Saturday, 1 June 2013

AEON Credit sees continuous strong growth in two divisions

Posted on April 13, 2013, Saturday

KUCHING: AEON Credit Services (M) Bhd (AEON Credit) continues to see promising loans growth premised on its strong personal financing sector as well as vehicle easy payments division.

An analyst with HwangDBS Vickers Research Sdn Bhd (HwangDBS Research) expected AEON Credit’s earnings and loan growth to remain strong albeit at a more moderate pace.

“We also expect the other segments to grow at a more moderate pace in financial year 2014 forecast (FY14F): vehicle easy payments at 30 per cent (versus 57 per cent in FY13F), general easy payments at 11 per cent (versus 22 per cent in FY13F) and credit cards at 15 per cent (versus 18 per cent in FY13F),” she detailed in her report on the group yesterday.

The analyst highlighted key drivers being personal loans and vehicle easy payments as AEON Credit continued to fill the financing needs of customers in the low to middle income segment.

“We believe loan growth of more 20 per cent should be sustainable for the next two years given AEON Credit’s relatively low base,” she added.

“Its total loan book of RM2.3 billion is relatively small compared to the banking sector’s RM1.1 trillion loans outstanding.”

Looking at the personal loans division, the analyst explained that outside the banking system, consumers’ financing needs are usually filled by non-bank financial institutions (NBFIs) such as AEON Credit, Malaysia Building Society Bhd, RCE Capital Bhd and development banks.

“Notably, Bank Negara Malaysia (BNM) reported lending by NBFIs to the households grew 23.4 per cent in 2012, much higher than the banking sector’s 11.6 per cent,” she elaborated.

“We believe NBFIs like ASCM filled the financing gaps after BNM introduced tighter retail lending rules for the banks in January 2012.

“Going forward, branch expansion will be an avenue to widen AEON Credit’s distribution network for personal loans.

“We believe salary revision among the low income group could drive higher spending power and thus trigger more financing or refinancing needs.”

Looking at vehicle easy payments, the analyst noted that AEON Credit targeted a different market from banks in the automotive segment.

“The biggest portion of the vehicle easy payment business is motorcycle financing.

“We understand banks do not usually focus on this space (except for bigger capacity bikes) as the loan size is very small; typically RM6,000 to RM7,000,” she explained.

This type of financing is being categorised as an easy payment scheme and is not governed by the Hire Purchase Act.

The key advantage is faster turnaround time for processing and approval, while almost all the loans are secured by the vehicles financed.

“Aeon Credit is also growing the loan book of the bigger capacity bikes (targeted at higher-end customers) to diversify its customer profile and to improve yields.

“There is also an opportunity to improve yields as AEON Credit takes on higher risks to finance used cars and motorcycles, but this segment is still small (less than 10 per cent of vehicle easy payment loan book),” she concluded.

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