RHB
10 July 2025
AEON Credit Service (ACSM MK): Better Days Ahead; BUY
Financial Services | Non-Bank Financials
Buy (Maintained)
- Keep BUY, new MYR7.60 TP from MYR8.10, 37% upside with c.6% FY26F (Feb) yield. At AEON Credit Service’s 1QFY26 results briefing, management was optimistic over a slow and steady improvement in credit costs ahead, and is retaining its modest 12% ROE guidance for the year. Although we cut our earnings estimates following the 1Q miss, our new forecasts still indicate decent ROEs of 14-17%, which is higher than management’s target for FY26. As such, we think its current sub-1x P/BV remains attractive.
- Expecting a credit cost recovery in the coming quarters. The near-peak credit cost in 1QFY26 was partly seasonal in nature, reflecting a marginally softer collection ratio for DO customers (ie not past due) due to festivals and public holidays. The seasonal factor should wear off in 2Q, and ACSM is also stepping up collection efforts for such customers through early communication. On the elevated write-offs, we gather that this arose from the personal finance and used car portfolios – management recently revised its credit underwriting criteria for these segments, especially for the younger (ie youths) and lower-income customers. On the whole, management aims to bring the write-off run rate down to c.MYR150m per quarter (1QFY26: MYR192m), while aiming for full-year credit costs to at least match – if not improve upon – the 3.9% recorded in FY25 (1QFY26: 5.0%).
- Digital bank updates. AEON Bank is slated to launch its first business banking propositions in 3QFY26, comprising payroll accounts and cash management solutions among others. Its target market for these products will be merchants currently operating within the AEON Living Zone. Upon its launch, ACSM will migrate payroll accounts to the digital bank, and also direct its existing merchants to utilise the bank’s cash management services as well. Management raised its Year 2 associate losses guidance to MYR80-90m (from flattish YoY vs FY25 numbers), citing the need for acquisition costs and promotions upon the launch of the business banking products.
- Other briefing highlights. After a very strong quarter for receivables growth (partly impacted by seasonality), management sees some healthy moderation ahead, bringing the group closer to its target of 10-12% for the year (1QFY26: +16%). Management is still seeing decent demand for financing on the ground, especially for used car financing, but remains cognisant of external developments potentially affecting living costs. Elsewhere, ACSM is keen to grow in the civil servant salary-deductible financing space, although it intends to avoid the more saturated segments (eg education and healthcare) and focus on areas such as agriculture and fisheries.
- We trim our FY26-28F earnings by 13%, 6% and 6% as we impute higher credit cost and associate loss assumptions. Our TP decreases to MYR7.60, and includes an unchanged 2% ESG premium.
| Target Price (Return): | MYR7.60 (+37%) |
| Price (Market Cap): | MYR5.55 (USD668m) |
| ESG score: | 3.1 (out of 4) |
| Avg Daily Turnover (MYR/USD) | 2.06m/0.47m |
Analysts
Nabil Thoo
+603 2302 8123
nabil.thoo@rhbgroup.com
David Chong, CFA
+603 2302 8106
david.chongvc@rhbgroup.com
Share Performance (%)
| YTD | 1m | 3m | 6m | 12m | |
|---|---|---|---|---|---|
| Absolute | (11.4) | (2.0) | (1.8) | (7.5) | (23.1) |
| Relative | (4.6) | (2.7) | (11.0) | (3.1) | (17.9) |
| 52-wk Price low/high (MYR) | 5.55 – 7.46 | ||||
Forecasts and Valuation
| Feb-24 | Feb-25 | Feb-26F | Feb-27F | Feb-28F | |
|---|---|---|---|---|---|
| Reported net profit (MYRm) | 414 | 371 | 403 | 490 | 587 |
| Net profit growth (%) | 1.6 | (10.5) | 8.6 | 21.7 | 19.8 |
| Recurring net profit (MYRm) | 414 | 371 | 403 | 490 | 587 |
| Recurring EPS (MYR) | 0.81 | 0.73 | 0.79 | 0.96 | 1.15 |
| BVPS (MYR) | 5.17 | 5.55 | 5.94 | 6.52 | 7.21 |
| DPS (MYR) | 0.28 | 0.29 | 0.32 | 0.38 | 0.46 |
| Recurring P/E (x) | 6.84 | 7.65 | 7.04 | 5.79 | 4.83 |
| P/B (x) | 1.07 | 1.00 | 0.93 | 0.85 | 0.77 |
| Dividend Yield (%) | 5.1 | 5.2 | 5.7 | 6.9 | 8.3 |
| Return on average equity (%) | 16.7 | 13.6 | 13.7 | 15.4 | 16.7 |
Overall ESG Score: 3.1 (out of 4)
E Score: 2.7 (GOOD)
S Score: 3.0 (GOOD)
G Score: 4.0 (EXCELLENT)
Please refer to the ESG analysis on the next page
Emissions And ESG
Trend analysis
ACSM’s FY25 Scope 1 and 2 GHG emissions rose slightly YoY due to lower offsets from renewable sources (eg renewable energy certificates) – total gross Scope 1 and 2 emissions (ie excluding offsets) declined 12% YoY.
