Aeon Thana Sinsap Thailand: Focusing on profitability
- 2QFY26 (Jun-Aug 2025) earnings of THB792mn (-3.7% y/y; +2.6% q/q) were in line with expectations
- Flat loan growth expected for FY26F
- Credit cost to ease in 2HFY26F, while C/I ratio may tick up but remain manageable
- Maintain BUY with a TP of THB130
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Source: Company, DBSVTH
AEONTS: Revenue breakdown for 2QFY26 (end-Aug 2025)
Source: Company, DBSVTH
Non-interest income increased q/q from higher income from bad debt recovery and gain from NPL sales. 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 was flat y/y but increased 11.2% q/q in 2QFY26. The q/q increase was attributed to (i) higher income from bad debt recovery (THB589mn, +4.0% q/q; accounting for 10.8% of total revenue) and (ii) gain from NPL sales (THB102mn in 2QFY26 vs. none in 1QFY26).
Spread narrowed due to lower yield and 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 2QFY26.
Meanwhile, its cost of funds rose to 3.75% in 2QFY26 (vs. 3.57% in 2QFY25 and 3.67% in 1QFY26), due to long-term debt rollover at higher rates. Nonetheless, interest expenses declined 3.7% y/y but increased 0.2% q/q, due to the continuing decline in funding base amid slow lending growth and high cash inflow from loan repayments.
Net-net, spread narrowed to 16.3% in 2QFY26 (vs. 16.9% in 2QFY25 and 16.4% in 1QFY26).
OPEX decreased, and cost-to-income ratio improved. OPEX decreased 5.1% y/y and 2.4% q/q, thanks to lower marketing and administration expenses, which may increase in 2HFY26 if economic conditions look more promising, supported by the government’s recently announced stimulus programmes.
Cost-to-income (C/I) ratio improved to 41.0% in 2QFY26 (vs. 41.3% in 2QFY25 and 42.7% in 1QFY26).
NPL ratio ticked up, and credit cost increased 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.
NPLs increased 1.5% q/q to THB4.6bn, while NPL ratio ticked up to 5.2% at end-2QFY26 (vs. 5.1% at end-1QFY26), due partly to loan portfolio contraction.
Credit cost increased to 8.6% in 2QFY26 (vs. 7.9% in 1QFY26) due to an overlay for expected credit loss (ECL) set aside amid high economic uncertainties that may adversely affect its customers’ ability to pay.
Coverage ratio improved to 167% at end-2QFY26 (vs. 162% at end-1QFY26).
THB2.55 interim DPS announced; XD on 21 Oct 2025. AEONTS announced an interim dividend for its 1HFY26 (Mar-Aug 2025) performance of THB2.55 per share. This implies a dividend payout of 40.8% and a dividend yield of 2.2%. The stock will go XD on 21 Oct 2025, and the payment date is 6 Nov 2025.
Share repurchase programme update. Recall that on 16 May 2025, AEONTS announced a share repurchase programme with a maximum budget of THB390mn, representing up to approx. 1% of the total paid-up shares (equivalent to 2.5mn shares). The repurchase program is scheduled to run from 22 May 2025 to 21 Nov 2025. As at end-2QFY26 (end-Aug), the company had repurchased a total of 1.3mn shares, or 0.54% of total paid-up shares.
Outlook
Flat loan growth expected for FY26F (end-Feb 2026). With the company’s focus on quality loan growth, AEONTS expects FY26F loan growth to remain flat and hopes to be able to expand its loan portfolio again in FY27F (Mar 2026-Feb 2027).
For credit cards, AEONTS will still focus on low-risk credit card customers, while modifying its credit card promotion programmes to be more effective. Moreover, there will be new credit card products launched in 3QFY26 to attract targeted customers.
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. It will launch a new personal loan product, i.e., term-loan with attractive interest rates, to attract the THB30k-50k monthly income customer segment.
For HP, AEONTS will continue to selectively expand its networks and dealers to grow its HP portfolio. Moreover, it plans to start direct sales by partnering with selected motorcycle manufacturers.
After all, while the total loan portfolio may not expand, this strategy should help contain the company’s credit cost.
Credit cost to decline in 2HFY26F. AEONTS has continued to set aside an ECL overlay of approx. THB200-250mn in 2QFY26. Excluding that, its 2QFY26 credit cost should be lower to c.7.5% (vs. 8.6% reported).
With that, at end-2QFY26, the overlay for ECL outstanding amounted to THB474mn, 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).
Given its cleaner balance sheet, quality loan growth, and high ECL overlay, we expect AEONTS’s credit cost to decline to 7.8% in FY26F (vs. 8.0% in FY25), with credit cost in 2HFY26F lower than 1H26.
OPEX to increase in 2HFY26 but FY26F C/I ratio to remain in check. With slow loan expansion in 1HFY26, AEONTS had cut marketing and promotion expenses but plans to increase such expenses in 2HFY26F if economic conditions improve, supported by political stability and the upcoming consumption stimulus programmes. Even so, we expect its FY26F OPEX and C/I ratio to remain below FY25 levels.
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 growth to remain muted in FY26F, we believe asset quality has already bottomed, and credit cost should continue to ease. We expect FY26F earnings to expand 8.6% y/y (vs. a 12.2% y/y contraction in FY25). At the current share price, we estimate AEONTS to deliver a total return of 17.8%, comprising 13.0% upside and a 4.8% dividend yield. Our BUY rating stands.
AEONTS: 2QFY26 (Jun-Aug 2025) results review
| THB mn | 2QFY26 | 2QFY25 | y/y (%) | 1QFY26 | q/q (%) |
| Interest income | 4,443 | 4,684 | (5.2) | 4,462 | (0.4) |
| Interest expense | (538) | (558) | (3.7) | (537) | 0.2 |
| Non-interest income | 1,030 | 1,030 | 0.0 | 927 | 11.2 |
| SG&A | (2,024) | (2,132) | (5.1) | (2,073) | (2.4) |
| PPOP | 2,911 | 3,024 | (3.7) | 2,778 | 4.8 |
| ECL | (1,908) | (1,986) | (3.9) | (1,766) | 8.0 |
| Net profit | 792 | 822 | (3.7) | 772 | 2.6 |
| EPS (THB) | 3.17 | 3.29 | (3.7) | 3.09 | 2.6 |
| Loans | 88,279 | 91,388 | (3.4) | 88,870 | (0.7) |
| Percent | 2QFY26 | 2QFY25 | y/y (ppts) | 1QFY26 | q/q (ppts) |
| Spread (bps) | 16.3 | 16.9 | (60.5) | 16.4 | (8.9) |
| NIM (bps) | 17.6 | 18.1 | (41.8) | 17.7 | (2.3) |
| Cost-to-income ratio | 41.0 | 41.3 | (0.3) | 42.7 | (1.7) |
| Credit cost | 8.6 | 8.7 | (0.1) | 7.9 | 0.7 |
| Operating margin | 18.3 | 18.2 | 0.2 | 18.8 | (0.5) |
| Net margin | 14.5 | 14.4 | 0.1 | 14.3 | 0.1 |
| ROE | 11.9 | 13.1 | (1.2) | 11.7 | 0.2 |
| ROA | 3.5 | 3.5 | (0.0) | 3.4 | 0.1 |
| NPL | 5.2 | 5.8 | (0.6) | 5.1 | 0.1 |
| Coverage ratio | 166.8 | 158.6 | 8.1 | 161.8 | 5.0 |
Source of all data: Company, DBSVTH
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