RCE jumps on bonus, rights issue plan

RCE Capital Bhd, a consumer-credit provider, advanced 5.8 per cent to 54.5 sen, bound for its highest close since July 7.

The company proposed a one-for-two bonus issue and rights issue, it said in a statement. - Bloomberg



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RHB Research expects RCE 4Q earnings to weaken

KUALA LUMPUR (Feb 15): RHB Research Institute said RCE’s 3QFY03/12 net profit of RM24.8 million (down 24.4% on-year; down 7.8% on-quarter) was in line with its and consensus expectations.

It said on Wednesday that this was despite 9MFY12 net profit of RM84.9 million (down 3.2% on-year) accounted for 83.5%-84.5% of its and consensus full-year net profit forecasts.

“We expect 4Q11 to weaken further amid a loan book that continues to contract and in the absence of further gains from sale of AMFIRST REITS [] now that RCE has fully disposed off its holdings in the REIT,” it said.

RHB Research said its fair value of 57 sen was unchanged and based on target CY12 PER to 4.5 times. Market Perform call maintained.



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HDBSVR: KLCI to trade sideways with slight positive bias

KUALA LUMPUR (Feb 15): HwangDBS Vickers Research said the FBM KLCI, which has been stuck inside a tight eight-point band over the last three days – will probably move sideways with a slight positive bias ahead.

“Technically speaking, the immediate support and resistance levels for the bellwether are currently seen at 1,555 and 1,580, respectively,” it said on Wednesday.

HDBSVR said in terms of news flows, Bank Negara Malaysia will announced the fourth quarter GDP data. It added that one media poll has projected an annual rise of 4.8% in the economic indicator during the quarter.

On the corporate front, stocks under watch may include: (a) RHB Capital, in response to a local business daily report that said major shareholder Aabar Investments is believed to be looking for a buyer for its 25% equity stake in the Malaysian banking group;

(b) Dayang Enterprise, after winning a maintenance services contract valued at RM125 million; and

(c) RCE Capital, which has proposed a one-for-two bonus issue and a rights issue of two redeemable convertible preference shares for every five shares held after the proposed bonus issue at an issue price to be determined later.



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Stocks to watch: AMMB, Dialog, RCE, Tebrau Teguh

KUALA LUMPUR (Feb 15): With the broader market showing signs of weakness, whether the market can perk up again hinges on fresh corporate developments and earnings which are going into full swing next week.

Also over the past two trading days, late fund support has helped the FBM KLCI close higher but volume has been declining in the broader market, with recent leaders among penny stocks and lower liners fading.

On the economic front, Bank Negara Malaysia is scheduled to release its fourth quarter GDP data after market. Most importantly, investors would want to hear is Bank Negara Malaysia’s assessment of the economy and its outlook.

As for stocks, among those which could see trading interest are AMMB HOLDINGS BHD [], DIALOG GROUP BHD [], RCE CAPITAL BHD [] and TEBRAU TEGUH BHD []. Naim Indah could also see trading interest with downside bias as more traders take profit.

AMMB posted net profit of RM357.18m for the third quarter ended Dec 31, 2011, up 9.8% from the RM325.31 million a year ago underpinned by profit growth across most divisions. Its revenue increased 7.2% to RM1.955 billion from RM1.824 billion. Earnings per share were 11.95 sen compared with 10.83 sen.

For the nine-months ended Dec 31, 2011, its earnings increased by 13.8% to RM1.168 billion from RM1.026 billion in the previous corresponding period. Its revenue registered a 14% increase to RM6.047 billion from RM5.302 billion.

Dialog’s earnings rose 15.1% to 41.45 million in the second quarter ended Dec 31, 2011 from RM35.99 million a year ago, boosted by higher revenue from the consolidation of its new businesses and operations.

Its revenue increased at a stronger pace of 33.5% to RM358.62 million from RM268.53 million. Its earnings per share were 2.10 sen compared with 1.84 sen.

Meanwhile, Dialog’s 396.87 million rights shares issued under its rights issue with warrants will be listed and quoted on Wednesday.

Bernama reports RCE Capital Bhd's pre-tax profit fell 10.4% to RM105.237 million for the nine-month period ended Dec 31, 2011 from RM117.44 million a year ago. The decrease was due to the loan financing segment, which posted a lower pre-tax profit by RM8.6 million arising from lower interest income generated from its loans and receivables.

