PETALING JAYA: CIMB Securities is expecting the fourth quarter (4Q) to be RCE Capital Bhd
’s strongest quarter, anticipating the latter’s net profit to rise 19.1% in the second half of financial year ending March 2025 (2H25) compared to 1H25.
This optimism stems from the upcoming 7% to 15% civil servant salary hike, starting from Dec 1, 2024, which is the first phase of the hikes and coinciding with the upcoming festive season, said the research unit.
Maybank Investment Bank Research (Maybank IB) believes future quarterly earnings for RCE ought to be higher, as the group has stated that there will be no more employee share scheme expenses to be recognised for the remainder of the financial year.
Moreover, gross financing receivables growth should accelerate from Dec 1 and there is a strong correlation between government emoluments and RCE’s gross financing receivables.
It forecast RCE’s gross financing receivables to grow by 15% over two years from December 2024.
CIMB Securities said the upcoming civil servant salary revision is expected to reduce the risk of early retirements and transition to the private sector by improving civil servants’ financial stability through increased disposable income, while also projecting a reduction in RCE’s non-performing financing or NPF ratio to 4%.
Having said that, the brokerage downgraded the stock to “reduce’’ on weaker earnings and cut its target price to RM1.37 a share. It said the downgrade is led by weaker 2Q25 results, while also reducing its net profit forecast by 13.1% for the financial year 2025 (FY25) and by 12.7% for FY26 to FY27.
It cut its receivable growth assumption to 4% for FY25 from 5% previously and raised its operating costs assumption to reflect higher staff costs.
CIMB Securities said key upside risks to its call include higher-than-expected receivable growth, higher-than-expected dividend, and the downside risk of higher-than-expected impairment loss on receivables.
It added that the holiday season (late December 2024 to early January 2025) and the school reopening (January 2025) typically lead to higher consumer spending and increased demand for financing.
Maybank IB said its earnings and dividend estimates were unchanged, while also maintaining its target price for the counter at RM1.45 a share. However, it downgraded its stock call for RCE to a “sell”.
