AEON Thana Sinsap

AEON Thana Sinsap Plc (AEONTS)  

 

AEONTS, as with all finance companies, is being hit in the pocketbook by the rule that it can charge a collection fee of just Bt100 – which slices 2% off its FY2015 forecast and 5% in FY2016. To help make up for this, it is pulling the reins on opex and freezing staff counts. It expects the new stimulus package to give it a boost, but its main thrust is into its CLMV ventures. We cut forecast to reflect the lower collection fee and this cuts TP to Bt115, but we still BUY. 

 

Hit by lower debt collection fee income. To comply with new regulations, AEONTS charges a collection fee of just Bt100/month from January this year. It had only recently raised this fee to Bt180/month from Bt100/month in mid-2015. We estimate this will slice 2% off earnings in FY2015F and 5% in FY2016F.   

 

4QFY15 preview. Note that AEONTS is moving its fiscal year end from February 20 to the end of February as of this fiscal year, which means 4QFY15 extended from November 21-February 29. We forecast a rise of 4% YoY and 12% QoQ in 4QFY15 to Bt614mn, with FY2015 essentially flat. The stronger growth of 12% QoQ will come from slightly lower credit cost (on easing NPLs) and opex (on tighter policy). The high-season effect and bonus from end-2015 stimulus (Bt15,000 shopping spree allowed as personal income tax deduction) will offset the cut in debt collection fee.    

 

Tightening opex. We expect opex growth to fall to 8% in FY2016 from 10% in FY2015, thanks to a tighter policy and no more impact from the outsourcing of debt collection in April last year. AEONTS plans to freeze its staff count in FY2016 and has negotiated cost savings with vendors and tightened up on telephone expenses.  

 

Loan growth upside from the new stimulus package. The government has just proposed new consumption stimulus measures: 1) a one-time cash payment of Bt1,000 for over 1mn civil servants in total worth Bt15,000, 2) a Bt15,000 deduction from taxable income for taxpayers who spend on dining, hotels and travel activities (must issue a tax invoice) for the two weeks around April’s Songkran holiday, 3) a hike in minimum wage to Bt360-550/day from Bt300/day in five industries, which is expected to take effect in August. This could provide upside to our 10% loan growth forecast for FY2016F vs. 9% for FY2015F. We maintain our forecast of loan growth recovery to 9% in FY2015F from 7% in FY2014. 

 

Further strides in Cambodia and Myanmar. Last October its Cambodia subsidiary got its Specialized Bank License and will start issuing credit cards this year. The subsidiary in Myanmar can now access bank loans as an alternative to equity after the Myanmar government gave banking licenses to nine foreign banks, which will foster faster expansion. AEONTS targets 10% revenue contribution from its CLMV subsidiaries by FY2020 from ~1% now with a 5-year CAGR of 43%.   

 

Cut TP to Bt115 but maintain Buy. We cut AEONTS’s target price (TP) to Bt115 (2x FY2016F BVPS) from Bt117 as we lower earnings forecast by 2% for FY2015F and 5% for FY2016F to factor in the cut in debt collection fee. We see its valuation as undemanding at 8.6x PER and 1.65x PBV relative to 21% ROE for FY2016 and still Buy, expecting 10% earnings growth in FY2016 as loan growth continues to pick up, opex is tightened and contribution from its CLMV subsidiaries rises.