KUALA LUMPUR: Aeon Credit Service (M) Bhd's nine-month ended November 30, 2021 results have outperformed Affin Hwang Capital and consensus estimates.
Affin Hwang said the better performance was driven by higher recoveries and significantly lower expected credit loss allowances in the third quarter of financial year 2022 (Q3 FY22).
For the nine-month period, the firm said Aeon Credit's net profit was up 192.6 per cent year-on-year (Y-o-Y), largely driven by decline in provisions by 66.5 per cent Y-o-Y (equivalent to an annualised net credit cost (NCC) of 42 basis points).
This was lower than Affin Hwang's FY22 NCC assumption of 255.7bps.
It said while Aeon Credit's outstanding receivables growth remained subdued, initiatives on receivables acquisition in Q3 FY22 had shown significant results, driven by motorcycles, personal and auto financing segments.
"We believe that these new receivables will continue to underpin Aeon Credit's revenue streams as older receivables were being paid off.
"Quarter-on-quarter (Q-o-Q), D1 (past due 30 days) and D2 (past due 60-90 days) collection ratios improved, while the improvement in gross non performing loan (NPL) ratio Q-o-Q from 2.24 per cent to 1.75 per cent has led to write-backs," it said.
Affin Hwang said Aeon Credit's receivables growth was expected to pick up circa 10 per cent per annum in FY23-FY24, in-line with the recovery in business activities and improved consumer sentiment.
"Though the Klang Valley flood incident may have an impact on business growth, we believe that on-going recovery efforts may alleviate the situation.
"Thus far, Aeon Credit has two outlets affected, Section 23 Shah Alam and Temerloh, Pahang out of its 64 branches and service centres nationwide," it said.
Affin Hwang has reiterated its "Buy" call on Aeon Credit, with an unchanged target price of RM15.80, pending further management guidance on the prosperity tax and Q4 FY22 outlook.