AEONCR has just released its Q3-FY2026 report. Indeed, it is an encouraging set of financial result as compared to its Q1 and Q2 results reported earlier. Earlier, the Management has insisted that the 2nd half of FY2026 would be better in terms of financial performance.
As quoted from source: https://theedgemalaysia.com/node/767216
Maeda said stricter underwriting is already yielding results, with early signs of improved repayment collections. However, the consumer financier's near-term earnings are expected to remain under pressure due to elevated credit costs.
"Q2 (second quarter) is still challenging, but from Q3 and Q4 our performance will be better," he told The Edge after the signing ceremony between AEON Credit and its sister company AEON Co (M) Bhd on Tuesday to establish a joint venture (JV) entity.
Indeed, it happened. The year-to-date (YTD), or 9M-FY2026 net profit is ~RM242M, vs RM 240M reported in 9M-FY2025, a marginal increase of < 1%.
Figure 1: Quarter result Q3-FY2026 of AEONCR
AEONCR was once a darling for many investors before Covid. It has recorded uninterrupted net profit growth from 2011-2019, see Figure 2 below:
Figure 2: Historical net profit of AEONCR
However, after Covid, the net profit seems a bit bumpy, which I believe it is due to two reasons:
(1) Huge impairment loss and write-off. Since FY2024, AEONCR has been very aggressive in expanding its loan book as shown in Figure 3. This can be witnessed from the relatively high growth of its gross financing receivable during that period. Unfortunately, the write-off is stubbornly high as well (see Figure 4 below). Since Q1-FY2024, the percentage of write-off on financing receivable is above 1.2% of total gross receivable consistently. According to the Management, the high write-off is coming from youths (< 25 years) and low-income customer category. Thankfully, there is a sign of down trending of the percentage recently.
Figure 3: Quarter gross financing receivable (in billion) of Aeon Credit
Figure 4: Historical percentage of write-off from the gross financing receivable of Aeon Credit
(2) Loss from Aeon Bank. Since Q4-FY2024, the loss of Aeon Bank (associate of Aeon Credit where it holds 50% of stake in Aeon Bank) has been included in the income statement of AEONCR. A lot of peoples argued that this is the main reason dragging the net profit of AEONCR. However, if we look at the quarterly loss of Aeon Bank contributed to AEONCR, it hovers between RM 12 million – RM 22 million. On the other hand, the quarterly write-off declared is ranging between RM170 million – RM 200 million. Therefore, I strongly believe that the recent underperformance of Aeon Credit is mainly due to the huge quarterly write-off. Nevertheless, AEON Credit also indicated that AEON Bank is unlikely to achieve profitability before FY2029, in line with a previous guidance stating it projected losses to peak in FY2026, ease in FY2027 and break even in FY2028. (Source: https://theedgemalaysia.com/node/761238)
Hopefully, AEONCR could report better profit thereafter.
How AEONCR safeguard its asset quality?
Firstly, from the quarterly presentation Q3-FY2026 of AEONCR, the financing volumes coming from (a) Easy Payment and (b) Personal Financing segments have declined QoQ. But fear not, it is the strategic shift of AEONCR toward higher-quality asset portfolio acquisition, focusing on customers with good credit scores. So, I guess the youth (<25 years) and low-income groups that have been causing huge impairment loss/write-off mentioned earlier are mainly coming from the Easy Payment and Personal Financing business segments. The Management has started to get more prudent in lending in these two segments, in other words.
Figure 5: Performance of various business segments of AEONCR
Secondly, it seems that the collection performance has improved since July 2025. This would help reducing the impairment loss/write-off in the future.
Figure 6: Collection ratio of AEONCR
Valuation?
Again, I am using the 5-years averaged PER to derive the fair PER value of AEONCR. However, instead of taking the PER values from the most recent 5 years directly, I only pick the PER value of the year that the reported profit has experienced year-on-year growth. The most recent 5 years that fit to my criterion are 2018-2019, and 2022-2024. Based on these 5 PER values, the mean and median values are computed and it is found that they are quite similar, i.e. ~ 9.6.
As on 22 Dec 2025, the share price is around RM5.65. Considering the rolling 4Q EPS of RM0.73, the current PER is 7.74. The Margin of Safety (MOS) is around 24%. If the business of AEONCR is improving, I believe it would deserve a higher PER. Then, the Davis Double Play effect would emerge, pushing the share price to a higher level.
One thing to take note. The upcoming quarter result Q4-FY2026 could be weaker than that of Q4-FY2025 as the latter has booked in a relatively huge write-back of 88 million (vs 50 million in Q3-FY2026). If it occurs, the share price might dip again as short-sighted investors might lock in profit/cut loss. Long-term investors may accumulate the share at a cheaper price then.
Figure 7: Historical PER and net profit of AEONCR
No comments:
Post a Comment