AEONCR: Financial Firm Reports Mixed Half-Year Performance, Analysts Maintain ‘Buy’ Rating

A prominent financial services company recently announced its first-half FY26 results, which fell short of market expectations primarily due to higher-than-anticipated impairment allowances. Despite the earnings miss, the company’s operational performance showed signs of resilience, prompting analysts to reiterate a ‘Buy’ recommendation.

In the first half of FY26, the firm recorded a net profit of MYR149.8 million, marking a 16% year-on-year decline. The second quarter contributed MYR72.2 million to this figure, representing a 2% year-on-year increase but a 7% quarter-on-quarter drop. These figures accounted for 40-41% of full-year estimates, indicating a notable deviation.

Performance Review

The key factor behind the earnings shortfall was elevated credit costs, which remained at 5% for the second consecutive quarter in 2QFY26. Gross impairment charges in 2QFY26 amounted to MYR244 million, with write-offs reaching MYR199 million, exceeding management’s target run rate. This surge in credit costs was largely attributed to younger, low-income customers, particularly in the central and southern regions.

Despite these headwinds, the company demonstrated solid operational growth. Pre-provision operating profit (PIOP) rose by 18% year-on-year to MYR614 million, supported by robust income growth of 14% year-on-year and positive JAWs (Cost-to-Income Ratio down 2 percentage points year-on-year to 38%). Gross financing receivables expanded by 15% year-on-year and 4% quarter-on-quarter to MYR15.2 billion, surpassing management’s 10-12% target. This growth was primarily fueled by strong performances in personal financing (+22% YoY) and credit cards (+23% YoY) businesses. Notably, superbike financing volumes surged by 34% quarter-on-quarter and 82% year-on-year due to effective marketing campaigns. Associate losses, however, widened to MYR18 million in 2QFY26, with the 1HFY26 total of MYR34 million tracking below management’s full-year guidance.

Addressing Challenges and Future Outlook

In response to the elevated credit costs, management has implemented several initiatives to enhance collection efficiency. These efforts have already shown positive results, with collection performance improving across all past-due categories since August 2025. The Non-Performing Loan (NPL) ratio eased by 8 basis points quarter-on-quarter to 2.49%, while the Loan Loss Coverage (LLC) remained robust at 228%. Should the strong collections continue into 2HFY26, credit costs are expected to show some improvement.

Analysts have maintained their earnings forecasts for now, acknowledging that risks are tilted towards the downside given the recent miss. The current valuation, with the stock trading near a multi-year low Price-to-Book (P/BV) of around 0.8x, is considered unjustified given the company’s consistent return on equity (ROE) above 10%. Furthermore, attractive dividend yields of 6% and higher present a compelling investment case.