ACSM: Financial Firm Anticipates H2 Recovery Amidst Revised Forecasts, Maintains BUY Rating

RHB has maintained its BUY recommendation on the financial services firm, setting a revised Target Price of MYR6.70 (previously MYR7.60), which still indicates a 21% upside from its last traded price of MYR5.53. This outlook comes as the firm anticipates a recovery in the second half of FY26 (2HFY26), driven primarily by an expected improvement in credit costs.

Performance Review and Drivers

During its 2QFY26 results briefing, management highlighted that better credit costs in 2HFY26 are expected to be the key driver to lift Return on Equity (ROE) to its target level of 12%, a notable improvement from the 10.5% recorded in 1HFY26. This positive shift is supported by stronger collection ratios observed in July and August 2025, which are a direct result of targeted initiatives to enhance collection productivity.

The projected improvement in credit costs for 2HFY26, estimated at 3.5% (down from 5.0% in 1HFY26), stems from two main factors: improved recoveries and/or reversal from accounts that became impaired between April and June 2025, and a reduction in slippages from performing accounts. Despite these positive developments in credit cost trajectory, the overall FY26 credit cost assumption has been adjusted upwards to 4.3% from the previous 3.8%.

Challenges and Forecast Revisions

Despite the optimistic outlook for 2HFY26, earnings forecasts for FY26F-28F have been cut by 13%, 11%, and 12% respectively. This revision primarily factors in higher credit cost assumptions, ranging from 0.4 to 0.5 percentage points annually. Another challenge noted is that operational losses from the firm’s nascent digital bank are projected to peak in FY26, with guidance for the firm’s share at MYR80-90m (compared to MYR34m in 1HFY26). An uncertain credit cost trajectory remains a key risk to the investment thesis.

Strategic Initiatives and Future Outlook

The firm continues to advance its digital banking initiatives. In early August 2025, Aeon Bank launched its initial business banking products, including current accounts and cash management solutions, and has successfully onboarded over 180 customers, mostly existing merchants. The ambitious target is to reach 1,000 customers by February 2026. Several new product launches are slated for later in 2025 and 2026, including working capital and term financing for businesses, business term deposits, and supply chain financing. From FY27F onwards, the digital bank’s strategic focus is expected to shift towards asset gathering from product rollouts, which should bolster financing income.

In a move to reinforce its commitment to social responsibility and market penetration, the firm undertook a MYR500m social loan on September 29, 2025. The proceeds are specifically earmarked to extend financing to underserved communities, such as lower-income households and small businesses in new growth areas, complementing a MYR600m sustainability-linked loan obtained in April 2023.

Investment Rationale

The investment bank maintains its BUY rating, highlighting the firm’s attractive sub-1x P/BV valuation, especially given the potential for narrowing associate losses from FY27F onwards. While the target price has been adjusted downwards, the anticipated 2HFY26 recovery and ongoing strategic initiatives underscore the firm’s long-term growth potential.