RCECap: Huge Dividend Payout

Result Update

For QE30/6/2015, RCECap's net profit was mix- down 15% q-o-q but rose 37% y-o-y - to RM9.4 million on the back of higher revenue (up 7% q-o-q or 23% y-o-y to RM37 million). NP dropped q-o-q due to lower impairment loss of RM4.7 million in the preceding quarter (QE31/3/2015) offset by higher net interest income of RM1.1 million. 


Table: RCECap's last 8 quarterly results

Looking at the Chart 1, we can see that RCECap's financial performance, which had been sliding for the past 3 years, had made a bottom. There are early signs that its financial performance may improve going forward.


Chart 1: RCECap's last 33 quarterly results

Huge Dividend Payout Announced

RCECap announced a final dividend of 15% and a special dividend of 105%. This translates into a total dividend payout of 12% since the share par value is 10 sen. The entitlement date is 22 September 2015.

Valuation

RCECap (closed at RM0.34 yesterday) is now trading at a PE of 14.3 times, a Price to Book of 1 time and has a dividend yield of 8.8% (excluding special dividend). At these multiples/yield, RCECap is deemed fairly valued. [Note: RCECap was trading at RM0.39 as at 11.45am.]

Technical Outlook

RCECap broke above its downtrend line, RR at RM0.30 in early part of 2014. A short-term uptrend has begun with support at RM0.32-0.33.


Chart 2: RCECap's monthly chart as at Aug 7, 2015_10.00am (Powered by ShareInvestor.com)

Conclusion

Based on improved financial performance, fair valuation & mildly positive technical outlook, RCECap is good stock for long-term investment. However, the sudden sharp rally to RM0.39-0.40 means that the huge dividend payout has already been factored into the share price. Thus, you should consider taking profit at the present price of RM0.39-0.40 and buyback at prices closer to RM0.32-0.33.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, RCECap.