Budget 2027 measures may ease AEON Credit’s impairment burden

By the Editorial Team · Friday, October 2, 2026

AEON Credit Service (M) Bhd is expected to see a better impairment outlook in the second half of FY27 due to improved debt collection efforts tied to wage-related initiatives and AI-enhanced tele-collections. These developments, alongside steady loan growth and controlled non-performing loans, support Kenanga Research’s “outperform” rating despite a reduced target price and challenges in reaching a 12% ROE.

AEON Credit Service (M) Bhd, a consumer financial services provider, could experience a more favorable impairment outlook driven by improved debt collection efforts linked to wage-related initiatives under Budget 2027, according to Kenanga Research.

The brokerage noted that these measures could strengthen collections and help reduce impairments in the second half of the financial year ending February 28, 2027 (FY27), compared to the same period in the prior year (FY26). Kenanga resumed coverage of AEON Credit with an “outperform” rating but lowered its target price to RM5.60 following the company’s management guidance, which highlighted ongoing challenges in achieving a 12% return on equity (ROE). AEON Credit recorded a 10% ROE in FY26.

Kenanga anticipates loan growth of 8% for FY27, slightly below the 9.1% growth recorded to date, reflecting the company’s tightening efforts. The research firm projects an 11.3% ROE for the period, maintaining the stock’s appeal based on its dividend yield relative to the current share price.

AEON Credit plans to maintain dividend per share (DPS) close to FY26’s 29 sen, equating to a yield of about 6% and offering a margin of safety given a forecasted price-to-earnings ratio of 7.4 for FY27. Kenanga expects a DPS of 30 sen for the year. The company declared an interim dividend of 13 sen for the quarter ended August 31, 2026.

Non-performing loan (NPL) formation has remained under control, with the NPL ratio slightly declining to 2.55% quarter-on-quarter after reaching 2.6% in the first quarter of FY27. Loan-loss coverage rose marginally to 199%, indicating continued prudent management, while delinquency rates prior to NPL classification have been stable.

Operationally, loan growth is maintaining momentum. New loan underwriting increased by 8.4% year-on-year in the second quarter, with outstanding loans up 9.1% year-on-year. Growth was strongest in the payment business segment, expanding 11.3%. The research firm anticipates a 25 basis point increase in the overnight policy rate during 2027.

AEON Credit is also expected to see improved credit quality through the second half of FY27, supported by better management of delinquent loans and enhanced collections using artificial intelligence (AI) technology for tele-collections. AI currently handles about one-third of such activities. Despite cautiousness regarding impairment due to ongoing cost-of-living pressures, the company is benefiting from various revenue and cost-control initiatives that are poised to mitigate credit costs.

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