AEON Credit Service (M) Bhd
(April 20, RM4.04)
Maintain buy at RM4.08, target price of RM4.95: AEON Credit’s revenue and net profit for 4QFY10 grew 4.4% and 5.2% respectively year-on-year (y-o-y) on the back of a growing customer base due to successful promotions and the expansion of its market reach.

This is in line with its growing trade receivables, which were higher by 8.4% y-o-y. However, net profit rose by a marginal 0.2% quarter-on-quarter due to flattish trade receivables, as there were fewer working days in the month of February.

Although a service tax on credit cards was imposed effective Jan 1, 2010, credit card retail transactions surged 16% against that in the preceding quarter as the company allowed its credit cardholders to redeem a RM50 department store voucher for a total of 12,500 points collected.

As part of its efforts to reward its shareholders, a final dividend of 12 sen per share was proposed for the quarter, which translates into a total dividend payout of 37.3% for FY10.

Due to a prudent lending policy and effective credit management, AEON Credit non-performing loans (NPL) declined marginally from 1.87% to 1.80% y-o-y.

In growing its customer base, AEON Credit is looking to convert the face of all its cards to a standard one bearing the “AEON” design, expand its used car easy payment financing in the east coast, Sabah and Sarawak, and launch a new loyalty programme and a new AEON web portal.

As the company expects to sustain its growth momentum, we are maintaining our buy call on AEON Credit with a target price of RM4.95 (based on a historical two-year price earnings band of 8.5 times over FY11 earnings per share). — OSK Research, April 20

This article appeared in The Edge Financial Daily, April 21, 2010.