Review

• AEHB reported FY23 net profit of RM7.3mn, up 14.2% YoY from RM6.4mn in FY22. Results came within expectations, with net profit accounting for 97% of our full-year forecast.

• FY23 revenue expanded by 26.9 YoY due to higher loan interest income from money lending operations amounting to RM6.9mn (FY22: RM2.9mn) and an increase in stock and securities broking activities amounting to RM38.5mn vs RM32.7mn in FY22.

• By segment, the stock and securities business reported an improvement in revenue due to higher margin interest income, which rose by 30.6% YoY. Brokerage income also improved by 7.9% YoY, driven by higher trading activities. The money lending operation, which was reactivated in 3Q22, saw encouraging growth. The segment registered healthy revenue and PBT contribution of RM6.9mn (FY22: RM2.9mn) and RM5.6mn (FY22: RM2.4mn), respectively.

• Sequentially, revenue climbed by 14.2% YoY due to better brokerage income and healthier margin and interest income. However, the net profit decreased by 33.1% QoQ due to higher operating expenditures.

• The group’s net cash and bank balances, including short-term funds, stood at RM47mn as of 31 December 2023, down from RM104.0mn in Dec 2022. Meanwhile, AEHB has total bank borrowings amounting to RM4.0mn.

Impact

• Incorporating the FY23 results, we tweaked our FY24/25 net profit forecasts to RM8.7/9.1mn. We project the net profit to grow by another 4% to RM9.4mn in FY26.

Outlook

• We continue to envisage modest earnings growth for AEHB in FY24, primarily supported by an expected improvement in the securities market. We believe that ongoing efforts by Bursa to fortify the trading ecosystem, enhance market vitality, and attract greater foreign participation will contribute to an upswing in trading activities and market volumes. We note that the stock and securities segment still accounts for a sizeable 84% of total revenue, followed by moneylending at around 15%.

Valuation

• Tagging a P/B ratio of 0.7x, based on the peer’s average, to AEHB’s FY24e BV, we maintain the TP at RM1.19. However, we upgrade the stock from sell to BUY considering the broader risk-reward potential resulting from the recent decline in the share price.

Source: TA Research - 28 Feb 2024