04 Jan 2020
The Star : Top 20 stock picks for 2020
Top 20 stock picks for 2020

Head of Research
Rakuten Trade

Stock picks: RCE Capital Bhd

RCE Capital Bhd
Price: RM1.65

One of our stock picks for the year is financial services firm RCE Capital Bhd, given that it provides financing to over 80,000 civil servant customers via its salary deduction scheme.

We also believe the group has plenty of room to grow in 2020, with its 5% market share vis-a-vis Malaysia’s civil servant population.

RCE Capital has shown consistent improvements in asset quality over the years, while its non-performing loans (NPL) ratio stands at a healthy rate of about 4%.

The group also has a net interest margin of about 8%, which is higher than its industry peers.

We also note that the financial services firm has been enjoying cheaper cost of funding via its recent sukuk programme amounting to RM2bil.

Another reason we will be watching this stock is it undemanding valuation, given its current price to book value (P/BV) ratio of 0.9x, backed by an anticipated dividend yield of about 5%.

The stock performed well in 2019 – we saw buying momentum building up and we expect this to intensify in 2020.

While other non-bank financial institutions have also seen their stocks gain interest from investors, we believe RCE Capital provides an even better platform for investors.

Its salary deduction scheme for civil servants minimises the chances for NPLs, and the group is also careful about the quality of loans it provides, which allows it to maintain its NPLs at good levels.