Aeon Thana Sinsap Thailand: Earnings growth momentum to continue
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- 1QFY26 (Mar-May 2025) earnings came in at THB772mn (+47.2% y/y; +6.4% q/q), in line
- FY26F to see bottom line growth, not loan expansion
- Q/q earnings growth momentum to continue over FY26F
- Maintain BUY with a TP of THB130
1QFY26 results in line with expectations. AEONTS’s 1QFY26 (Mar-May 2025) earnings came in at THB772mn (+47.2% y/y; +6.4% q/q), in line with the Blomberg consensus and our estimate. The y/y increase was attributed to higher non-interest income (mainly income from bad debt recovery and higher commission income), lower interest expenses (from lower funding base), lower operating expenses (OPEX), and lower credit cost. Meanwhile, the q/q increase was thanks to higher non-interest income and lower OPEX.
Pre-provision operating profit (PPOP) was THB2.8bn (+0.6% y/y; +8.5% q/q). The y/y increase was thanks to higher non-interest income, lower interest expenses, and lower OPEX. Meanwhile, the q/q increase was attributed to higher non-interest income and lower OPEX.
Loan growth remained muted. Loan portfolio contracted 2.8% y/y and 0.1% q/q to THB88.9bn at end-1QFY26 (end-May 2025). Specifically, AEONTS continued to focus on low-risk customer groups who have high spending power and high ability to repay debts. These customers typically repay their loans in full (i.e., paying no interest). With that, credit card loans declined 1.5% q/q to THB36.7bn and made up of 41% of total loans at end-1QFY26 (vs. 42% at end-FY25).
Meanwhile, personal loans remained stable at THB42.5bn and made up of 48% of total loans at end-1QFY26 (similar to that at end-FY25), while hire purchase (HP) loans increased 6.4% q/q to THB9.6bn, making up of 11% of total loans at end-1QFY26 (vs. 10% at end-FY25).
Only HP revenue and non-interest income increased. Total revenue decreased 2.1% y/y but increased 0.7% q/q in 1QFY26. On a y/y basis, only HP revenue (+31.2% y/y) and non-interest income (9.5% y/y) increased in 1QFY26.
Credit card revenue declined 10.2% y/y to THB1.7bn, accounting for 32% of total revenue. The decline was due to the reduction of private consumption, the increase in the minimum payment rate from 5% to 8%, and the implementation of debt restructuring programmes that converted revolving credit card debts into long-term instalment loans to improve customer liquidity.
Personal loan revenue declined 3.6% y/y to THB2.4bn, accounting for 44% of total revenue. The decline in revenue was in line with the decrease in loan balance (on a y/y basis), which was due to the high household debt level and the company’s restricted loan underwriting policy to maintain its portfolio quality.
AEONTS is considering a policy to gradually expand its personal loan portfolio, focusing on quality customers, such as regular employees, civil servants and government officials, and inactive customers with good debt repayment history, and expanding access to new customers through digital channels.
HP revenue increased 31.2% y/y toTHB371mn, accounting for 7% of total revenue. The increase was attributed to the company’s extensive collaboration with used car dealers and accelerated the loan approval process, resulting in continued growth in loan disbursements. Meanwhile, title loans also continued to grow gradually and steadily in 1QFY26.
Non-interest income increased, thanks mainly to higher income from bad debt recovery. Non-interest income comprised mainly (i) income from bad debt recovery, (ii) gain from NPL sales, (iii) insurance commission income, and (iv) collection service income.
Non-interest income increased 9.1% y/y and 3.5% q/q in 1QFY26. The increase was attributed mainly to higher income from bad debt recovery (THB567mn, +7.8% y/y; accounting for 10.5% of total revenue).
Note that there were no NPL sales in 1QFY26, 1QFY25, and 4QFY25.
Spread narrowed y/y and q/q due to higher funding cost. With AEONTS’s loan portfolio shifting towards HP loans, while personal loans remained relatively stable, its yield declined y/y and q/q in 1QFY26.
Specifically, total loans comprised 47.8% personal loans, 41.3% credit card loans, and 10.9% HP loans at end-1QFY26 (vs. 47.8%, 41.9%, and 10.2% at end-FY25 and 47.6%, 45.1%, and 7.3% at end-FY24).
Meanwhile, its cost of funds rose to 3.55% in 1QFY26 (vs. 3.24% in 1QFY25 and 3.46% in 4QFY25), due to long-term debt repricing at higher rates. Nonetheless, interest expenses declined 3.9% y/y but increased 1.4% q/q, due to the y/y decline in funding base amid slow lending growth and high cash inflow from credit card loan repayments.
Net-net, its spread narrowed to 16.4% in 1QFY26 (vs. 16.8% in 1QFY25 and 16.4% in 4QFY25).
OPEX reduced, and cost-to-income ratio improved. OPEX decreased 5.2% y/y and 8.5% q/q, thanks mainly to the reduction of marketing and administration expenses.
Cost-to-income (C/I) ratio improved to 42.7% in 1QFY26 (vs. 44.2% in 1QFY25 and 47.0% in 4QFY25), thanks to the company’s operating cost control amid slow business volume and increasing cost efficiency through the digitalisation process.
Note that AEONTS is considering a more effective way to utilise its marketing expenses (especially for credit card), and as such, we expect its marketing expenses to increase in the coming quarters. With that, we expect its C/I ratio to also tick up and estimate C/I ratio to stay at 44.2% in FY26F, stable from FY25’s level.
Asset quality improved, while credit cost edged up on ECL overlay. According to the company’s asset quality management, mainly through NPL write-offs, its NPL ratio and credit cost should have already peaked in FY24 and FY25, respectively.
