RCE Capital likely to post stronger receivables
The recent civil servant salary adjustments are also expected to enhance financial stability within RCE Capital's main borrower base, it said.
This will potentially lower the risk of early retirement or migration to the private sector by improving disposable income levels, it noted.
RHB Research said the company is still maintaining a cautious stance on disbursements amid the still-elevated and plateauing cases of bankruptcies and early retirements.
'While most of the bad news looks priced in, an unexciting core earnings profile will likely cap the stock's potential upside.
'Management reiterated the need to remain cautious with disbursements amidst a tough operating environment, where cases of bankruptcies and early retirements are still at elevated levels.
'Financing receivables growth was a soft 1% year-on-year but flat quarter-on-quarter,' RHB Research said.
However, the company could benefit slightly from the recent overnight policy rate cut.
This will then have a slight positive impact on interest or profit expenses on RCE Capital's revolving credits, which form some 30% of the group's financing liabilities base, RHB Research said.
'We estimate the interest/profit expense savings to amount to circa RM2mil per year, which is not too significant.
'More significantly, RCE Capital is planning a new sukuk tranche issuance to capitalise on the favourable bond yield movements of late.
'While the tranche amount and profit rate are undisclosed at this juncture, we think this could allow the group to more significantly lower its overall cost of funds over a longer period,' it said.
RHB Research, which had retained its 'neutral' call on RCE Capital, decreased its financial year 2026 (FY26) to FY28 earnings estimates by 15%, 12%, and 10%, respectively, after factoring in softer receivables growth and higher credit cost assumptions.
It also reduced its target price to RM1.15 from RM1.25, noting the share price has retreated some 16% over the past three months.
But at these reduced share price levels, it pointed out most of the bad news has likely already been priced in.
For the 1Q25, RCE Capital's net profit dipped to RM25.99mil from RM30.32mil in the previous corresponding period, while revenue stood at RM79.79mil against RM79.12mil a year earlier.
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