1Q27 results gain momentum – Aeon Credit (ACSA) provides consumer credit in Hong Kong by issuing credit cards and providing personal loans. ACSA reported 1Q27 operating profit of HK$256mn, representing a robust 11.4% YoY growth, on the back of a 7.7% increase in revenue to HK$476mn, both in line with expectations. Revenue and operating profit accounted for 23.4% and 23.2% of our full-year FY27 estimates, respectively, broadly on track if considering seasonality. The healthy growth in revolving credit card receivables (+9.1% YoY), favorable funding costs (-12.8% YoY), and disciplined control over operating expenses collectively drove operating profit growth. Moreover, with continued improvement in impairment losses (-4.4% YoY, compared with -5.5% at end-FY26), net profit recorded a strong increase of 24.4% YoY.

Improving cost-to-income ratio – The cost-to-income ratio improved to 43.3% from 44.5% at end-FY26, as operating income posted a solid 8.9% increase to HK$451mn, while total operating expenses rose by a more moderate 5.8% YoY to HK$196mn. Within this, marketing and advertising expenses increased by 35.6% YoY, reflecting both a lift in market sentiment and a gradual recovery in consumer spending.

Healthy credit risk management – The proportion of doubtful (Stage 2) and loss (Stage 3) receivables to gross advances and receivables continued to decline, falling to 3.7% at end-1Q27 from 3.9% at end-FY26 and 4.2% a year earlier. Meanwhile, impairment allowances as a percentage of gross advances and receivables remained flat at 3.5%. By leveraging a robust credit risk assessment model, the company has effectively controlled credit exposure and improved asset quality, marking another quarter of prudent risk management and enhanced customer repayment capacity.

Our view – ACSA’s 1Q27 performance gained further traction, supported by improving consumer sentiment and its proactive marketing strategy. Moreover, the continued improvement in impairment losses underscores the company’s effective risk management, and together with a moderately expanding loan book, this strengthens our confidence in its sustainable earnings growth.

Accordingly, we maintain our revenue estimates for FY27E, FY28E, and FY29E at HK$2.03bn, HK$2.11bn, and HK$2.21bn, respectively. FY27E–FY29E EPS is expected to be 148, 153, and 157 HK cents, respectively. Based on our DCF valuation, we assign a fair value of HK$12.20 per share. The stock currently trades at approximately 0.58x FY2/27E P/B, with an estimated dividend yield of 10.8%.