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PublicInvest Research
RCE’s 4QFY25 headline net profit fell 42% YoY to RM16.9m, dragged by higher
impairment allowances and a one-off goodwill impairment. After adjusting for the
one-off item, RCE’s core net profit came in at RM35.9m, bringing FY25 core net
profit to RM124.8m. Results were in-line with our and consensus estimates,
accounting for 97% and 98% respectively.
Nevertheless, we cut our earnings
forecast for FY26-27F by an average of 5% as we raise our credit cost assumption
on concerns over asset quality. While dividend yield appears attractive at 5%
following the share price retracement, we maintain our Neutral call on RCE as we
think RCE’s valuation remains lofty, trading at +1SD from its 5-year average P/BV
of 2.2x. Following our earnings adjustment, our DDM derived TP is reduced to
RM1.42. On a side note, RCE declared a second interim dividend of 3.5sen (FY25:
6.5sen), translating to a dividend payout ratio of 77%.
Financing disbursements reached all-time high in Jan. Credit demand
among civil servants surged after the salary adjustment in Dec 2024, which
resulted in an all-time high financing disbursements in Jan 2025. This led to a
1.8% QoQ financing receivables growth. We expect financing receivables
growth to moderate going forward, on the absence of festive season and a
normalisation in credit demand post salary adjustments.