RCECAP Q1 2020

1. Revenue increased by 5.8% while interest expense increased by 9.8%. 
2. Allowances for impairment loss on receivables reduced by 28% which means the quality of the loan are improving. 
3. Net profit improved by 3.9%. 

1. Bank borrowings reduced by 8.8% hence gearing ratio further reduce from 1.91 to 1.81. This will reduce the interest expense of RCECAP and further strengthen its balance sheet.
2. Loan and receivables grew by 1.5%. 

• Nothing much being mentioned other than the group expect the company to be profitable. 

Comments

1. Valuation of RCECAP at RM1.57
• PE: 5.6 which is the lowest in the 5 years period considering the share price is at high. [undervalue]
• CAGR from 2017 - 2019 is 5.54%, therefore at the PE of 5.6, its PEG ratio is 1.01 which is deemed to be fair.  If Rcecap dropped to RM1.5, its PEG ratio would be 0.97 which is undervalue. [undervalue]
• DY: If the company do a dividend payout of 35% in 2020 or equivalent to 10 sen, its DY would be 6.4% (this is comparable to Maybank dividend yield) [undervalue]
• NTA is RM1.65 which is higher than its share price of RM1.57. [undervalue]
• Price to book value is currently 0.87 which means we are paying 0.87 sen for a company asset that worth RM1.[undervalue]
• ROE is 15 which is 2 times higher than its PE. [undervalue]
• RCECAP fair PE should be 7 to 8.  At PE 7 Rcecap is worth RM1.96. At PE 8, Rcecap is worth RM2.24.