RCE-Good Investment Stock

I attached an analysis of RCE Capital by Market Analyzer Malaysia. I have always fancied this stock though I hardly buy into it.

Here is his report in verbatim.

"RCECAP recorded profit after taxation of RM66.6 million despite the slowdown in the economy, thanks to the growing volume of loan receivables. At the closing price of RM0.62 per share as at 25 June 2009, the shares is considered undervalued after taking into account the following factors:

a) Nature of the business

Being a company with the main activity of lending money to government servants through strategic tie-up with cooperatives and recovered through monthly deductions of salaries, the company's non-performing loan has always been low for the past few years. The main source of funding is through equity of RM71 million and borrowing (including bonds)which amounted to RM932 million as at 31 March 2009; and the Company made gains through the margin. The company has obtained approval from SC to issue RM1.5 billion bonds (including above-mentioned borrowings) and thus there is a room for continuous growth of the Company's loan base.

b) Financial analysis

At the price of RM0.62, and EPS of RM0.094, the PE ratio of 6.6 is considered low. Coupled with the double digit growth for the loan receivable (77% and 40% for FY2008 and 2009 respectively) and revenue income (63% and 34% for FY2008 and FY2009 respectively), there is still an upside potential for the shares.

Historical news:

i) Credit company RCE Capital Bhd wanted to acquire a stake in Malaysia Building Society Bhd (MBSB) from the controlling shareholder, Employees Provident Fund (EPF) - 2007 - no further news.

ii) RCE Capital Bhd aimed to penetrate Vietnam's financial market by forming a joint venture company with Southern Bank Vietnam (SBV) in Ho Chi Minh City - Plan failed to materialise.

Future outlook

The growth of the company is expected to continue and will not be hindered by the current economic recession, given its unique way of recovery of its receivables . Taking into account the above factors, the targeted price of the company should not be less than RM1.00."

Wow, if the price should be RM1.00, there is so much upside to go.

Anyway, they have yet to pay their 10 sen dividend.

Whatever the case, I would caution against dabbling too much. Best to wait for a bad market fall before committing more funds.