RCE Capital Bhd (+ve)

SHARES of non-bank financial institution RCE Capital (Fundamental: 1.25/3, Valuation: 2/3) saw renewed trading interest after it posted a stellar 1QFYMar16 results and announced bumper dividends last Thursday. Its share price soared 21% to a 3-year high of 40.5 sen last Friday before retracing to 39.5 sen yesterday.

For 1Q16, revenue increased 23% y-o-y to RM37.5 million while net profit added 37% to RM9.4 million, primarily due to higher net interest income from the loan financing segment arising from higher loan base. Loan impairment, however, increased by RM2.0 million to RM7.9 million. 

The company proposed a final dividend of 1.5 sen per share and declared a special dividend of 10.5 sen per share. Dividends for FY15 totalled 12 sen per share, representing an outsized 30% of its current share price of 39.5 sen. Both dividends will go ‘ex’ on September 22 and will be payable on October 8. 

RCE Capital is principally engaged in providing general loan financing services. Personal financing is the largest contributor to group revenue with civil servants making up bulk of its client base. It is also involved in commercial financing business such as factoring, confirming and industrial hire purchase.

To recap, RCE Capital saw its net profit for FY15 nearly triple to RM36.2 million from RM12.5 million in FY14, mainly due to a RM40 million decrease in allowance for impairment loss on receivables. Gross loans and receivables grew 12% to RM1,202.5 million, on the back of a 57% increase in loans disbursement in the consumer financing segment. 

The stock currently trades 10% below book value of 45 sen per share and a trailing 12 month P/E of 13.3 times.

This article first appeared in digitaledge Daily, on August 13, 2015.