Wednesday, February 15, 2012

RCECap- still going strong

Results Update

RCECap has just released its results for QE31/12/2011. Its net profit dropped 8% q-o-q or 24% y-o-y to RM25 million while revenue was mixed; up 4% q-o-q but down 21% y-o-y to RM61 million. Revenue inched up q-o-q due to increased loan base while bottom-line was impact by higher impairment loss of RM8.4 mil which more than offset the improved net interest margin (reflected in higher interest income of RM2.4 mil & lower funding cost of RM3.0 mil).

Table: RCECap's last 8 quarterly results

From the two charts below, we can see that RCECap has managed to maintain its revenue at about RM60 million each quarter. RCECap faces stiff competition from MBSB & Bank Rakyat which impact the top-line as well as the net interest margin. Thus, the slide in the net profit margin in Chart 2. However, the latest report seems to suggest that RCECap is able to hold its own as MBSB & Bank Rakyat, with improvement in loan base & net interest margin. If this improvement can be sustain, RCECap's earning may improve in the coming quarters.

Chart 1: RCECap's last 19 quarterly results

Chart 2: RCECap's net profit margin for last 19 quarterly results


RCECap (closed at RM0.515 yesterday) is now trading at a PE of 4 times (based on last 4 quarters' EPS of 12.98 sen). At this PE multiple, RCECap is deemed fairly attractive. [Note: As at 9.45 am, RCECap was trading at RM0.54.]

Technical Outlook

RCECap has been testing the 3rd fan downtrend line (R-R3) at RM0.52. If it can break above this downtrend line, the stock could start its next upleg. The indicators are slowly turning upwards- MACD is inching into positive territory, RSI had a bullish breakout and ADX reading is positive with +DMI cut above the -DMI. All in all, the technical outlook for RCECap is constructive and the stage is well-prepared for a small rally. Immediate resistance at RM0.54-0.55 and then RM0.60 & RM0.70.

Chart 3: RCECap's weekly chart as at Feb 14, 2012 (Source: Quickcharts)


Based on satisfactory financial performance (albeit still a drop in earning), cheap valuation & mildly positive technical outlook, RCECap is a good stock to consider for medium-term investment.


DenveR said...

Hi Alex,
Could you comment on Dialog? What is your view of their latest quarterly report? Is the Dialog PER consider high?


billyboy said...

hi alex,

any view on perisai?

luckystock2 said...

Hi Alex,
Can you comment on Mediac? Look like the expected rally will fail?

Meteoric said...

The timing couldn't be any better for RCECAP to have bonus issue and RCPS now. Its share price has been in downtrend for some time for more than a year despite having a set of good profit record. It is probable that the KOWAJA's incidence was part of a grand plan. Is there going to be a major change in RCECAP core business as well as shareholdings after the above mentioned excercise?

Alex Lu said...

Hi Meteoric

I don't think there is or will be a change in its main businesses.

Alex Lu said...

Hi luckystock2

Mediac is capped by its horizontal resistance at RM1.23-1.25. If it can break above that level, it may go to RM1.50.

Alex Lu said...

Hi DenveR

If you look at the trailing PE of 35 times, Dialog would appear expensive. However, Dialog has a lot of things going for it. These include the development of a tank farm in Johor, marginal oil field, etc. The share price reflects all these developments.

Alex Lu said...

Hi billyboy

Perisai's immediate resistance is at RM1.00. Can it go above that level? If it can, it may go to RM1.80.

DenveR said...

Dear Alex,
Thank you for your view on Dialog, appreciate it :)