Rce Capital Berhad

$RCECAP / 9296 (RCE CAPITAL BERHAD)
Research by RHB

$RCECAP / 9296 (RCE CAPITAL BERHAD)
Research by PBIV

$RCECAP / 9296 (RCE CAPITAL BERHAD)
Research by Maybank

KUALA LUMPUR: Public Investment Bank Bhd (PublicInvest) is optimistic over financing solutions company RCE Capital Bhd’s long-term growth driven by the upcoming salary hike among civil servants in December this year.

© New Straits Times Press (M) Bhd

$RCECAP / 9296 (RCE CAPITAL BERHAD)
Research by Public Invest

$RCECAP / 9296 (RCE CAPITAL BERHAD)
Research by Maybank

$RCECAP / 9296 (RCE CAPITAL BERHAD)
Research by RHB
Sell – TP RM2.70

“A Soft Start To FY25F; SELL"

Maintain SELL, new MYR2.70 TP from MYR2.40, 17% downside, c.5% FY25F (Mar) yield. RCE Capital’s 1QFY25 results disappointed as a result of slower-than-expected disbursements, which we expect will pick up later in the year. The group’s longer-term prospects look good, as it is a prime beneficiary of the revision to civil service wages, though near-term challenges remain. Our call is premised on valuation grounds.

Analysts:
Nabil Thoo
nabil.thoo@rhbgroup.com
David Chong CFA
david.chongvc@rhbgroup.com

$RCECAP / 9296 (RCE CAPITAL BERHAD)
Research by Public
Neutral – TP RM3.18

“Affected by Increase in Provisions"

RCE’s 1QFY25 net profit declined by 17.8% YoY to RM30.3m, dragged by lower fee income and higher allowance for impairment loss on receivables. Results came in broadly within our and consensus estimates, accounting for 21% and 20% of our full-year forecast respectively. Nevertheless, we adjust our earnings forecast for FY25-27F by an average of 2% due to book-keeping changes. We believe that RCE’s financing receivables growth will likely accelerate in 2HFY25, driven by the adjustment in civil servants’ salaries that will be implemented later this year, given the strong correlation with government emoluments. We maintain our Neutral call and TP of RM3.18 on RCE.

Analyst:
Wong Ling Ling
wong.lingling@publicinvestbank.com.my

$RCECAP / 9296 (RCE CAPITAL BERHAD)
Research by Maybank
Hold – TP RM3.00

“All eyes on civil service salary hike announcement today"

Like 4QFY24, 1QFY25 results were lacklustre. That said, we believe that the worst is over. The government will announce a major civil service salary hike effective 1 Dec 2024 today. With history as our guide, this ought to be positive for financing growth. Our earnings estimates and MYR3.00 TP based on 2.5x end-CY25E P/BV are maintained for now as we wait for the full details of this announcement. As things stand, RCE offers decent dividend yields of >5% p.a.

Analyst:
Yin Shao Yang
samuel.y@maybank-ib.com

Recent 2 months I’ve been noticing quite a few corporate actions going-on, so I’ve compiled a non-exhaustive list here…

$CRESNDO / 6718 (CRESCENDO CORPORATION BERHAD) proposes three-to-one share split
$RCECAP / 9296 (RCE CAPITAL BERHAD) proposes one-for-one bonus issue
$PMBTECH / 7172 (PMB TECHNOLOGY BERHAD) to raise RM300 mil from rights issue
$MGRC / 0155 (MALAYSIAN GENOMICS RESOURCE CENTRE BERHAD) plans private placement to raise up to RM4.98 mil
PTT proposes one-for-one bonus issue
$KLSE-BMGREEN proposes one-for-four bonus issue of warrants
HAILY proposes one-for-one bonus issue with free warrants
QL proposes one-for-two bonus issue
ANNJOO proposes one-for-four rights issue with warrants, to raise up to RM166m
GREATEC proposes one-for-one bonus issue
VS proposed 1-for-10 bonus issue of warrants
TRIVE proposes two-for-five bonus issue of warrants
ENGTEX proposes three-for-four bonus issue
ATECH fixes issue price for private placement at RM3.35 per share
XOX plans for 30-to-one share consolidation after proposing capital reduction
YENHER proposes bonus warrants

Any that warrants attention, you think?

