AEONCR: Bottom-line dropped q-o-q

Result Update

For QE20/8/2014, AEONCR's net profit dropped 16% q-o-q but rose 10% y-o-y to RM47 million while revenue increased by 4% q-o-q or 29% y-o-y to RM209 million.

Bottom-line was lower compared to last year due to increased non-performing loans (NPL) ratio of 2.65% (compared to 1.64% last year); higher ratio of total operating expenses against revenue of 59.6% (compared to 55.9% in last year) and higher average funding cost (though no number was given). On the other hand, other incomes rose due to increase in bad debts recovered and AEON Big loyalty programme processing fee. AEONCR’s effective tax rate was higher than the statutory tax rate as certain expenses are not deductible for tax purpose.


Table: Aeoncr's last 8 quarterly results

The jump in operating expenses was fairly substantial, with the ratio of total operating expenses against revenue increased by 3.7 ppts. It caused a bottom-line to hook down in the first graph in the chart below. In the third graph, we can the rate of change for top-line has been declining over the past 3 quarters while the rate of change for profitability has been decreasing steadily for the past 3 years. We could be seeing the tip point for the out-performance in AEONCR, with the capitulation coming in the next few quarters.


Chart 1: Aeoncr's last 29 quarterly results

Valuation

AEONCR (closed at RM16.48 yesterday) is now trading at a PE of 12.2 times (based on last 4 quarters' EPS of 135 sen). At this PE, AEONCR is deemed fairly priced.

Technical Outlook

AEONCR is still in a long-term uptrend line. However, the MACD indicator has hooked down and this may signal a decline in share price in the near term.


Chart 2: Aeoncr's weekly chart as at Sep 19, 2014 (Source: Tradesignum)

 
Chart 3: Aeoncr's monthly chart as at Sep 19, 2014 (Source: Equities Tracker)

Conclusion

Based on good financial performance & attractive valuation, AEONCR is still a good stock for long-term investment. However, the technical outlook shows weakness ahead.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, AEONCR.