Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

* Poor Operating Result:Aeon Financial Service (8570.JP) [AFS] reported a FY 1Q20 operating loss of JPY 0.8 bn, and a net loss of JPY 1.1 bn. The poor result was driven by JPY 30.7 bn in net loss provisions, as credit quality across AFS deteriorated well beyond expectations resultant of the global slowdown attributed to COVID-19;* ASEAN Risk: Aeon Thana Sinsap (ATS.TB) [ATS], AFS’ 54.3% owned subsidiary) reported a 46% YOY decline results to THB 530 mn, as ATS temporarily closed 70 branches for about six weeks through mid-May due to COVID-19, and offered credit assistance to customers in line with the Bank of Thailand’s relief measures. Aeon Credit Service Berhad (ACSM.HK) reported results of MYR 26.3 mn  - declining 69% YOY in 1Q to MYR 26.3 mn. The Malaysian government’s Movement Control Order (MCO) to prevent the spread of COVID-19 had a negative impact on local business activities,*Dividend Cut: FY 2/21 DPS guidance of JPY 23 is a sharp reduction in DPS – but in line with the projected profit decline and works out to a dividend payout ratio of 50%-100%. This was a negative surprise as AFS had made a convincing argument for dividend stability at the FY 2/20 earnings briefing. If a 2nd wave of COVID-19 occurs, we’d expect the dividend to decline to zero.

* Poor Operating Result:Aeon Financial Service (8570.JP) [AFS] reported a FY 1Q20 operating loss of JPY 0.8 bn, and a net loss of JPY 1.1 bn. The poor result was driven by JPY 30.7 bn in net loss provisions, as credit quality across AFS deteriorated well beyond expectations resultant of the global slowdown attributed to COVID-19;* ASEAN Risk: Aeon Thana Sinsap (ATS.TB) [ATS], AFS’ 54.3% owned subsidiary) reported a 46% YOY decline results to THB 530 mn, as ATS temporarily closed 70 branches for about six weeks through mid-May due to COVID-19, and offered credit assistance to customers in line with the Bank of Thailand’s relief measures. Aeon Credit Service Berhad (ACSM.HK) reported results of MYR 26.3 mn  - declining 69% YOY in 1Q to MYR 26.3 mn. The Malaysian government’s Movement Control Order (MCO) to prevent the spread of COVID-19 had a negative impact on local business activities,*Dividend Cut: FY 2/21 DPS guidance of JPY 23 is a sharp reduction in DPS – but in line with the projected profit decline and works out to a dividend payout ratio of 50%-100%. This was a negative surprise as AFS had made a convincing argument for dividend stability at the FY 2/20 earnings briefing. If a 2nd wave of COVID-19 occurs, we’d expect the dividend to decline to zero.  

Mitsubishi UFJ Financial (MUFG) (8306 JP)

AEON Financial Services – ASEAN Weakness Results In Dividend Cut