$RCECAP / 9296 (RCE CAPITAL BERHAD)

$RCECAP / 9296 (RCE CAPITAL BERHAD)
Research by Public
Neutral – TP RM3.18

" Proposed Bonus Issue "

RCE Capital has proposed a one-for-one bonus issue with an entitlement date to be determined later which will involve the issuance of up to 764.9m new shares. This will bring the enlarged share capital to 1.53bn shares. We are positive on this proposal as we believe that the bonus issue will enhance the marketability of its shares, making it more appealing to a wider base of public shareholders, thereby improving its trading liquidity. Should the proposed bonus issue go through, our DDM-derived TP will be adjusted to RM1.56, under the maximum number of shares issued. Nevertheless, we maintain our Neutral call and TP of RM3.18 on RCE at this juncture, pending further details from the proposal.

Analyst:
Wong Ling Ling
wong.lingling@publicinvestbank.com.my

Top 10 Dividend Yield Companies without disposals/one off special dividends this Year!

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Let us know in the comment section below!

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$MARCO / 3514 (MARCO HOLDINGS BERHAD) $UOADEV / 5200 (UOA DEVELOPMENT BHD) $APOLLO / 6432 (APOLLO FOOD HOLDINGS BERHAD) $RCECAP / 9296 (RCE CAPITAL BERHAD) $AMWAY / 6351 (AMWAY (MALAYSIA) HOLDINGS BERHAD)

DEALINGS IN LISTED SECURITIES (CHAPTER 14 OF LISTING REQUIREMENTS) : Dealings Outside Closed Period

OTHERSRCE Capital Berhad ("RCE" or "Company")
- Employees' Share Scheme ("ESS")

$RCECAP / 9296 (RCE CAPITAL BERHAD)
Research by PIB
Neutral – TP of MYR 3.18

“Earnings Within Expectations”

RCE’s 4QFY24 net profit fell by 16.6% YoY to RM29.1m, mainly dragged by an increase in allowance for impairment loss, higher operating expenses from facility fee relating to new funding secured and higher sales and marketing expenses. Full-year FY24 net profit of RM138.7m came in within our and consensus estimates, accounting for 97% and 96% respectively. Nevertheless, we tweak our earnings forecast for FY25-26Fdownwards by c.3% to account for the higher credit cost. We raise our dividend payout assumption to c.70% on higher financing receivables growth underpinned by the increase in civil servants’ salaries. As such our DDM-derived TP is adjusted to RM3.18, implying a P/BV of 2.7x. Given the recent run in share price (+16.4%) since our initiation and the limited upside potential, we downgrade our call on RCE from Trading Buy to Neutral.

Analyst(s):
Wong Ling Ling
w ong.lingling@publicinvestbank.com.my

$RCECAP / 9296 (RCE CAPITAL BERHAD)
Research by RHB
Sell – TP of MYR 2.40

“A Slight Miss; Keep SELL”

RCE Capital’s FY24 (Mar) results missed our and Street’s expectations on the back of higher-thanexpected operating and credit costs. While the impending revision to civil service wages will likely boost its financing growth prospects, we still prefer peers with similar ROE generation that are trading at cheaper valuations.

Analyst(s):
Nabil Thoo
nabil.thoo@rhbgroup.com
David Chong, CFA
david.chongvc@rhbgroup.com

$RCECAP / 9296 (RCE CAPITAL BERHAD)
Research by Maybank
Hold – TP of MYR 3.00

“Keep calm and wait for Budget 2025”

Earnings and dividends came in at the lower range of our expectations. As we flagged earlier, RCE’s operating environment has turned a tad more challenging. Having said that, we expect it to improve markedly come 1 Dec 2024 when the ≥13% hike in civil servants’ salaries take effect. Until more details are announced during Budget 2025, we trim our earnings and dividends estimates by 3-4% on minor housekeeping. We trim our TP to MYR3.00 from MYR3.02 on an unchanged 2.5x end-CY25E BVPS.

Analyst(s):
Yin Shao Yang
samuel.y@maybank-ib.com

RCECAP - Notice of Book Closure

Second Interim Dividend

Quarterly rpt on consolidated results for the financial period ended 31/03/2024

OTHERS(I) PROPOSED SHAREHOLDERS' MANDATE FOR RECURRENT RELATED PARTY TRANSACTIONS OF A REVENUE OR TRADING NATURE ("PROPOSED RRPT SHAREHOLDERS' MANDATE")
(II) PROPOSED RENEWAL OF SHARE BUY-BACK AUTHORITY ("PROPOSED SHARE BUY-BACK AUTHORITY")

$RCECAP / 9296 (RCE CAPITAL BERHAD)
Research by Maybank
Hold (Prior: Buy) – TP RM3.02

“Break for tea before Budget 2025"

With <10% upside potential currently, we downgrade RCE to HOLD from BUY with an unchanged MYR3.02 TP on 2.5x end-CY25E BVPS. We caution that the positive impact of the civil servants’ salaries hike will not be felt until 1 Dec 2024. That said, we flag the possibility of upside to financing receivables growth if civil servants who receive disproportionately higher salary hikes pivot to RCE. More details will be revealed during Budget 2025. Until then, investors will receive >5.0% dividend yield.

