PETALING JAYA: RCE Capital Bhd
’s earnings momentum will be sustained into the financial years of 2026 (FY26) and 2027 (FY27) and this will be led by enhanced growth in financing receivables as well as fee income, besides reduction in credit losses and non-performing financing.
CIMB Securities Research also expects improved earnings in the second quarter to fourth quarter of FY25.
This will be driven by a 3% to 7% rise in financing receivables and normalising impairment provisions, with 4Q25 expected to be the strongest quarter.
Much has to do with the phased rise in civil servants salaries as RCE provides personal financing at fixed rates to civil servants, who then make monthly repayments via direct salary deductions.
The new Public Service Remuneration System is set to be implemented in two phases on Dec 1, 2024 and Jan 1, 2026.
The strong boost in financing receivables with civil servant salary hikes coincides with festive celebrations, holidays, and back-to-school spending.
CIMB Securities Research maintained its FY25 to FY27 earnings forecasts and reaffirmed its “hold’’ call for RCE.
Its target price has been adjusted to RM1.49 a share to reflect the recent one-for-one bonus issue exercise.
It said its conservative assumption of a 70% dividend payout (versus FY24’s 80% and management’s dividend policy of 60% to 80%), which translates to a dividend yield of 4.5% to 4.9%, would support the share price.
The key upside risks cited include higher-than-expected receivable growth, and higher-than-expected dividend, while the key downside risks are higher-than-expected impairment loss on receivables.
It said the 2Q25 to 4Q25 period covers multiple major celebrations namely Christmas, Chinese New Year and Eid along with the holiday season between late Dec 2024 and early Jan 2025) as well as annual school re-opening in January.
The festivities and back-to-school school preparations typically lead to increased consumer spending, prompting higher demand for financing as consumers seek additional liquidity to manage heightened expenditures during this peak period. Its FY26 and FY27 earnings forecasts also incorporated a 5% growth in financing receivables, supported by strong economic growth and robust consumer spending.
