KUALA LUMPUR: Aeon Credit Service (M) Bhd may need to generate new sales of at least RM500 million every quarter to match the financial year ended February 28, 2021's (FY21) receivables level of RM10 billion, said Affin Hwang Capital.
Its analyst Tan Ei Leen said this was in relation to the group's second quarter of FY22's outstanding of RM9.6 billion.
"Aeon Credit has revised its receivables growth target for FY22 (from high single-digit to somewhat flat), on the back of the subdued growth seen throughout the first half of FY22, which saw a year-to-date (YTD) decline of 4.5 per cent," she said in a research note today.
Affin Hwang has revised down Aeon Credit's FY22 receivables growth assumption to 1.8 per cent but with more optimism in the second half of FY22 outlook.
"The management is expected to ramp up receivables growth in credit cards, motorcycles, objective financing and personal financing," Tan said.
Affin Hwang has revised Aeon Credit's FY22 net earnings forecasts by -0.7 per cent after cutting down its receivables growth from 9.0 per cent YoY to 1.8 per cent.
"Correspondingly, lowering interest expense and provisions in-line with our low er credit risk expectation.
"We also maintained a receivables growth rate of 10 per cent YoY for FY23-FY24, and adjusted our net credit cost lower as well. This resulted in a 3.4 per cent and 1.5 per cent enhancement to FY23E-24E earnings."
Tan said the catalysts for recovery included the reopening by end-2021, while the group was still awaiting award of digital-banking licence.
"The transition of all states out of Phase One under the National Recovery Plan has lifted overall investor confidence.
"Aeon Credit, under a 40:60 joint-venture with the AEON Financial Service Co. Ltd (Japan), has submitted a joint application to Bank Negara Malaysia for a digital banking (DB) licence. The results are expected to be known by March 2022."
Affin Hwang has maintained a "Buy" call for Aeon Credit with a 12-month revised target price of RM15.80.
"Our assumptions for FY22E, FY23E and FY24E include receivables growth at 1.8 per cent, 10 per cent and 10 per cent; and net credit cost at 256 basis points (bps)/334bps/334bps," it said.
