KUALA LUMPUR: RHB Research has raised its valuation on Aeon Credit Service (M) Bhd following the group's fourth-quarter financial year 2026 (FY26) results, which came in above expectations.

The research house lifted its target price to RM6.80 from RM6.70 and maintained a "Buy" call, based on a price-to-book value (P/BV) of 1.04 times.

It said Aeon Credit's key performance indicators for FY27 appear modest, likely reflecting uncertainties stemming from ongoing geopolitical tensions.

"We expect investors to keep a close watch on asset quality under such conditions, but at 0.83 times FY27 P/BV, we believe much of the concern has been priced in," it said.

For FY27, Aeon Credit is targeting loan growth of eight per cent, return on equity (ROE) of about 12 per cent, lower than 13.1 per cent in FY26, and a dividend payout exceeding 30 per cent.

"Our FY27 loan growth assumption is in line with the group's guidance. We project ROE of 13.6 per cent and assume a payout ratio of 40 per cent," RHB Research said.

Meanwhile, CIMB Securities Sdn Bhd lowered its target price to RM6.50 from RM6.64, while maintaining a "Buy" rating.

The revision is based on a FY27 P/BV of one time, following a higher cost of equity assumption of 13.4 per cent from 13.25 per cent, reflecting a higher risk-free rate of 3.6 per cent.

CIMB Securities said it remains constructive on Aeon Credit's earnings outlook, noting that legacy credit risks from older, weaker receivables are nearing the end of their seasoning cycle.

Current write-offs, averaging RM60 million to RM65 million per month, are expected to ease in the second half of the calendar year.

"Together with remedial actions, tighter credit controls and a focus on better-quality customers, this suggests Aeon Credit's net credit charge could gradually normalise to 300 to 400 basis points between FY27 and FY29, from the elevated FY26 level of 411.6 basis points," it said.