PETALING JAYA: The outlook for credit financing provider RCE Capital Bhd
, which focuses on lending to civil servants, is still unclear, with analysts providing differing opinions on the company’s business prospects.
The company on Tuesday reported net profit of RM29.31mil for its second quarter ended Sept 30 (2Q26).
This was 5.3% higher compared with the same quarter a year ago, while revenue increased 2.8% to RM82.67mil.
It declared a first interim dividend of three sen per share.
CIMB Research, which has maintained a “reduce” call on the stock with an unchanged target price of RM1, said 2Q26 net profit fell short of expectations, accounting for 45% of estimates for the company’s financial year ending June 30, 2026 (FY26).
“Although RCE’s lending franchise remains anchored on payroll deduction financing for civil servants, the sizeable exposure to the bottom 40% (B40) income group continues to expose RCE to vulnerable economic shocks as the B40 group is sensitive to cost of living pressures and may have thinner financial buffers,” the research house said.
“Consequently, although RCE may continue delivering a stable dividend yield of 6%, this stability may be at risk if RCE is unable to accurately predict structural changes in consumer behaviour and more sophisticated fraud,” the research house said, adding that its earnings forecasts for the company have been revised downward 5.4% for FY26, down 2.9% for FY27, and up 0.3% for FY28.
Meanwhile, Maybank Investment Bank Research upgraded its call to a “buy” from “hold” and raised its target price to RM1.16 from RM1.12, as RCE’s 2Q26 results were in line with its expectations.
“Of note, RCE’s quarterly earnings grew year-on-year (y-o-y) for the first time after seven consecutive quarters of declining y-o-y,” the research house said.
“In a similar vein, its non-performing financing (NPF) ratio appears to be moderating, and this translated into lower credit cost,” it said.
The research house said the NPF ratio had eased to 4.7% from a high of 4.8% in 1Q26 as bankruptcies, resignations and early retirements among civil servants had begun to moderate, although it was still high historically.
The research house pointed out that the moderation could be due to a 8% rise in civil service salaries last December, with the company accelerating its financing activity.
It could also possibly lower its NPF ratio January next year when a second salary hike of 7% for the civil service takes effect.
“Our earnings estimates are premised on RCE’s gross financing receivables growing 2% a year,” the research house said, noting that gross financing receivables for 2Q26 grew only 38 basis points quarter-on-quarter as RCE remains cautious on disbursements.
It added that the 25-basis-point cut in the benchmark interest rate should lift earnings by 3% a year in the long term.
