Albeit marginal, the 1QFY3/24 results for RCE Capital (RCE) beat Maybank Investment Bank (Maybank IB)’s expectations and set another record.
“It is also good to know that Non-Performing Financing (NPF) ratios continue to ease after surging last year. This gives us comfort that RCE’s high forecasted dividend yields of more than 6.0% per annum will continue going forward,” said Maybank IB in a recent report, maintaining a RM2.38 Target Price and upgrading RCE to Buy from Hold.
1QFY24 net profit of RM36.9m was marginally above Maybank IB’s expectations at 27% of their FY estimate. The outperformance was due to interest/profit expense of RM24.9m coming in at only 23% of their FY estimate despite financing liabilities and debt securities growing 5% QoQ. No dividend was declared but this was expected as RCE traditionally declares dividends in the 2QFY and 4QFY.
Gross financing receivables growth decelerated to 1% QoQ in 1QFY24 from 2% QoQ in 4QFY23. That said, this was expected as there were no marked increase in the salaries of civil servants in the current quarter. Gross NPF ratio continues to improve by easing to 3.7% or down 22 basis points YoY and 7 basis points QoQ.
“Recall that this time last year, gross NPF ratios and allowance for impairment loss on receivables spiked due to more civil servants in the academic and healthcare sectors resigning,” said Maybank IB.
Overall, Maybank IB rate RCE’s prospects as stable. RCE flagged the enactment of the Consumer Credit Act (CCA). Yet, Maybank IB understands that the CCA is meant to target the unregulated ‘buy now pay later’ segment and not RCE which is regulated by the Ministry of Housing and Local Government and voluntarily reporting to Bank Negara Malaysia.
