AEON Credit: Week 19 (7-11 May) Stock Picks Commentary

Stock Picks #2

AEON Credit Berhad (AEONCR)

Two-Week high : RM 11.50 (Up 85 sen – 8.8%)

“To receap 2 weeks ago, On 23 April, AEON Credit reported that its net profit jumped 43% year-on-year and 10% quarter-on-quarter to RM27.7mil for 4th quarter ended Feb 20, 2012, mainly from credit card and personal financing. Hwang DBS Vickers Research revised AEON Credit's target price to RM 9.20 on the same day pegging to 8 times PE ratio.

Market took this news as positive on improving market sentiments for the financing business. Furthermore, on 24 April, market talk rumoured that AEON Credit may be mulling for a 1-for-1 bonus issue.

OSK Research indicated that a bonus issue would be a positive move to retail investors as liquidity is one of the concerns of AEON Credit. AEON Credit rose 61 sen (6.3%) since 24 April to the week’s highest RM 10.26 on 26 April and closed at RM 10.06 at the end of the week.”

Click here for pervious post Week 17 (23-27 April) Stock Picks commentary on Aeon Credit

AEON Credit stock continue to rally through Week 19 (7-11 May) gaining a total 8.8% or 85 sen since April 24 when market talk rumoured that AEON is mulling for a bonus issue to improve its stock liquidity.

OSK Research also indicated that a bonus issue would be a positive move to retail investors as liquidity is one of the concerns of AEON Credit

This definitely gave the market an energy boost just after AEON Credit reported a 43% jump in its year-on-year quarterly net profit announced on 23 April.

Market continue to favour AEON Credit’s improving sentiments in its credit card and personal financing business which saw AEON Credit stock gained a total 8.8% or 85 sen since April 24 to reach its two-week high of RM 11.50 on 11 May and closed at RM 11.20 for the week.

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AEON Credit: Week 17 (23-27 April) Stock Picks Commentary

Stock Picks #4

AEON Credit Bhd (AEONCR)

Week high : RM 10.26 (Up 61 sen – 6.3%)

On 23 April, AEON Credit reported that its net profit jumped 43% year-on-year and 10% quarter-on-quarter to RM27.7mil for 4th quarter ended Feb 20, 2012, mainly from credit card and personal financing.

Hwang DBS Vickers Research revised AEON Credit's target price to RM 9.20 on the same day pegging to 8 times PE ratio.

Market took this news as positive on improving market sentiments for the financing business. Furthermore, on 24 April, market talk rumoured that AEON Credit may be mulling for a 1-for-1 bonus issue.

OSK Research indicated that a bonus issue would be a positive move to retail investors as liquidity is one of the concerns of AEON Credit.

AEON Credit rose 61 sen (6.3%) since 24 April to the week’s highest RM 10.26 on 26 April and closed at RM 10.06 at the end of the week.

Click Here for all latest posts on AEON Credit

AEON Credit Bhd is mulling a bonus issue?

AEON Credit Service (M) Bhd, which saw its revenue and net profit grow by 27.7% and 50.7% year-on-year, respectively, in the financial year ended Feb 20, 2012 (FY12), is mulling a bonus issue to improve the stock's liquidity, said sources.

"The company may seek the approval of its shareholders under a special resolution at the forthcoming annual general meeting (likely to be in June) for the proposed bonus issue," a source told SunBiz yesterday.

Another source said AEON Credit is likely to offer a one-for-one bonus issue of equity shares to reward its shareholders and to help improve liquidity of the stock.

"A bonus issue doesn't really change the fundamentals of the company because the share price and earnings per share get adjusted accordingly after the issue. It's more of a psychological effect among retail investors that are favourable to such issues on the ground that they expand the base and bring down prices and, hence, make the shares more affordable," said the source.

An OSK Research Sdn Bhd analyst said: "If they were to go ahead with a bonus issue, it would be a positive move to retail investors as liquidity is one of the concerns of AEON Credit."

In its report on the counter last Friday, OSK maintained a "buy" call on AEON Credit at RM8.74, with a higher fair value of RM9.98 from RM7.20 previously as it believes the company is still in its high-growth phase "which will contribute to net profit growth of at least 20% in each of the next three years".

Since then, AEON Credit's share price has shot up by about 10% in two days to end at RM9.62 yesterday.

OSK has bumped up its FY13 revenue and net profit forecasts for AEON Credit by 14.5% and 24.5%, respectively, largely due to robust growth in its consumer durable financing and personal loan business.

"Risk-wise, we believe that given AEON Credit's prudent risk management policies and portfolio management strategies, it would be able to keep its non-performing loan ratio below 2%," said the research firm.

"We (also) continue to like AEON Credit's collaboration with AEON Co (M) Bhd given the solid brand loyalty it enjoys from its 900,000-odd members in the AEON member programme (previously called J Card member programme), which will provide AEON Credit with a solid base to tap on," it added.

"Also, we think that AEON Co's rebranding exercise may somewhat benefit AEON Credit as members may be more likely to register for AEON's credit card when renewing their AEON Card (previously J Card), provided there are cross-selling efforts at the card renewal counters," said OSK.

As at Feb 20, 2012, the number of AEON Credit's total principal credit cards in circulation stood at about 160,000.

Source: www.thesundaily.my

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.

Source: www.thestar.com.my