Has AEON Credit reached its bottom? Time to scoop?

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Apr 25 2008
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AEON Credit Services (M) Berhad was listed on 12th Dec 2007. No, it’s not a loan shark one-stop financial shop for you to borrow money without any collateral because the conventional bank won’t lend you any. It’s also not a financial institution comparable to banks. But AEON Credit is in the business of offering personal finances and with over 89,000 credit card customers, who can blame you for mistaken this company as another bank. This company is perhaps the only non-banking company that gotten license to operate in such a manner.

AEON Credit ServicesAEON Credit (KLSE: AEONCR, stock code 5139), a subsidiary of AEON Credit Japan, specializes in niche SMEs (small and medium-sized enterprises) market serving the non-popular segment otherwise ignored by banks. Product financing for consumers in the RM1,000 to RM5,000 bracket and less than RM50,000 for SMEs are their focus. This includes electrical items, gold, jewellery, office furniture and so on. Currently, it has 26 branches, 13 of which are customer-service outlets known as AEON-Spots that are set up mainly in shopping centers.

AEON Credit’s Fundamental

For financial year 2008 ended Feb, the company posted a 69.5 percent jump in net profit to RM33.4 million – about 9.5% higher that its forecasted earnings of RM30.5 million stated in its listing prospectus. Revenue jumped 30.8% to RM151.8 million and EPS (earnings per share) increased by 7.63 sen to 32.65 sen. The three main revenue product segments are easy payment schemes, personal financing schemes and credit cards which contributed 30%, 43% and 29% annual growth respectively.

AEON Credit RevenueAEON Credit Net ProfitIn tandem with the good result, the company proposed a final dividend of 7.44 sen per share, less 26% tax for FY08 – a 34 percent payout ratio. Earlier, the company planned to pay at least 30 per cent of net profit as dividend in fiscal year 2008, estimated at 7.63 sen gross per share. Thus translates into a gross dividend yield of 3.05 percent based on IPO price of RM2.50 or 2.27 percent based on today’s closing stock price of RM3.36 a share.

With average net earnings annual growth of 67 percent since 2001, the fundamental of AEON Credit deserves some shouting, don’t you think?

What does AEON’s technical chart says?

Since it’s listing, the stock has seen consistent profit-taking inline with the local stock market weakness that saw the Composite Index plunged from the high of 1,524 (middle of Jan 2008) to 1,296 on 7th Mar 2008 before a huge gap-down due to 12th general election result. Fortunately AEON Credit was well supported at RM3.00 a share and didn’t follows KLCI during the 8th Mar 2008’s crash.

AEON Credit stock chartSince then the stock has been slowly climbing to the current RM3.30+ level, just inches away from the resistance of RM3.40 a share. Above RM3.40 the stock is expected to rock & roll. If you wish to buy at below RM3.00, then you got to have tons of patience although I’m not sure if it will happens again in the near future considering the daily transaction is exceptionally low.

So, has AEON Credit reached its bottom and is actually on its way up? I wish I’ve the crystal ball but I would think the downside is pretty much limited. You can’t buy at the lowest silly, if that’s what you’re wondering.

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