Maybank Investment Bank (Maybank IB) maintains their earnings per share estimates for RCE Capital (RCE) but raised dividend per share estimates by 2 sen per annum as dividend payout ratio going forward will likely come in at 75% or 10 points more than they had earlier expected.
With a narrowed upside of less than 10% after the recent share price rally, Maybank IB downgrades RCE to Hold. Investors should still Hold it for its stable and generous dividend yields of more or equal to 6.0% per annum.
While the government has not been guiding more salary adjustments and raises going forward, RCE still expects financing receivables growth to track banking sector loans growth as demand has been resilient.
“Thus, we are comfortable with our financial year 2024 estimate financing receivables growth forecast of +4.0%,” said Maybank IB.
In response to rising cost of funds, RCE repriced its profit rates to 6.65%- 9.99% from 5.99%-9.99% in Oct 2022. It doesn’t plan to reprice again unless the OPR rises markedly above 3.00%.
While financial year 2023 actuals core dividend per share of 12sen translates into 63% dividend payout ratio, the second half financial year 2023 dividend per share of 7sen translates into a higher 73% dividend payout ratio.
“RCE stated that it will try to at least maintain absolute dividend per share going forward. Given its stable earnings outlook, we gather that this implies financial year 2024 estimated dividend per share of at least 14 sen or 75% dividend payout ratio or 10 points more than we had expected,” said Maybank IB.
