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Wednesday, July 05, 2017

AEONCR: Earnings Stayed Strong

Result Update

For QE30/5/2017, AEONCR's net profit dropped 5% q-o-q but rose 21% y-o-y to RM76 million while revenue rose 4% q-o-q or 16% y-o-y to RM302 million. Revenue rose 16% y-o-y due to 17.4%-increase in financing receivables to RM6.669 billion. Other operating income, consisting of bad debts recovered, commission income from sale of insurance products and AEON Big loyalty program processing fees, rose 13% to RM31.16 million. This led to a 21%-increase in PBT as operating costs were well-controlled. For example, funding costs rose 17.7% due to increased borrowings (in line with increased financing receivables); NPL provisions crept up to 2.43% from 2.42% previously; and the ratio of total operating expense against revenue dropped to 58.2% as compared to 60.5% previously, due to higher growth in interest income and corresponding lower increase in operating expenses.


Table: AEONCR's last 8 quarterly results

As noted previously, AEONCR's net profit is at a new "high" territory! Other things to note are profit margin turning up again after a long slide and growth in revenue & profit continue to accelerate.


Graph: AEONCR's last 44 quarterly results

Proposed Capital Exercise

In late March, AEONCR announced a proposal for a Bonus Issue of 1-for-2 plus a Rights Issue of ICULs of 2-for-1 (which may be revised to 3-for-1 in the event the bonus issue is terminated). I highlighted the proposal which led to a price drop - which I rate as a buying opportunity (here). The first leg of this exercise will happen in less than 2 weeks' time. The ex-date of the 1-for-2 bonus issue has been fixed on July 14.

Valuation

AEONCR (closed at RM19.08 yesterday) is now trading at a PE of 10.34 times (based on last 4 quarters' EPS of 183.6 sen). At this PER, AEONCR is deemed fairly attractive. In addition, it pays a decent dividend with DY of 3.3% (based on last year dividend of  63 sen).

Technical Outlook

AEONCR is now at all-time high territory- after it broke above the 2013 high of RM18.80. It's in a descending triangle formation, with support at the lower line of RM19.00 & resistance at the sloping line at RM19.50. An upside breakout will lead to the continuation of the prior uptrend.


Chart 1: AEONCR's monthly chart as at july 4, 2017 (Source: Shareinvestor.com)


Chart 2: AEONCR's daily chart as at july 4, 2017 (Source: Shareinvestor.com)

Conclusion

Based on satisfactory financial performance, fairly attractive valuation, exciting growth prospect, generous bonus issue & positive technical outlook, AEONCR is a good stock for long-term investment.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

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