AEONCR Q1 2020

• Revenue +1.8% : increase slightly or remain flat (consider pretty good as March, April and May is MCO)
• Operating expenses +24.9% : due to higher impairment loss on receivable of RM174 million vs RM94 million in Q1 2020. An increase of RM80 million. 
• Interest expenses + 22.6% : Bank borrowings increased by 19% while financing receivables increased by 15% as compared to Q1 2020 respectively. 
• Profit after tax -68.9% : If addback the additional impairment of RM80 million, its net profit should be RM106 million which is higher than Q1 2020 of RM84 million. 

Future Prospects

• Overall, the management is bearish on the financial performance for 2021. 

Analyst Report & AGM's Q&A

• The higher than expected impairment loss on receivables is due to MCO. Will reverse the impairment in the future once the company successfully collect the receivables. 
• MCO causes total financing volume to dropped drastically:
• Personal financing -74%
• Motorcycle financing -58%
• Auto financing -60%
• Nonetheless, non-performing loan remain low at 1.42%, dropped from 1.92% in 2020.
• Management expect impairment loss for Q1 2021 to be the peak. 
• Asset quality remain stable with collection ratio returning back to 70% - 80% of prior covid. 
• Loan application rate in June has returning back to 80% of prior covid. 

For more info: https://www.aeoncredit.com.my/ul/1593156385408_q1fye21_26_june_20.pdf

Valuation of Aeoncr @ RM9.50

• Without a doubt that Aeoncr earnings in Q1 2021 is the weakest in the past five years with earning per share of 10.3 sen only. 
• Management is bearish towards its earning for year 2021 in futures prospect. Expecting 2021 revenue and profit continue to shrink along its EPS.
• Lower EPS also translate into lower dividend yield as Aeoncr usually pays 30% - 40% of it EPS as dividend. 
• Although the management mention that its impairment loss is peak in Q1 2021 however to me there are still uncertainty to it, need to further monitor in the next Q to verify. 
• If the next 3 Q's earning remain weak with high impairment loss on receivables, the current price for Aeoncr is pretty fair. 
• However, if we do see a lower impairment loss moving forward, the target price of Aeoncr would adjust upward accordingly too.
• Overall, to me the core business of Aeoncr remain intact where its NPL is low at 1.42% and asset quality remain stable. Impairment loss on receivable doesnt equal bad debts, therefore, any reversal will boost Aeoncr earnings in the future.