AEONCR Q2 2020

1. Revenue increased by 19% to RM 783 million which accounts for 57% of 2018's revenue. 
2. Total operating expenses increased 38.4% to RM 521 million where its gross profit margin dropped to 33% which is way below its benchmark of 40% - 45%. (The reason for this is because of RM248 million of impairment loss from financing receivables. Please take note that the full year impairment loss from financing receivables in 2019 is only RM 308 million. Meaning to say 2 quarters of impairment has already accounted for 80% of 2019 impairment. The reason given by the management is due to the requirement under MFRS 9 )
3. Interest expenses increased by 29.7% to RM 155 million because of increase in borrowings which is inline with its increase in revenue (Revenue ⬆ 19%, borrowings ⬆ 15%, Interest ⬆ 30% - revenue increased more than its borrowings should be a good sign however its increase expenses increase twice more than its borrowings isnt very good).

1. Revenue ⬆ 19%, net financing receivables ⬆ 10%, borrowings ⬆15%, total asset ⬆ 11%, total liability ⬆ 14% (Overall increase in borrowings is in line with increase in revenue and increase in its financing receivables which is very fair however the overall increase in liability is higher than the increase in its total asset isnt that nice)

1. Core operating profit increased by 16% which is inline with the increase in revenue (meaning to say the fundamental of Aeoncr didnt change as the operating profit actually increase)

• The management will focus on quality of loan as well as enhancing the company efficiency. (worth to take note that in Q1 2020, the management says that the financial performance in 2020 will maintain but in Q2 2020, the management no longer mention it. This could mean that 2020 financial performance is not gonna be satisfactory)

Comments

In this kind of economic environment, Aeoncr deserves an applause for delivering a record high revenue. However its profit was being dragged down by its impairment loss on receivables. Assuming if the impairment amount is same as 2019 which is RM 152 Million, Aeoncr should achieve a net profit of RM229 million for cumulative 2 quarters 2020 which is historical new high too.

As i mentioned above, its operating profit actually increased by 16% meaning to say there isnt a change in company's fundamental. Any drop is a chance to collect.

Valuation wise, Aeoncr is currently trading at PE of 13 at the price of RM 14.96. Like i mentioned before, its fair PE is around 10 - 11. At PE 10, its share price is RM 11.5, at PE 11, its share price is RM 12.65.