Business

Monday August 24, 2009

AEON Credit gains on cash-to-credit shift

By ELAINE ANG


The company’s business is growing despite the economic slowdown

KUALA LUMPUR: The current economic downturn, which has put many companies in the red, seems to have an opposite effect for AEON Credit Service (M) Bhd so far.

The locally-incorporated Japanese consumer finance provider turned in a commendable performance despite the challenging environment with a 46% jump in net profit to RM48.7mil for the financial year ended Feb 20 (FY09) versus FY08 while revenue rose 23.1% to RM186.9mil.

Business also grew in the first quarter ended May 20 with an increase of 20.4% in net profit to RM12.2mil versus the previous corresponding quarter while revenue improved 21.8% to RM51.5mil.

Managing director Naruhito Kuroda expects revenue in FY10 to experience double-digit growth albeit slightly lower than the 23.1% achieved in FY09 with bottom line following the same trend.

»Our aim is to keep NPLs below 2%« NARUHITO KURODA

“The trend in consumer spending has changed from cash to credit since last year and this is good, especially for our easy-payment scheme and credit card businesses.

“Our merchants have also migrated their focus or marketing strategy from cash to credit. They have recorded double-digit growth in the past few months by providing such options to consumers,” he told StarBiz.

Kuroda is also upbeat that the upcoming festive season, including Hari Raya, Christmas and Chinese New Year, will help boost the group’s business in its second half.

“The outlook for the company is good. We are very positive about our financials,” he said.

HwangDBS Vickers Research Sdn Bhd expects AEON Credit to register a 16.1% growth in net profit to RM56.6mil year-on-year in FY10.

This would be driven mainly by the recognition of interest income from new receivables of RM959mil as well as unearned interest of RM190mil carried forward from FY09.

“After registering a three-year net profit compounded annual growth rate of 53% between FY06 and FY09, AEON Credit’s future growth momentum, while still on the increase, is expected to come in slower due to the high base effect,” it noted.

Despite the focus on growing the business, Kuroda pointed out that the group was also more prudent in giving out financing to its customers in current economic conditions.

Non-performing loans (NPLs) in FY09 were 1.87% but were slightly lower at 1.85% in the first quarter ended May 20.

“Our aim is to keep NPLs below 2% and we do not expect to see any spike in the numbers.

“It should still be manageable as our easy-payment business consists of financing small-ticket items, such as consumer durables and motorcycles, with low monthly instalments ranging from RM80 to RM150 per month, so payment should still not be much of a problem,” he said.

However, Kuroda admitted that NPLs were higher for its credit card business but “was still manageable”.

AEON Credit has also put plans into gear to expand its product range. It plans to introduce new card products, such as a prepaid card and loyalty point card, next year.

“We also aim to expand the easy-payment business to include used-car financing. We have started testing the market in the Klang Valley with five used-car dealers last year.”

Financing is up to RM50,000 and total receivables for used-car financing so far is about RM2mil.

“We may be more aggressive next year once we have a better idea of NPLs, credit recovery and demand trends for such financing,” Kuroda said, adding that the group was not in direct competition with financial institutions as it focused on smaller loan amounts.

AEON-Biz, which offers product financing such as for computer systems and copiers for small and medium enterprises, is another new area for the group.

AEON Credit started the business a year ago with a financing limit of up to RM50,000.

“It is still in the testing stage but there is potential for such business. We just need to create more awareness that we are offering such financing,” Kuroda said.

Plans are also under way to open new branches in Segamat, Setiawan, Taiping, Temerloh, Sungai Petani, Sibu and Sandakan to expand its network to smaller towns and cities to cater to a wider group of consumers.

Each branch is estimated to cost RM500,000. The group plans to open two branches in FY10 and another five in FY11.

AEON Credit, which now has 125,000 credit card members, aims to grow this figure to 180,000 by FY10 and 350,000 by FY12.

It is targeting card members (credit cards, express cards, loyalty point cards and prepaid cards) to grow to over two million within three years.

Kuroda aims to achieve this via tie-ups with partners, collaboration with sister company AEON Co (M) Bhd as well as improving the benefits and services offered to customers.

AEON Co currently has a J-Card member base of about 850,000.

 
AEONCR :  [Stock Watch]  [News]


For latest Bursa Malaysia indices, charts and other information click here

  • E-mail this story
  • Print this story