| Emissions (tCO2e) | Feb-23 | Feb-24 | Feb-25 | Feb-26 |
|---|---|---|---|---|
| Scope 1 | 172 | 200 | 57 | na |
| Scope 2 | 2,295 | 1,440 | 1,601 | na |
| Scope 3 | – | – | 3,603 | na |
| Total emissions | 2,467 | 1,640 | 5,261 | na |
Latest ESG-Related Developments
Disclosing Scope 3 emissions: In its FY25 sustainability statement, ACSM began disclosing its Scope 3 GHG emissions, ie emissions from business travel and employee commuting.
Second-year review of sustainability-linked loans performance: It is currently auditing the performance of its sustainability-linked loans (MYR600m obtained in Apr 2023), with the amount disbursed and carbon emissions reduction being the key metrics measured.
Enters FTSE4Good Index: ACSM was one of 28 new additions to the FTSE4Good Bursa Malaysia index in the Dec 2024 semi-annual review.
ESG Unbundled
Overall ESG Score: 3.1 (out of 4)
Last Updated: 9 Jul 2025
E Score: 2.7 (GOOD)
In FY25, ACSM’s Scope 1 and 2 GHG emissions declined by 29% against the FY22 baseline – in line with the group’s target of bringing GHG emissions down by 25% by FY25 and 40% by FY26. In FY25, it also began disclosing Scope 3 emissions, comprising emissions from business travel and employee commuting for now. ACSM’s emissions data is independently assured by KPMG.
S Score: 3.0 (GOOD)
ACSM promotes inclusive finance, where all segments of society have convenient access to suitable and affordable financial services. Such services provide opportunities for Malaysians, including the lower-income segment (B40). The group is also actively promoting the adoption of green mobility options (eg electric motorcycles) to mitigate customers’ and its own carbon footprint.
G Score: 4.0 (EXCELLENT)
The Board currently consists of 11 members, of which six are independent directors. The Board is well represented by individuals from diverse geographies and professional fields ie financial services, law, finance and accounting etc.
Financial Exhibits
Valuation basis
Our GGM assumptions include:
i. COE of 12.5%;
ii. 15.5% ROE;
iii. 3.5% long-term growth.
Key drivers
Our forecasts are most sensitive to:
i. Financing receivables growth;
ii. Impairment allowances;
iii. Interest margins.
Key risks
Downside risks to our forecasts include:
i. Weaker-than-expected receivables growth;
ii. Higher-than-expected impairment allowances;
iii. Weaker-than-expected margins.
Company Profile
AEON Credit Service operates a micro-financing business in Malaysia that provides easy payment schemes, personal financing and credit card facilities.
Financial summary (MYR)
| Feb-24 | Feb-25 | Feb-26F | Feb-27F | Feb-28F | |
|---|---|---|---|---|---|
| EPS | 0.81 | 0.73 | 0.79 | 0.96 | 1.15 |
| Recurring EPS | 0.81 | 0.73 | 0.79 | 0.96 | 1.15 |
| DPS | 0.28 | 0.29 | 0.32 | 0.38 | 0.46 |
| BVPS | 5.17 | 5.55 | 5.94 | 6.52 | 7.21 |
Valuation metrics
| Feb-24 | Feb-25 | Feb-26F | Feb-27F | Feb-28F | |
|---|---|---|---|---|---|
| Recurring P/E (x) | 6.84 | 7.65 | 7.04 | 5.79 | 4.83 |
| P/B (x) | 1.1 | 1.0 | 0.9 | 0.9 | 0.8 |
| Dividend Yield (%) | 5.1 | 5.2 | 5.7 | 6.9 | 8.3 |
Income statement (MYRm)
| Feb-24 | Feb-25 | Feb-26F | Feb-27F | Feb-28F | |
|---|---|---|---|---|---|
| Interest income | 1,696 | 1,966 | 2,211 | 2,433 | 2,631 |
