Rce Capital Bhd @ 29july2010

RCECAP is currently involved in the provision of financing to government servants through the Salary Deduction Scheme and factoring services. During FY09, the loan financing business was the main activity for the group, which accounted for 94% of the group PBT.

Customer: Government servants which have the huge market potential.

Pros:

1. Using salary deduction scheme which is very low risk for rcecap as rcecap will automatic receive loan payment from government servants, so which mean the possibility to get bad debt is low unless the government servants suddenly quit their job.

Cons:

1. It is not like commercial banking system use saving account money (low interest) to borrow to people. Its capital source is through bond or loan from other place (high interest). So it means it have to charge higher interest on government servant, which i think in long term, when government servant start to realise it, then will stop to borrow money from it.
2. From now, Rcecap is half monopoly this government servant market because commercial bank yet to get the license to enter this market, but what if the government start to re list new license? It definitely will hurt its business as commercial bank can provide cheaper interest rate.

 

ROE stands around 26%

Current market price RM 0.630

PE for last year is around 6

PE for last quarter is 5.4 (2.94 x 4)

Cash flow healthy, no bad debt problem..

Future target:

• RCE Capital continues to seek organic growth via cheaper funding and extension to the non-government sector. Additionally, the Company also aims to strengthen its distribution network and agency management on top of strategic arrangement with potential credit cooperatives to continue to expand its business. RCE Capital remains open to exploring opportunistic investment and complementary business, both locally and abroad.

 

Remarks:

• Recently RCECAP has changed its category to finance category. Based on bank company PE now is around 12 to 15, so it is consider undervalue.

Fundamental wise:

• By buying 63 cents company which give you 11.76 cents per year, which is 18.67% return, from business man point of view, it should be a good deal!
• Short-term receivables is greater than short-term liabilities.
• Long-term receivables is greater than long-term liabilities.

 

Source: http://www.rce.com.my/about.html
            Rcecap annual report 2009, 2008, 2007, 2006