to 4.4% from 4.24%, but average spreads improved by 7 basis points (bps) year-on-year due to higher asset yields.
The capital adequacy ratio was 22% versus 24% in FY11.
We raised FY13 and FY14 forecast loan and funding growth assumptions to 23% from 19% previously. While Easy Payment will grow at a moderate pace due to a larger base, growth for personal financing and credit card loans should remain robust.
The new growth areas of the company will be in micro-loans to small medium enterprises, and financing of super-bikes and used cars. The ongoing branch expansion and growing credit card base will enhance its distribution base.
We forecast that the spreads will narrow by 54 to 116 bps, due to competition in lending. We also expect that funding cost will inch up.
We maintain our view to “hold” the stock. We raised the target price to RM9.20, from RM7 previously after rolling forward the valuation base to calendar year 2012, and pegging it to eight times price earnings.