The consumer finance company is expected to experience a firmer recovery in loan growth, which would spur its revenue expansion this year due to higher demand for funding.
Its net income for the first quarter ended May 31, 2022 (1Q23) was flat but improved quarter over quarter. Its net profit was RM163.07 million in 1Q23 with earnings per share (EPS) of 63.87 sen.
Meanwhile, revenue fell 5% to RM390.57 million for the quarter from RM410.97 million a year ago.
RHB Research said the company’s 1Q23 loan growth of 1.6% lagged management’s 10% target for fiscal year 2023 (FY23).
The weak growth is due to weak demand for financing, due to special withdrawals from the Employees Provident Fund (EPF), as well as supply chain bottlenecks in the automotive industry which are hampering the application for vehicle financing.
“We believe these effects will subside in the next quarter, as supply chain issues have begun to subside and management has noticed a pick-up in funding demand.
“Helped by the pick-up in collection productivity, this should lead to an improvement in the company’s turnover,” he added.
The research house said inflation risks remain.
Most of the company’s clients are in the B40 and M40 segments – as such they are likely to be more exposed to some sort of inflationary risk, he noted.
However, the existing accumulated overlays of RM74mil should provide the company with some leeway until the severity of the risks can be determined.
RHB said it was increasing FY23 earnings guidance by 6.6% to account for the company’s stellar 1Q23 numbers and keeping the FY24 guidance stable to reflect concerns over the ‘inflation.