Analyst:
Yin Shao Yang
samuel.y@maybank-ib.com

What about $RCECAP / 9296 (RCE CAPITAL BERHAD), $MBSB / 1171 (MALAYSIA BUILDING SOCIETY BERHAD), $BIMB / 5258 (BIMB HOLDINGS BERHAD)? They might directly benefited from the hike of civil servants salary?

DEALINGS IN LISTED SECURITIES (CHAPTER 14 OF LISTING REQUIREMENTS) : Dealings During Closed Period

$RCECAP / 9296 (RCE CAPITAL BERHAD)
Research by Maybank
Buy – TP of MYR3.02

“Windfall for civil servants a boon for RCE”

With civil servants’ salaries set to rise by ≥13% on 1 Dec 2024, we raise our post-FY24E EPS/DPS estimates by up to 10%/9%. We also raise our P/B target to 2.5x on end-CY25E BVPS (full year impact of salary raise) from 2.1x on end-CY24E BVPS, thus lifting our TP to MYR3.02 from MYR2.44; the re-rating to reflect stronger earnings and dividend prospects. As a sanity check, our FY26E DPS of 18.5sen divided by the CY25E average banking sector dividend yield of 6.0% (Fig. 5) returns an implied TP of MYR3.08.

Analyst(s):
Yin Shao Yang
samuel.y@maybank-ib.com

$RCECAP / 9296 (RCE CAPITAL BERHAD)
Research by Maybank
Buy (Prior: Hold) – TP RM3.02

“Windfall for civil servants a boon for RCE"

With civil servants’ salaries set to rise by ≥13% on 1 Dec 2024, we raise our post-FY24E EPS/DPS estimates by up to 10%/9%. We also raise our P/B target to 2.5x on end-CY25E BVPS (full year impact of salary raise) from 2.1x on end-CY24E BVPS, thus lifting our TP to MYR3.02 from MYR2.44; the re-rating to reflect stronger earnings and dividend prospects. As a sanity check, our FY26E DPS of 18.5sen divided by the CY25E average banking sector dividend yield of 6.0% (Fig. 5) returns an implied TP of MYR3.08.

Analyst:
Yin Shao Yang
samuel.y@maybank-ib.com

PROVISION OF FINANCIAL ASSISTANCE

$RCECAP / 9296 (RCE CAPITAL BERHAD)
Research by Maybank
Hold (Prior: Hold) – TP of MYR2.44

“Will wait for this storm to pass”

We understand that RCE’s operating environment has weakened recently. Financing receivables growth is likely to ease as the credit quality of new applicants has much to be desired. Credit costs also remain high due to more resignations and early retirements. Thus, we trim our EPS estimates by 3-5%, and our TP to MYR2.44 from MYR2.59 as we employ a lower endCY24E target P/BV of 2.1x (2.2x previously). With share price having reflected much of the negatives, we upgrade RCE to HOLD from SELL.

Analyst(s):
Yin Shao Yang
samuel.y@maybank-ib.com

$RCECAP / 9296 (RCE CAPITAL BERHAD)
Research by PB
Trading Buy - TP of RM2.95

""Stable Growth Trajectory with Attractive Dividends"

RCE Capital (RCE) is generally involved in the provision of consumer financing  services, with Malaysian civil servants as its end customers. The group has a  unique salary deduction scheme whereby the installments are collected through  monthly installments via two agents namely EXP Payment SB and Angkatan Koperasi Kebangsaan Malaysia (ANGKASA). Looking ahead, we forecast a 3-year earnings CAGR of 5%, on stable growth in financing receivables and a stable credit cost assumption. In addition, for the next 3 years, we forecast a dividend payout of c.60% as we err on the conservative side on the group’s dividend payout policy of 60-80% of net profit. We believe that the recent decline in share price represents a good buying opportunity, therefore we initiate coverage on RCE with a Trading Buy call and a TP of RM2.95 based on Dividend Discount Model (DDM), implying a P/BV of 2.4x.

Analyst(s):
Wong Ling Ling
wong.lingling@publicinvestbank.com.my