Review RCECAP!

RCECAP has achieved stable growth in net income for 9 consecutive years, which is very commendable for a listed company in Malaysia. In the latest quarter, RCECAP's revenue reached RM87.8 million and its net income was RM38.2 million. The profit margin reached 43.6%. The net income of RM38.2 million has grown by 4.7% compared to the same period last year. It is worth mentioning that its net income has been growing YoY for 5 consecutive quarters.

First of all, RCECAP is not like ordinary traditional banks. RCECAP cannot accept any deposits, so it needs to cooperate with various cooperatives and funds to finance and provide loan funds. Therefore, its financing cost is relatively higher compared to conventional banks. Even so, we need to understand that the cost of financing can be easily passed on to borrowers as long as there is a consumer cohort. That's why its profit margin can be above 40%. As any new government in the past has provided good treatment and salary increases to government employees, their borrowing capacity has also become stronger, allowing them to borrow more. In addition, when the central bank lowers interest rates, it can also reduce RCECAP's financing costs.

RCECAP's main customer cohort is government employees. Currently, Malaysia has 1.7 million government employees, but RCECAP's financing liability is only RM2.14 billion. Roughly calculated, each government employee borrows less than RM1300 from RCECAP. From this perspective, RCECAP's market share is still very low and there is a lot of room for growth. When lending to government employees, RCECAP collects loan repayments through involuntary salary deductions, allowing them to keep bad financing under control.

Of course, RCECAP also provides many conveniences to its customers. The loan balance for government employees increases with salary growth, so each government employee has a corresponding loan quota, making it easier to get approved for a loan. Once the loan is approved, customers can receive their money within 48 hours. That's why many government employees consider borrowing from RCECAP.

Currently, RCECAP's PE and ROE are only 13.58 and 17.34, respectively. An ROE of 17.34 is relatively high compared to other banks. RCECAP's dividend payout rate will increase from the previous 76% to 80%. Currently, RCECAP's dividend yield is 11.28%, mainly due to a special dividend payout in FY23. If the company's performance continues to grow, dividends will also increase. We can continue to monitor this company.

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