AEON (6599) : Kenanga keeps Outperform call for Aeon but slashes TP
KUALA LUMPUR: Kenanga Research is maintaining its Outperform call on Aeon Credit Service Bhd, but has slashed the target price to RM12.45 from RM17.80 following below-expectation third quarter results.
It said the 3Q15 net profit of RM48.3mil was lower than expected, with impairment loss provision up by 40% in the quarter.
“There was continued deterioration in asset quality with non-performing loans ratio coming in at 3.1% (+1.1 precentage points). Meanwhile annualised credit cost ratio edged higher at 5.28% (+85 basis points), signalling potential further deterioration. Annualised return on equity (ROE), on the other hand, loss 49 basis points to 33.1% on fatter reserves of RM494.0mil (+18.3%),” the research house said.
It added that Aeon faced some challenges going forward, with the pullback in subsidies by the Government, higher interest rates and the implementation of the GST on April 1, 2015.
“We have imputed a higher credit cost assumptions of between 5.3-5.5%. Meanwhile growth in net financing receivables should hover at a lower level of around 20-23%. Net financing margin compression is also expected to continue, and we have factored in an aggressive squeeze of around 90 basis point in FY15,” it said.
Kenanga said in view of the above, it was trimming FY15/16 earnings by 7%-10%.
It is, however, keeping its Outperform call, but has slashed target price by RM5.35 to RM12.45.
“Despite the downward adjustments to our estimates, the counter still offers an attractive total upside potential of 23%. Furthermore, its dividend yield is now higher than Malaysia Government Securities (4.26%) at 6.3%,” the research house said, adding it was anticipating a second and final dividend of about 27.6 sen in the next few months,” Kenanga said.
http://www.thestar.com.my
KUALA LUMPUR: Kenanga Research is maintaining its Outperform call on Aeon Credit Service Bhd, but has slashed the target price to RM12.45 from RM17.80 following below-expectation third quarter results.
It said the 3Q15 net profit of RM48.3mil was lower than expected, with impairment loss provision up by 40% in the quarter.
“There was continued deterioration in asset quality with non-performing loans ratio coming in at 3.1% (+1.1 precentage points). Meanwhile annualised credit cost ratio edged higher at 5.28% (+85 basis points), signalling potential further deterioration. Annualised return on equity (ROE), on the other hand, loss 49 basis points to 33.1% on fatter reserves of RM494.0mil (+18.3%),” the research house said.
It added that Aeon faced some challenges going forward, with the pullback in subsidies by the Government, higher interest rates and the implementation of the GST on April 1, 2015.
“We have imputed a higher credit cost assumptions of between 5.3-5.5%. Meanwhile growth in net financing receivables should hover at a lower level of around 20-23%. Net financing margin compression is also expected to continue, and we have factored in an aggressive squeeze of around 90 basis point in FY15,” it said.
Kenanga said in view of the above, it was trimming FY15/16 earnings by 7%-10%.
It is, however, keeping its Outperform call, but has slashed target price by RM5.35 to RM12.45.
“Despite the downward adjustments to our estimates, the counter still offers an attractive total upside potential of 23%. Furthermore, its dividend yield is now higher than Malaysia Government Securities (4.26%) at 6.3%,” the research house said, adding it was anticipating a second and final dividend of about 27.6 sen in the next few months,” Kenanga said.
http://www.thestar.com.my