| Interest expense | (359) | (425) | (483) | (529) | (573) |
| Net interest income | 1,337 | 1,541 | 1,728 | 1,904 | 2,058 |
| Non interest income | 228 | 244 | 253 | 266 | 279 |
| Total operating income | 1,565 | 1,784 | 1,981 | 2,170 | 2,336 |
| Overheads | (597) | (692) | (778) | (838) | (903) |
| Pre-provision operating profit | 968 | 1,092 | 1,204 | 1,332 | 1,433 |
| Loan impairment allowances | (386) | (510) | (569) | (609) | (622) |
| Income from associates | (17) | (68) | (80) | (60) | (30) |
| Pre-tax profit | 565 | 514 | 555 | 663 | 782 |
| Taxation | (151) | (143) | (152) | (174) | (195) |
| Reported net profit | 414 | 371 | 403 | 490 | 587 |
| Recurring net profit | 414 | 371 | 403 | 490 | 587 |
Profitability ratios
| Feb-24 | Feb-25 | Feb-26F | Feb-27F | Feb-28F | |
|---|---|---|---|---|---|
| Return on average assets (%) | 3.5 | 2.7 | 2.7 | 3.0 | 3.3 |
| Return on average equity (%) | 16.7 | 13.6 | 13.7 | 15.4 | 16.7 |
| Return on IEAs (%) | 14.6 | 14.7 | 14.6 | 14.6 | 14.6 |
| Cost of funds (%) | 4.1 | 4.2 | 4.3 | 4.3 | 4.3 |
| Net interest spread (%) | 10.5 | 10.5 | 10.3 | 10.3 | 10.3 |
| Net interest margin (%) | 11.5 | 11.5 | 11.4 | 11.4 | 11.4 |
| Non-interest income / total income (%) | 14.5 | 13.6 | 12.8 | 12.2 | 11.9 |
| Cost to income ratio (%) | 38.1 | 38.8 | 39.2 | 38.6 | 38.7 |
| Credit cost (bps) | 335 | 387 | 380 | 370 | 350 |
Balance sheet (MYRm)
| Feb-24 | Feb-25 | Feb-26F | Feb-27F | Feb-28F | |
|---|---|---|---|---|---|
| Total gross loans | 12,232 | 14,120 | 15,814 | 17,080 | 18,446 |
| Other interest earning assets | 172 | 190 | 213 | 224 | 235 |
| Total gross IEAS | 12,404 | 14,310 | 16,027 | 17,303 | 18,681 |
| Total provisions | (696) | (778) | (969) | (1,174) | (1,360) |
| Net loans to customers | 11,536 | 13,342 | 14,845 | 15,906 | 17,086 |
| Total net IEAS | 11,708 | 13,532 | 15,058 | 16,129 | 17,321 |
| Total non-IEAS | 912 | 812 | 588 | 782 | 991 |
| Total assets | 12,620 | 14,344 | 15,646 | 16,912 | 18,312 |
| Other interest-bearing liabilities | 9,405 | 10,783 | 11,862 | 12,811 | 13,836 |
| Total IBLs | 9,405 | 10,783 | 11,862 | 12,811 | 13,836 |
| Total non-IBLs | 578 | 728 | 751 | 773 | 797 |
| Total liabilities | 9,983 | 11,512 | 12,612 | 13,584 | 14,633 |
| Share capital | 584 | 584 | 584 | 584 | 584 |
| Shareholders’ equity | 2,638 | 2,832 | 3,034 | 3,327 | 3,679 |
Asset quality and capital
| Feb-24 | Feb-25 | Feb-26F | Feb-27F | Feb-28F | |
|---|---|---|---|---|---|
| Reported NPLs / gross cust loans (%) | 2.6 | 2.6 | 2.5 | 2.4 | 2.3 |
| Total provisions / reported NPLs (%) | 221.6 | 208.8 | 245.1 | 286.4 | 320.5 |
Earnings forecasts
We lower FY26, FY27 and FY28 earnings forecasts by 13%, 6% and 6% to factor in:
- Higher credit costs of 3.8% for FY26F, reflecting a slight drop from the 3.9% recorded in FY25. This matches with management’s latest guidance;
- Wider associate losses of MYR80m for FY26F, in line with management’s updated guidance. Our FY27-28F associate loss assumptions remain unchanged;
- Slightly higher receivables growth of 12% (from 10%) for FY26F, given the strong 1QFY26 position. Management had mentioned that it is comfortable with 10-12% receivables growth for the year, despite having a c. 10% formal guidance.
