Published June 4, 2009

ACSM bucks earnings trend with 46% jump

Credit services firm posts double-digit growth in all core business segments

By PAULINE NG
IN KUALA LUMPUR

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CONSUMER spending may have tightened because of the global recession, but one consumer financier has managed to persuade its patrons to loosen their purse strings.

As a result, Malaysian stock exchange listed Aeon Credit Service (ACSM) has bucked the earnings trend, in its fiscal year to end February, posting a 46 per cent increase in net profit to nearly RM49 million (S$20.3 million) from RM33.4 million the year before.

While the earnings of most other firms drooped along with an economy which contracted 6.2 per cent in the first quarter, ACSM's fourth quarter profit rose 21 per cent from a year ago. In the past five years, its profits have seen a consecutive increase, as have sales which hit RM187 million in the year just ended.

Analysts said its 'solid' results included net profit exceeding market expectations by about 8 per cent, but also double-digit growth in all its core business segments. Noticeably, they were achieved without compromising its non-performing loans.

In addition to issuing credit cards, ACSM - majority owned by Japan's Aeon Credit Service Co - offers easy payment and personal financing schemes.

In motorbike-dense Malaysia, its motorcycle easy payment (MEP) scheme has proven a big sell, the segment continuing to be a strong contributor to operating income and expanding by 30 per cent last fiscal year.

Financial adviser iCapital believes ACSM benefited from high crude palm oil prices. Because the income of settlers in Felda schemes - the Federal Land Development Agency tasked with re-settling thousands under land development projects on palm oil and rubber plantations - were buoyed by soaring commodity prices, many bought motorcycles under the company's MEP.

But other areas also delivered. In the general easy payment segment, its sales grew 17 per cent as consumers bought 'necessity items' including laptops, computers and household products.

Proving a match to more established banks, growth in its credit card and personal financing segments also expanded by about a fifth and ACSM now boasts some 117,000 credit card members.

That its improved results were achieved without impairing its non-performing loans was noteworthy, the analysts said, especially since its NPL ratio was in fact reduced to 1.87 per cent from 2.15 per cent previously.

Funding costs were also pared to an average of 4.61 from 4.86 per cent in FY08.

iCapital expects new products and services such as an Internet transactions portal - plus a network expansion of branches and service centres to further broaden ACSM's revenues.

Its leverage on the popularity of Jusco - a group member and hypermarket chain that continues to expand locally - would further enhance transactions, iCapital added in its latest client newsletter, recommending the stock a buy.

At RM2.93, it is trading at single-digit price earnings. Stockbroker Hwang- DBS-Vickers agrees. Besides its resilient business and innovation, it noted ACSM remains attractive for its 25 per cent return on equity and prospective net dividend yield of 6 per cent.