Aeon Credit Malaysia sees strong revenue growth

 

AEON Credit Service Malaysia is confident of double-digit revenue growth next year as it expects demand for its consumer financing products to rise as Malaysians scramble to cope with an economic downturn.

The company, controlled by Japanese consumer credit company AEON Credit Service Co Ltd, wants to expand geographically and enter new market segments such as used cars, managing director Naruhito Kuroda said in an interview.

“Next year we will be opening more outlets and marketing offices in rural and suburban areas,” said Kuroda.

“Our strength has been in the city and big towns, but in rural areas, there is still room to expand,” he said.

Malaysia’s economic growth will slow to 3.5 per cent in 2009 from a projected 5 per cent growth this year, according to the government as the global financial crisis hits its exports.

A severe global slowdown will force Malaysian factories, most of them which count on US and European consumers to drive growth, to reduce headcount in order to survive.

“With the economy slowing down, for some people who used to pay cash previously, they may not be comfortable paying cash now and they are likely to use our easy-payment scheme,” he said.

“The economic slowdown actually puts us in a better position to provide the consumer financing for necessity items such as electrical appliances and furniture,” said Kuroda.

While a deteriorating economic outlook could put pressure on asset quality, the executive said he expects non-performing loan (NPL) ratio to hover around 2 percent next year.

As of end-August, the company’s NPL ratio stood at 1.83 per cent.

“It’s very natural that NPL ratio will go up when the economy is slowing but we don’t see it having a big impact on our bottomline,” said Kuroda.

“We are monitoring our receivables closely, every month we monitor our customers’ paying behaviour. So far, the trend has been quite stable.”

As precaution, the company has adopted a more stringent approach in approving unsecured loans such as credit car loans and personal loans, he said.

AEON Credit’s funding cost has remained stable despite the global financial crisis, said chief financial officer Krishnappan Singaram, also present during the interview.

There is no urgent need for the company to tap the bond market now as it still has unused credit lines and as more than 70 per cent of its borrowings are long-term debt, he added.

AEON Credit reported a 68 per cent jump in net profit to RM21.52 million (US$6 million) for the first half to August.

AEON Credit’s stock has fallen 29 per cent so far this year, outperforming the broader market’s near 40 per cent loss. - Reuters