Financial Performance and Strategic Shift at AEON Credit Service (M) BHD

AEON Credit Service (M) BHD (ticker AEONCR) has recently reported a notable rise in first‑quarter earnings for the fiscal year ending 28 February 2027, with net profit reaching RM 95.16 million, a 22.7 % increase from the previous year’s RM 78.43 million. The company’s earnings were driven by a steady expansion in loan and financing volumes, as well as a reduction in operating‑expense pressure relative to revenue.

1. Earnings Growth Amid Loan Expansion

  • Net profit: RM 95.16 million (up 22.7 % YoY).
  • Revenue: RM 647.57 million, a 7.9 % increase YoY.
  • Pre‑tax profit: RM 130.88 million, up 20 % YoY.
  • Total loan and financing: 4.6 % increase YoY.

The incremental earnings are largely attributable to a stable performance in the loan and financing portfolio, which has grown by 4.6 % in the first quarter. This growth, coupled with a decline in the ratio of operating expenses to revenue, has helped offset the rise in credit‑related costs associated with increasing receivables.

2. Credit‑Risk Management and Non‑Performing Loans

AEON Credit has acknowledged a modest rise in its non‑performing loan (NPL) ratio, which increased by three basis points to 2.60 % at the end of May 2026. The firm attributes this to broader economic pressures—particularly the cost of living—that have affected certain customer segments, especially younger and lower‑income borrowers.

In response, the company has implemented corrective measures to curb the upward trend in bad loans. Despite the NPL rise, AEON Credit maintains a healthy loan‑loss coverage ratio of 195 %, down from 217 % in the same period last year but still comfortably above industry norms. The firm’s loan‑loss provisions have been adjusted accordingly, ensuring that the company remains well‑positioned to absorb potential credit losses.

3. Strategic Refocusing of the Loan Portfolio

After a “painful learning period” characterized by heightened accounts receivable and bad‑debt write‑downs over the past three years, AEON Credit is re‑orienting its lending strategy. The company is shifting its growth focus from high‑risk, high‑yield products toward a more disciplined portfolio of lower‑overdue customers.

Analysts at Lien‑Chang International Securities forecast that a decline in write‑downs will be a key driver of profitability improvement in the second half of FY 2027. Their model projects a core net‑profit growth of 24.7 % for the full year, aligning with market consensus and the company’s own guidance.

4. Market Reaction

The first‑quarter results have been well received by investors. AEON Credit’s stock closed at RM 5.85 million on 10 July 2026, reflecting a 7 sen (1.21 %) lift from the previous day’s close of RM 5.78 million. The share price remains comfortably within the 52‑week range of RM 4.85 to RM 6.13, with a market capitalization of approximately MYR 2.94 billion.

The company’s price‑to‑earnings ratio of 7.61 underscores its relative undervaluation compared with peers in the Malaysian financial sector, suggesting that the market may still be pricing in further upside potential as AEON Credit continues to refine its risk‑management practices.

5. Outlook

With a clear focus on quality financing and rigorous credit controls, AEON Credit Service (M) BHD is positioned to sustain momentum through the remainder of FY 2027. The firm’s commitment to maintaining a robust loan‑loss coverage ratio, combined with disciplined portfolio management, should help it navigate the cyclical nature of consumer financing and deliver improved profitability in the coming quarters.