AEON Credit Service (M) Bhd ("AEONCr") is involved in the provision of personal financing schemes, easy payment schemes and credit cards. For more, go here.
Recent Corporate Development
In March AEONCr has set up a subsidiary in India which will involve in the same business. The establishment of this new company is a precursor to AEONCr's expansion plan in Asia. For more, go here.
Recent Financial Results
Based on the latest results for QE20/2/2011, AEONCr's financial performance is deemed satisfactory. Its top-line & bottom-line have both increased steadily over the past 3 quarters.
Table 1: AEONCr's last 8 quarterly results
Chart 1: AEONCr's last 15 quarterly results
Financial Position
As at 20/2/2011, EONCr's current ratio is satisfactory at 2.51 times. While debts to equity ratio appears high at 2.95 times, AEONCr should not be measured in the same matrix as a normal trading or manufacturing company. It is a financial services company which needs to leverage to earn a decent return. A good comparison would be RCECap which has a debt to equity ratio of 2.84 times as at 31/12/2010. Based on this, I believe AEONCr's financial position as at 20/2/2011 is deemed acceptable.
Valuation
AEONCr (closed at RM4.10 yesterday) is trading at a PE of 7.8 times (based on last 4 quarters' EPS of 52.86 sen). This PE multiple appears high when compared to the PE of RCECap of about 3.5 times only. However, AEONCr may duplicate its success in Malaysia by setting up similar operation in other part of Asia. The first such set-up will be in India.
Technical Outlook
AEONCr may have broken above its downtrend line at RM3.90 on April 12. Since then, AEONCr has broken above the strong horizontal resistance at RM3.97-3.99 as well as tested its recent high of RM4.14. If AEONCr can break above the horizontal resistance at RM4.14-4.16, the stock could commence on its next upleg. Failure to do could lead to a mild correction akin to the formation of the 'handle' in a chart pattern called the 'cup with handle'. Subsequent upside breakout above the RM4.14-4.16 would lead to a bullish breakout that would be good for trading BUY.
Chart 2: AEONCr's weekly chart as at April 19, 2011 (Source: Quickcharts)
Conclusion
Based on good financial performance & fairly positive technical outlook, AEONCr could be a good stock for medium-term investment. While its valuation is less attractive than RCECap, this could be justified by its close tie with its parent company, AEON (one of my largest departmental store cum supermarket) and its exciting plan to expansion to the rest of Asia.
4 comments:
The wonder is Aeon credit have progressively increase dividend payout in tandem with increasing EPS. Its dividend yield of more than 7% is one the the highest yield in financial stock.
Hi Alex, what is ur view on RCECap now- Buy, hold or sell?
Hi st
RCECap is quite attractive as it is trading at a PE of 3.5 times. Why is it trading at such low PE? Could it be that it may encounter credit or collection problem? Could it be the concern about a margin squeeze in an environment of rising interest rate ahead?
Technically speaking, RCECap is in a gradual downtrend. It may see support at the psychological level of RM0.50 and the horizontal line at RM0.47-0.48. Its immediate resistance is at the horizontal line of RM0.55-0.56.
Hi hng,
You are right. AEONCr pays a decent dividend.
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