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.