RCE Capital up 13.4% after posting record quarterly earnings

RCE Capital up 13.4% after posting record quarterly earnings
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KUALA LUMPUR (Nov 11): Non-bank financial institution RCE Capital Bhd rose as much as 26 sen or 13.4% to RM2.20 after the group achieved record quarterly earnings.

At 12.12pm, the counter stood at RM2.11, still up 17 sen or 8.76%. It saw 3.02 million shares changed hands.

The company announced yesterday that its net profit for the second quarter ended Sept 30, 2020 (2QFY21) rose 21.48% to RM32.99 million from RM27.16 million a year ago, on higher revenue and the manageable level of its operating costs.

Its revenue for 2QFY21 also increased by 8.19% to RM75.92 million from RM70.18 million a year ago, primarily led by the increase in early settlement income arising from higher refinancing activities by customers.

It also declared a first interim single-tier dividend of six sen per ordinary share.

For the six months ended Sept 30 (1HFY21), the group’s net profit grew 8.85% to RM55.82 million from RM51.28 million a year ago. Its revenue also climbed 2.57% to RM140.64 million from RM137.11 million in the year-ago period.

The group’s 2QFY21 and 1HFY21 results were within analysts’ expectations.

Maybank Investment Bank Research’s analyst Yin Shao Yang said in a note today that his records indicated that RCE's 2QFY21 earnings are a record high.

“That said, we caution that 2QFY21 earnings could have ‘played catch up’ with the 1QFY21 one. Thus, we think it wise to maintain our earnings estimates and RM2.09 target price (TP) based on target end-CY20 estimate price to book value (P/BV) of one time for now,” he said.

He maintained his "buy" call on the stock, and continued to like RCE for its relatively resilient business model and high dividend yields of about 6% per year.

Meanwhile, RHB Research Institute’s analyst Lee Wai Hoong and Fiona Leong also said in a note today that RCE is largely unaffected by the re-imposition of the Conditional Movement Control Order (CMCO), with both the underlying demand and asset quality still resilient.  

“At 0.8 time of FY22 forecast P/BV, we estimate RCE is still undervalued despite the consistent deliveries in both earnings and dividends,” they said.

They maintained their "buy" call on the stock with an unchanged target price of RM2.50. This translated into a yield of 6%.

Lam Jian Wyn