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.

The firm also anticipates 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 bagged a digital banking licence 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 group 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 knowhow and platform could be built and localised accordingly. 

"Aeon's large data pool of consumer spending and repayment habits are also essential components 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.

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

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

"That said, losses are to be 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 fund raising to be expected as of now. 

"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 Research has maintained its "Outperform" call on Aeon, with a target price of RM16.45.