CIMB Securities downgrades Aeon Credit on deteriorating asset quality

On 93ef84eb-be1, CIMB Securities downgraded Aeon Credit Service's rating to Reduce following below-target earnings in the second quarter. The firm's core net profit for the first half of 2027 grew by just 3.1% year-on-year, reaching RM154.5 million. Analyst Ei Leen Tan explained that the earnings were well below CIMB Securities' own forecast and the market consensus.

The decline was mainly attributable to a 17.9% YoY and 34.1% QoQ drop in Q2FY27 earnings, as well as rising net provisions by 16% and 19% respectively. The Net Credit Cost (NCC) remained high at 501 basis points (bps) in 1HFY27, surpassing management's guidance and their FY27 expectation. The NCC further increased to 538bps in Q2FY27 from 463bps in the prior quarter, indicating continuing asset quality issues despite steps taken to curb receivables migration.

While the gross non-performing loan ratio marginally improved to 2.55% in Q2FY27 from 2.60% in Q1FY27, Tan noted this was largely due to rising receivables, not a true enhancement in asset quality. Aeon Credit's core business showed relative stability, with net financing income up 8.2% YoY, driven by 9.1% rise in gross receivables.

Receivables growth was consistent across segments, including Easy Payment, Personal Financing, and Payment Business. CIMB Securities revised its FY27, FY28, and FY29 earnings forecasts downwards by 22.1%, 21.3%, and 25.5% respectively, after boosting its NCC assumptions to 485bps, 444bps, and 390bps.