For the third quarter, RCE Capital posted a lower pre-tax profit of RM30.645 million compared with RM42.401 million a year ago. Its revenue declined to RM61.11 million from RM77.179 million.

Meanwhile, the Malay Chamber of Commerce Malaysia (MCCM) Johor has announced its plan to acquire a 33.15% stake in Tebrau Teguh from Kumpulan Prasarana Rakyat Johor Sdn Bhd (KPRJ).

Its president Syed Ali Alattas was quoted saying by Bernama that MCCM Johor, supported by MCCM, would be offering KPRJ 80 sen per share or about RM177 million.

"We will send the official letter by the end of the month," Syed Ali, who is also MCCM president, said on Tuesday. He added MCCM Johor was also willing to buy KPRJ's 41.15% stake in Tebrau Teguh.

KPRJ plans to sell a 33.15% stake in Tebrau Teguh to Iskandar Waterfront Holdings Sdn Bhd (IWH) for 76 sen a share, or RM168.7 million in total. The move will result in IWH having to make a mandatory general offer for the rest of Tebrau Teguh’s shares at the same price.

KPRJ, which is the Johor state’s investment arm, currently owns a direct 41.15% stake in Tebrau Teguh. IWH is owned by KPRJ and Credence Resources Sdn Bhd.



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RCE feeling the heat from the competition?

RCE Capital Bhd (Nov 29, 47.5 sen)
Maintain market perform, fair value of 50 sen: RCE Capital Bhd’s net profit of RM26.9 million for 2QFY12 ended Sept 30 (-13.9% year-on-year [y-o-y]; -19.1% quarter-on-quarter [q-o-q]) was slightly ahead of our and consensus expectations. The 1H12 net profit of RM60.1 million (+9.5% y-o-y) accounted for 62.4% of our and 61.3% of consensus full-year net profit forecasts.

The key variances were further gains recognised from the sale of AmFirst REITs (RM2.1 million during the quarter) and low effective tax rate of 19.4% in 1HFY12 (against our assumption of 25%). As expected, RCE did not declare any dividend.

Q-o-q net profit fell 19.1% due to: (i) 3.2% q-o-q drop in revenue as RCE’s loan book continued to contract and lower interest from early settlement of loans; (ii) lower gain from sale of AmFirst REITs (1QFY12: RM3.8 million); (iii) higher loan impairment allowance of RM2.3 million against 1QFY12’s RM400,000; and (iv) higher effective tax rate of 22.7% than 1QFY12’s 16.5%.

Revenue for 1HFY12 was down 10.4% y-o-y due to a smaller loan base but net profit was up 9.5% y-o-y due to: (i) RM5.9 million gain from sale of REITs; (ii) lower loan impairment allowance of RM2.7 million against 1HFY11’s RM5.7 million; and (iii) lower effective tax rate of 19.4% versus 1HFY11’s 26.9%.

RCE’s net loan book as at end-September 2011 contracted by 2.1% q-o-q (-11.9% y-o-y). This could reflect the stiff competition, resulting in the refinancing/early settlement of loans by borrowers. RCE said early settlement of loans slowed during the quarter. Coupled with the resumption of disbursements to Koperasi Wawasan Pekerja-Pekerja Bhd (Kowaja) in July 2011, the pace of contraction of RCE’s loan book moderated in 2QFY12 compared with 1QFY12 (-9.4% q-o-q; -7.6% y-o-y).

The risks would be slower than expected loan growth and weaker than expected margins, which could be due to, for example, competition and regulatory issues.

We raise our FY12 net profit forecast by 5.2% after imputing higher gains from the disposal of AFS securities and a lower effective tax rate assumption of 22.5%. We are keeping our FY13/FY14 net profit projections unchanged for now.

Our fair value of 50 sen is unchanged and based on target calendar year 2012 price-earnings ratio of four times. We think the operating environment remains challenging amid stiff competition from the likes of Malaysia Building Society Bhd.

Regulatory changes could exacerbate the situation. As Bank Negara Malaysia said recently, Suruhanjaya Koperasi Malaysia (SKM) will be imposing requirements for responsible financing practices on credit cooperatives.

We think these concerns have been partly reflected in RCE’s valuations so we are keeping our “market perform” call on the stock. — RHB Research, Nov 29


This article appeared in The Edge Financial Daily, November 30, 2011.



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