PETALING JAYA (April 24, 2012): AEON Credit Service (M) Bhd, which saw its revenue and net profit grow by 27.7% and 50.7% year-on-year, respectively, in the financial year ended Feb 20, 2012 (FY12), is mulling a bonus issue to improve the stock's liquidity, said sources.

"The company may seek the approval of its shareholders under a special resolution at the forthcoming annual general meeting (likely to be in June) for the proposed bonus issue," a source told SunBiz yesterday.

Another source said AEON Credit is likely to offer a one-for-one bonus issue of equity shares to reward its shareholders and to help improve liquidity of the stock.

"A bonus issue doesn't really change the fundamentals of the company because the share price and earnings per share get adjusted accordingly after the issue. It's more of a psychological effect among retail investors that are favourable to such issues on the ground that they expand the base and bring down prices and, hence, make the shares more affordable," said the source.

An OSK Research Sdn Bhd analyst said: "If they were to go ahead with a bonus issue, it would be a positive move to retail investors as liquidity is one of the concerns of AEON Credit."

In its report on the counter last Friday, OSK maintained a "buy" call on AEON Credit at RM8.74, with a higher fair value of RM9.98 from RM7.20 previously as it believes the company is still in its high-growth phase "which will contribute to net profit growth of at least 20% in each of the next three years".

Since then, AEON Credit's share price has shot up by about 10% in two days to end at RM9.62 yesterday.

OSK has bumped up its FY13 revenue and net profit forecasts for AEON Credit by 14.5% and 24.5%, respectively, largely due to robust growth in its consumer durable financing and personal loan business.

"Risk-wise, we believe that given AEON Credit's prudent risk management policies and portfolio management strategies, it would be able to keep its non-performing loan ratio below 2%," said the research firm.

"We (also) continue to like AEON Credit's collaboration with AEON Co (M) Bhd given the solid brand loyalty it enjoys from its 900,000-odd members in the AEON member programme (previously called J Card member programme), which will provide AEON Credit with a solid base to tap on," it added.

"Also, we think that AEON Co's rebranding exercise may somewhat benefit AEON Credit as members may be more likely to register for AEON's credit card when renewing their AEON Card (previously J Card), provided there are cross-selling efforts at the card renewal counters," said OSK.

As at Feb 20, 2012, the number of AEON Credit's total principal credit cards in circulation stood at about 160,000.