Figure 2: ACSM – revisions to earnings forecasts
| FYE Dec (MYRm) | Previous FY26F | Previous FY27F | Previous FY28F | Revised FY26F | Revised FY27F | New FY28F | Change FY26F | Change FY27F | Change FY28F |
|---|---|---|---|---|---|---|---|---|---|
| Net interest income | 1,707 | 1,861 | 2,011 | 1,728 | 1,904 | 2,058 | 1% | 2% | 2% |
| Non-interest income | 253 | 266 | 279 | 253 | 266 | 279 | 0% | 0% | 0% |
| Operating expenses | (778) | (838) | (903) | (778) | (838) | (903) | 0% | 0% | 0% |
| PIOP | 1,183 | 1,289 | 1,386 | 1,204 | 1,332 | 1,433 | 2% | 3% | 3% |
| Impairment charges | (494) | (522) | (529) | (569) | (609) | (622) | 15% | 17% | 18% |
| Associates | (60) | (60) | (30) | (80) | (60) | (30) | 33% | 0% | 0% |
| Pretax profit | 629 | 707 | 828 | 555 | 663 | 782 | -12% | -6% | -6% |
| Net profit | 464 | 523 | 622 | 403 | 490 | 587 | -13% | -6% | -6% |
| Headline EPS (MYR) | 0.91 | 1.02 | 1.22 | 0.79 | 0.96 | 1.15 | -13% | -6% | -6% |
| DPS (MYR) | 0.36 | 0.41 | 0.49 | 0.32 | 0.38 | 0.46 | -13% | -6% | -6% |
| Loan growth (%) | 10.0 | 8.0 | 8.0 | 12.0 | 8.0 | 8.0 | 2.0ppts | 0.0ppts | 0.0ppts |
| CIR (%) – derived | 39.7 | 39.4 | 39.5 | 39.2 | 38.6 | 38.7 | -0.4ppts | -0.8ppts | -0.8ppts |
| Credit cost (%) | 3.3 | 3.2 | 3.0 | 3.8 | 3.7 | 3.5 | 0.5ppts | 0.5ppts | 0.5ppts |
Valuation and TP
Our GGM-derived TP of MYR7.60 (from MYR8.10) is based on a lower P/BV of 1.16x (from 1.34x). Changes to our GGM model include:
- A lower ROE assumption of 14.5% (from 15.5%) in line with our forecast changes;
- A higher COE assumption of 13.0% (from 12.5%) to account for the earnings risk, should credit costs remain higher for longer;
- A higher BVPS of MYR6.42 (from MYR5.94) as we rolled forward our valuation year to CY26F.
At below 1x P/BV, we think ACSM’s valuation is unjustified – especially against its consistent ROE generation of >13%, and our forecasted 14-17% for FY26-28. Our 17% FY26-28F earnings CAGR is premised on continued receivables growth strength, moderating credit costs, and narrowing associate losses.
Figure 3: ACSM – GGM valuation with ESG overlay
| Cost of equity (COE) computation: | Sustainable ROE (%) | 14.5 | |
| Risk free rate (%) | 4.0 | COE (%) | 13.0 |
| Equity premium (%) | 7.5 | Long-term growth (g) | 3.5 |
| Beta (x) | 1.2 | Implied P/BV (x) | 1.16 |
| Cost of equity – CAPM (%) | 13.0 | BVPS – CY26F | MYR6.42 |
| Intrinsic value | MYR7.47 | ||
| ESG premium/(discount) (%) | 2 | ESG premium/(discount) | MYR0.15 |
| TP (rounded) | MYR7.60 |
| Date | Recommendation | Target Price | Price |
|---|---|---|---|
| 2025-07-09 | Buy | 8.10 | 5.55 |
| 2025-04-08 | Buy | 8.10 | 5.79 |
| 2024-12-19 | Buy | 8.00 | 6.10 |
| 2024-09-29 | Buy | 8.40 | 7.05 |
| 2024-07-12 | Buy | 8.80 | 7.45 |
| 2024-04-12 | Buy | 7.90 | 6.95 |
| 2024-04-09 | Buy | 7.00 | 6.72 |
| 2023-12-25 | Buy | 7.00 | 5.62 |
| 2023-12-12 | Buy | 7.00 | 5.65 |
| 2023-08-15 | Buy | 7.00 | 5.91 |
| 2023-07-12 | Buy | 7.00 | 5.59 |
| 2023-07-11 | Buy | 7.30 | 5.58 |
| 2023-04-25 | Buy | 7.45 | 5.99 |
| 2023-04-11 | Buy | 7.60 | 5.96 |
| 2022-10-27 | Buy | 7.60 | 6.65 |
RHB Guide to Investment Ratings
| Buy: | Share price may exceed 10% over the next 12 months |
| Trading Buy: | Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain |
| Neutral: | Share price may fall within the range of +/- 10% over the next 12 months |
| Take Profit: | Target price has been attained. Look to accumulate at lower levels |
| Sell: | Share price may fall by more than 10% over the next 12 months |
| Not Rated: | Stock is not within regular research coverage |
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(1) they do not have any financial interest in the securities or other capital market products of the subject companies mentioned in this report, except for:
| Analyst | Company |
|---|---|
(2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
Contact Information
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