PUBLIC INVESTMENT BANK
RCE CAPITAL BERHAD
RCE Capital is mainly involved in the general financing services to civil servants
12-month Target Price RM1.22
Current Price RM1.10
Expected Return 10.8%
Previous Target Price RM1.43
Market Main
Sector Consumer Finance
Bursa Code 9296
Bloomberg Ticker RCE MK
Shariah-compliant Yes
[SHARE PRICE CHART DATA NOT AVAILABLE]
52 Week Range (RM) 1.02-1.77
3-Month Average Vol (‘000) 730.8
| 1M | 3M | 6M | |
|---|---|---|---|
| Absolute Returns | -1.8 | -13.7 | -21.5 |
| Relative Returns | -0.4 | -18.1 | -22.3 |
| Market Capitalisation (RMm) | 1,614.8 |
| No. of Shares (m) | 1,468.0 |
| % | |
|---|---|
| Cempaka Empayar SB | 59.1 |
| Employees Providend Fund | 4.1 |
| Lembaga Tabung Haji | 3.8 |
Wong Ling Ling
T 603 2268 3000
F 603 2268 3014
E wong.lingling@publicinvestbank.com.my
Easing Financing Receivables Growth
RCE’s 1QFY26 net profit decreased by 14% YoY to RM26m, dragged by higher impairment allowances on the back of an uptick in self-declared bankruptcy and early retirements within the civil service. Results were below expectations, accounting for 19% of our and consensus estimates. The discrepancy in our forecast was mainly due to the lower-than-expected loan disbursements. As such, we cut our earnings forecast for FY26-28F by 9-12%, as we lower our financing receivables assumption to account for RCE’s cautious lending stance and increased competition especially from digital lenders. We maintain our Neutral rating on RCE, as we are concerned of the group’s asset quality as non-performing financing (NPF) ratio is still elevated. Post earnings adjustment, our DDM derived TP is lowered to RM1.22.
- Results review. 1QFY26 revenue grew marginally by 0.8% YoY, due to higher fee income from increased disbursements. Despite the higher revenue, RCE’s net profit declined 14% YoY to RM26m, dragged by higher credit cost given early retirement while self-declared bankruptcy trends continued to increase.
- Financing receivables growth tapered off slightly. RCE saw its financing receivables eased marginally by 0.2% QoQ, likely due to the high base effect in 4QFY25 following salary adjustments. While credit demand is still resilient, management continues to adopt a cautious lending approach amid a challenging operating environment. Recall that the Malaysian Anti-Corruption Commission had earlier dismantled a financial syndicate that facilitated personal loans for blacklisted civil servants through falsified documentation. As such, we lower our financing receivables growth assumption to 1-2% for FY26-28F (from 3% previously).
- Early signs of easing for impairments. While impairment provisions eased 25% QoQ, signaling early signs of moderation, we are still cautious on RCE’s asset quality, given the persistently high bankruptcy rate and early retirement cases within the civil service. RCE’s NPF ratio climbed to a record 4.8% reflecting ongoing concerns over the credit quality of new customers. We understand that RCE provided an additional one-off c.RM3m impairment, to reflect lower repayments following a revision in debt service ratio (DSR) treatment, which now excludes certain allowances. Previously, these allowances were factored into the 60% DSR threshold, enabling higher financing eligibility. However, the exclusion had resulted in lower financing eligibility and payroll deductions, leading to only partial repayments of financing to RCE. As such, RCE has provisioned for the impacted portion of the portfolio.
