KUALA LUMPUR: Aeon Credit Service (M) Bhd is poised to benefit from the pacing economic recovery, which should fuel demand for financing, Kenanga Research said.

In a note today, the firm also anticipates a softer sentiment from Aeon Credit's financial year ending February 28, 2022 (FY22) impairment shocks to ease with progressive updates from the digital banking front.

Recently, Aeon Credit has bagged a digital banking license from Bank Negara Malaysia with its parent Aeon Financial Service and MoneyLion Inc.

"With the existing client base in the Aeon ecosystem and MoneyLion's expertise, being an already operating digital bank in the US, the company hopes for a smooth launch within Bank Negara's 24-month timeframe.

"All in, we see this consortium to be in a favourable position to launch its digital bank well within the 24 months timeline set by Bank Negara.

"With MoneyLion as the technology partner, its fintech know-how and platform could be built and localised accordingly.

"Aeon's large data pool of consumer spending and repayment habits is also essential to enable the digital bank to implement effective targeted marketing strategies.

"Meanwhile, the specific application and award for the Islamic license made sense as Aeon's financing products are already shariah-compliant and are well ready to cater to market needs," it said.

Meanwhile, Kenanga said Aeon Credit might introduce attractive promotional pricing to capture consumers' attention for lending and deposits while it finds a sweet spot in cost management, Kenanga Research said.

This was in line with Bank Negara initiatives, of which efforts would be dedicated to offering lower ticket size financing to boost access and inclusion to underserved communities.

"That said, losses are expected, as with most digital banks in the near-term until they achieve profitable scale.

"Until then, capital obligations are fuelled by Aeon's internally generated funds with no equity fundraising to be expected.

"Recall that during the foundational phase (three to five years of commencement), minimum capital funds of RM100 million should be maintained and RM300 million post-foundational phase," it added.

Kenanga has maintained its 'Outperform' call on Aeon with a target price of RM16.45.