KUALA LUMPUR (Aug 12): RCE Capital Bhd (KL:RCECAP) has become attractive, analysts say after the general financing firm reported results that met expectations.
Earnings in the first quarter of the financial year ending March 2027 accounted for 23% of the consensus’ full-year estimate and growth could be “unexciting” over the next three years, said Maybank Investment Bank in a note. Still, the house upgraded the stock to ‘buy’ from ‘hold’ post-results.
“Investors would be rewarded with attractive dividend yields” of at least 7% per year while waiting for gross financing receivables growth to recover, Maybank Investment said.
Shares of RCE Capital, which mainly provides financing to government employees, also did not react much to the results and were unchanged at RM1.06 at the time of writing on Wednesday.
RCE Capital had been climbing after the government announced salary increases for public employees in January. However, the stock has since lost more than 10% from this year’s peak amid concerns over rising bad debts among civil servants sensitive to economic shocks.
Nevertheless, asset quality in the recently-ended quarter appears stable with non-performing loans of 4.3% that will remain steady “given the moderating trend in resignations, self-declared bankruptcies and early retirements within the civil service”, Public Investment Bank said in a separate note.
Further, RCE Capital’s valuation has turned attractive, trading slightly below its one-year forward average earnings multiple of 12 times and 1.8 times its book value, following the recent retreat in its share price, the research house said.
Public Investment upgraded RCE Capital to ‘trading buy’ — a rating that means the stock return is expected to exceed a relevant benchmark’s return by at least 5% over the next three months but the underlying fundamentals are not strong enough to warrant an ‘outperform’.
Post results, RCE Capital now has two ‘buy’, two ‘hold’, and no ‘sell’ calls among the analysts tracked by Bloomberg. The average target price is now RM1.19.