Normally, NPLs and credit cost are seasonally higher in 1Q, due to long holidays in Apr and May. Following the company’s NPL management, active loan restructuring, proactive customer assistance policy, and efficient debt collection, its NPL ratio declined to 5.1% in 1QFY26 (vs. 5.2% in 4QFY25).
Meanwhile, its credit cost increased to 7.9% in 1QFY26 (vs. 6.1% in 4QFY25) due to an overlay for expected credit loss (ECL) set aside amid high economic uncertainties that may adversely affect its customers’ ability to pay.
Note that as at end1QFY26, the overlay for ECL outstanding amounted to THB300mn, covering the potential asset quality deterioration due to (i) the increase in credit card minimum payment from 8% to 10% (set for 1 Jan 2026) and (ii) high economic uncertainties that may adversely affect its customers’ ability to pay (including customers in the “You Fight, We Help” programme).
If excluding an ECL overlay, its credit cost in 1QFY26 should have been much lower than 7.9%, thanks to declined NPLs and improved collection performance.
Coverage ratio improved to 162% at end-1QFY26 (vs. 154% at end-FY25).
FY26F to see bottom line growth, not loan expansion. With its focus on healthy loan growth, AEONTS expects FY26F loan growth to remain flat and hopes to be able to expand loan portfolio again next year. With that, we expect credit card loans to continue to contract, while HP loans should continue expanding, and personal loans should remain relatively stable.
Specifically, AEONTS will still focus on low-risk credit card customers, while modifying its credit card promotion programmes to be more effective. For personal loans, on top of using alternative data for credit approval, the company has more frequently updated customer data to its credit scoring model, which should result in a more accurate customer credit score amid the changing economic environment.
For HP, AEONTS will continue to selectively expand its networks and dealers to grow its HP portfolio. Moreover, this year, it plans to start direct sales by partnering with selected motorcycle manufacturers.
With that, the total loan portfolio may not expand much, or may still be flat y/y. Nonetheless, such strategies should save the company’s credit cost and thus drive its bottom-line growth.
Q/q earnings growth momentum to continue over FY26F. With its cleaner balance sheet and high ECL overlay, we expect AEONTS’s credit cost to decline to 7.5% in FY26F (vs. 8.0% in FY25), with credit cost in 2HFY26F lower than 1H26F. In addition, we believe the company will be able to control its C/I ratio in a 44% range in FY26F, despite a lower total income (from portfolio contraction). Meanwhile, we conservatively estimate its income from bad debt recovery to grow 4% y/y in FY26F (vs. management expectation of 10% y/y growth). Lastly, we expect AEONTS to sell NPLs and realise gain from sales in 2QFY26F and 4QFY26F. These together should drive AEONTS’s earnings growth to 9.8% y/y in FY26F.
On a quarterly basis, we expect a q/q earnings growth momentum to continue in 2QFY26F from lower credit cost and gain from NPL sales. 3QFY26F earnings should continue to grow q/q from lower credit cost, and 4QFY26F should be the best quarter of FY26F, driven by another NPL sales and manageable asset quality.
Maintain BUY with a TP of THB130. Our TP is based on 1.2x FY26F (end-Feb) P/BV, i.e., 1.5SD below its 5-year average P/BV. While we expect AEONTS’s loan portfolio to remain muted in FY26F, we believe its asset quality has already passed bottom and expect credit cost to taper down. With that, we expect FY26F earnings to expand 9.8% y/y (vs. a 12.2% y/y contraction in FY25). Meanwhile, the stock is trading at only 0.87x FY26F P/BV, near its multi-year low, while offering a decent dividend yield of 5.7%.
THB mn | 1QFY26 | 1QFY25 | 4QFY25 | y/y (%) | q/q (%) |
Interest income | 4,462 | 4,657 | 4,459 | (4.2) | 0.1 |
Interest expense | (537) | (558) | (529) | (3.9) | 1.4 |
Non-interest income | 927 | 849 | 895 | 9.1 | 3.5 |
SG&A | (2,073) | (2,187) | (2,266) | (5.2) | (8.5) |
PPOP | 2,778 | 2,760 | 2,559 | 0.6 | 8.5 |
ECL | (1,766) | (2,089) | (1,356) | (15.4) | 30.2 |
Net profit | 772 | 524 | 725 | 47.2 | 6.4 |
EPS (THB) | 3.09 | 2.10 | 2.90 | 47.2 | 6.4 |
Loans | 88,870 | 91,453 | 88,948 | (2.8) | (0.1) |
Percent | 1QFY26 | 1QFY25 | 4QFY25 | y/y (ppts) | q/q (ppts) |
Spread (bps) | 16.4 | 16.8 | 16.4 | (43.0) | (0.6) |
NIM (bps) | 17.7 | 17.9 | 17.6 | (28.0) | 6.7 |
Cost-to-income ratio | 42.7 | 44.2 | 47.0 | (1.5) | (4.2) |
Credit cost | 7.9 | 9.1 | 6.1 | (1.2) | 1.9 |
Operating margin | 18.8 | 12.2 | 22.5 | 6.6 | (3.7) |
Net margin | 14.3 | 9.5 | 13.5 | 4.8 | 0.8 |
ROE | 11.7 | 8.4 | 11.3 | 3.3 | 0.4 |
ROA | 3.4 | 2.2 | 3.2 | 1.1 | 0.2 |
NPL | 5.1 | 5.4 | 5.2 | (0.3) | (0.1) |
Coverage ratio | 161.8 | 168.1 | 153.8 | (6.3) | 8.0 |
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