| FYE Mar (RM’m) | 2024A | 2025A | 2026F | 2027F | 2028F | CAGR |
|---|---|---|---|---|---|---|
| Operating Income | 281.1 | 259.5 | 257.5 | 273.9 | 288.5 | 3.6% |
| Pre-provision profit | 215.1 | 195.0 | 195.0 | 207.8 | 220.0 | 4.1% |
| Pre-tax profit | 184.8 | 146.5 | 159.2 | 172.1 | 184.2 | 7.9% |
| Core net profit | 138.8 | 105.5 | 121.0 | 130.8 | 140.0 | 9.9% |
| EPS (sen) | 9.5 | 7.2 | 8.2 | 8.9 | 9.5 | |
| P/E (x) | 11.6 | 15.3 | 13.3 | 12.3 | 11.5 | |
| DPS (sen) | 7.5 | 6.5 | 5.8 | 6.2 | 6.7 | |
| Dividend Yield (%) | 6.8 | 5.9 | 5.2 | 5.7 | 6.1 |
Source: Company, PublicInvest Research estimates
| FYE Mar (RM’m) | 1Q26 | 1Q25 | 4Q25 | YoY chg (%) | QoQ chg (%) | YTD FY26 | YTD FY25 | YoY chg (%) | Comments |
|---|---|---|---|---|---|---|---|---|---|
| Interest income | 71.2 | 72.0 | 76.6 | -1.2 | -7.0 | 71.2 | 72.0 | -1.2 | |
| Interest expense | -24.2 | -25.5 | -24.9 | -5.2 | -2.9 | -24.2 | -25.5 | -5.2 | |
| Net interest income | 47.0 | 46.5 | 51.7 | 1.1 | -9.0 | 47.0 | 46.5 | 1.1 | |
| Other non-profit income | 16.6 | 15.9 | 25.0 | 4.2 | -33.8 | 16.6 | 15.9 | 4.2 | YoY growth on higher fee income |
| Operating income | 63.6 | 62.4 | 76.7 | 1.9 | -17.1 | 63.6 | 62.4 | 1.9 | |
| Directors’ remuneration and staff cost | -7.5 | -7.3 | -7.6 | 3.1 | -0.9 | -7.5 | -7.3 | 3.1 | |
| Allowances for impairment loss | -11.3 | -7.7 | -15.0 | 46.1 | -24.6 | -11.3 | -7.7 | 46.1 | Higher credit cost as early retirements and bankruptcy cases remains elevated, including one-off impairment of RM3m |
| Impairment of goodwill on consolidation | 0.0 | 0.0 | -19.0 | 0.0 | -100.0 | 0.0 | 0.0 | 0.0 | |
| Depreciation and amortisation | -1.3 | -1.1 | -1.0 | 23.8 | 32.3 | -1.3 | -1.1 | 23.8 | |
| Other expenses | -7.9 | -5.8 | -6.6 | 35.1 | 19.8 | -7.9 | -5.8 | 35.1 | |
| Finance cost | 0.0 | 0.0 | 0.0 | -86.9 | -85.8 | 0.0 | 0.0 | -86.9 | |
| Profit before tax | 35.5 | 40.4 | 27.5 | -12.1 | 29.2 | 35.5 | 40.4 | -12.1 | |
| Taxation | -9.5 | -10.1 | -10.6 | -6.0 | -10.3 | -9.5 | -10.1 | -6.0 | |
| Net profit | 26.0 | 30.3 | 16.9 | -14.1 | 53.9 | 26.0 | 30.3 | -14.1 | |
| Core net profit | 26.0 | 30.3 | 35.9 | -14.1 | -27.5 | 26.0 | 30.3 | -14.1 | |
| Gross financing receivables | 2087.4 | 2074.4 | 2090.7 | 0.6 | -0.2 | ||||
| Allowance for impairment | -144.2 | -129.9 | -140.7 | 11.0 | 2.5 | ||||
| Net financing receivables | 1943.2 | 1944.4 | 1950.1 | -0.1 | -0.4 | ||||
| Gross NPF ratio (%) | 4.8 | 4.2 | 4.6 | NPF climbed to all-time high | |||||
| Total borrowings | 2202.5 | 2162.6 | 2058.0 | 1.8 | 7.0 |
Source: Company, PublicInvest Research
INCOME STATEMENT DATA
| FYE Mar (RM’m) | 2024A | 2025A | 2026F | 2027F | 2028F |
|---|---|---|---|---|---|
| Interest income | 290.8 | 284.3 | 280.9 | 298.9 | 315.1 |
| Interest expense | -98.5 | -100.3 | -100.3 | -103.3 | -106.4 |
| Net Interest Income | 192.3 | 184.0 | 180.6 | 195.6 | 208.7 |
| Non-interest income | 88.8 | 75.5 | 76.9 | 78.3 | 79.7 |
| Staff costs | -32.2 | -33.9 | -32.2 | -34.1 | -35.9 |
| Other operating expenses | -33.6 | -30.5 | -30.2 | -31.7 | -32.4 |
| Pre-provision profit | 215.1 | 195.0 | 195.0 | 207.8 | 220.0 |
| Allowance for impairment | -30.2 | -37.5 | -35.7 | -35.7 | -35.7 |
| Profit Before Tax | 184.8 | 146.5 | 159.2 | 172.1 | 184.2 |
| Income tax | -46.1 | -41.0 | -38.2 | -41.3 | -44.2 |
| Net profit | 138.8 | 105.5 | 121.0 | 130.8 | 140.0 |
| Core net profit | 138.8 | 124.5 | 121.0 | 130.8 | 140.0 |
Growth
| Interest income (%) | Pre-provision Profit (%) | Net Profit (%) | |
|---|---|---|---|
| 2024A | 3.6 | 1.2 | 0.0 |
| 2025A | -2.2 | -9.3 | -23.9 |
| 2026F | -1.2 | 0.0 | 14.7 |
| 2027F | 6.4 | 6.6 | 8.1 |
| 2028F | 5.4 | 5.8 | 7.1 |
Source: Company, PublicInvest Research estimates
BALANCE SHEET DATA
| FYE Mar (RM’m) | 2024A | 2025A | 2026F | 2027F | 2028F |
|---|---|---|---|---|---|
| Property, Plant and Equipment | 7.3 | 4.9 | 6.6 | 6.6 | 7.6 |
| Financial Receivables | 2100.4 | 2090.7 | 2111.6 | 2143.3 | 2186.2 |
| Cash and Deposits with Banks | 840.2 | 767.5 | 846.9 | 919.1 | 984.6 |
| Other Assets | 47.7 | 123.0 | 119.1 | 118.0 | 116.2 |
| Total Assets | 2995.6 | 2986.2 | 3084.2 | 3187.0 | 3294.5 |
| Trade and Other Payables | 34.6 | 34.3 | 34.3 | 34.3 | 34.3 |
| Interest-bearing Debt | 2119.6 | 2058.0 | 2119.8 | 2183.4 | 2248.9 |
| Other Liabilities | 11.7 | 54.3 | 54.3 | 54.3 | 54.3 |
| Total Liabilities | 2165.8 | 2146.6 | 2208.4 | 2272.0 | 2337.5 |
| Shareholders’ Equity and Minority | 829.8 | 839.5 | 875.8 | 915.1 | 957.1 |
| Total Equity and Liabilities | 2995.6 | 2986.2 | 3084.2 | 3187.0 | 3294.5 |
Source: Company, PublicInvest Research estimates
PER SHARE DATA & RATIOS
| FYE Mar | 2024A | 2025A | 2026F | 2027F | 2028F |
|---|---|---|---|---|---|
| Book Value Per Share (RM) | 0.6 | 0.6 | 0.6 | 0.6 | 0.7 |
| P/BV | 1.9 | 1.9 | 1.8 | 1.8 | 1.7 |
| EPS (Sen) | 9.5 | 7.2 | 8.2 | 8.9 | 9.5 |
| DPS (Sen) | 7.5 | 6.5 | 5.8 | 6.2 | 6.7 |
| Payout Ratio (%) | 79.4 | 90.4 | 70.0 | 70.0 | 70.0 |
| ROA (%) | 4.6 | 3.5 | 3.9 | 4.1 | 4.3 |
| ROE (%) | 16.7 | 12.6 | 13.8 | 14.3 | 14.6 |
Source: Company, PublicInvest Research estimates
DISCLAIMER
This document has been prepared solely for information and private circulation only. It is for distribution under such circumstances as may be permitted by applicable law. The information contained herein is prepared from data and sources believed to be reliable at the time of issue of this document. The views/opinions expressed herein are subject to change without notice and solely reflects the personal views of the analyst(s) acting in his/her capacity as employee of Public Investment Bank Berhad (“PIVB”). PIVB does not make any guarantee, representations or warranty neither expressed or implied nor accepts any responsibility or liability as to its fairness liability adequacy, completeness or correctness of any such information and opinion contained herein. No reliance upon such statement or usage by the addressee/anyone shall give rise to any claim/liability for loss of damage against PIVB, Public Bank Berhad, its affiliates and related companies, directors, officers, connected persons/employees, associates or agents.
This document is not and should not be construed or considered as an offer, recommendation, invitation or a solicitation of an offer to purchase or subscribe or sell any securities, related investments or financial instruments. Any recommendation in this document does not have regards to the specific investment objectives, financial situation, risk profile and particular needs of any specific persons who receive it. We encourage the addressee of this document to independently evaluate the merits of the information contained herein, consider their own investment objectives, financial situation, particular needs, risks and legal profiles, seek the advice of their, amongst others, tax, accounting, legal, business professionals and financial advisers before participating in any transaction in respect of any of the securities of the company (ies) covered in this document.
PIVB, Public Bank Berhad, our affiliates and related companies, directors, officers, connected persons/employees, associates or agents may own or have positions in the securities of the company(ies) covered in this document or any securities related thereto and may from time to time add or dispose of, or may be materially interested in, any such securities. Further PIVB, Public Bank Berhad, our affiliates and related companies, associates or agents do and/or seek to do business with the company(ies) covered in this document and may from time to time act as market maker or have assumed an underwriting commitment in the securities of such company(ies), may sell them or buy them from customers on a principal basis, may have or intend to accommodate credit facilities or other banking services and may also perform or seek to perform investment banking, advisory or underwriting services for or relating to such company(ies) as well as solicit such investment advisory or other services from any entity mentioned in this document. The analyst(s) and associate analyst(s) principally responsible for the preparation of this document may participate in the solicitation of businesses described aforesaid and would receive compensation based upon various factors, including the quality of research, investor client feedback, stock pickings and performance of his/her recommendation and competitive factors. The analyst(s) and associate analyst(s) may also receive compensation or benefit (including gift and company/issuer-sponsored and paid trips in line with the Bank’s policies) in executing his/her duties. Hence, the addressee or any persons reviewing this document should be aware of the foregoing, amongst others, may give rise to real or potential conflicts of interest.
