KUALA LUMPUR (July 23): Shares in RCE Capital Bhd (KL:RCECAP) rose on Tuesday and recorded their biggest single-day gain in more than two months, following a proposed one-for-one bonus share issue.

RCE Capital rose as much as 28 sen or nearly 10% to RM3.20, its highest since Jan 26. The stock closed at RM3.14 and logged its best day since May 2, 2024. At the closing price, the consumer finance company has a market value of RM2.33 billion.

The stock was also more active than usual, with 2.54 million shares changing hands, nearly six times the trading volume’s 20-day moving average.

“We are positive on this proposal, as we believe that the bonus issue will enhance the marketability of its shares”, making the stock more appealing and improve the trading liquidity, said Public Investment Bank. If the proposal goes through, RCE Capital’s target price will be adjusted to RM1.56, it noted.

The latest bonus share announced on Monday would be the company's second issue in more than two years. In January 2022, RCE Capital issued 19 bonus shares for every 21 ordinary shares, and distributed one treasury share for every 20 ordinary shares.

Shares in RCE Capital have been volatile. The stock climbed amid optimism about an earnings boost as a result of an upcoming increase in civil servants’ salaries, before tumbling following the company's results announcement. Year to date, the stock barely changed, with just a 2% gain following Tuesday’s boost.

Analysts remained cautious, with three out of four having ‘hold’ or ‘neutral’ recommendations. RHB Investment Bank has the stock on a ‘sell’ call. The 12-month consensus target price is RM2.89, according to Bloomberg.

“We are keeping our eyes peeled for more details of the upcoming civil service salary hike,” Maybank Investment Bank flagged. Investors should watch for details of the salary increase to be announced on Aug 16, the house noted.

There is a “strong correlation” between government emoluments and RCE Capital’s financing receivables balance, the investment bank said, adding that if the effective raise in salaries of civil servants is higher than 15%, earnings estimates for RCE Capital could be revised up.

On May 1, Prime Minister Datuk Seri Anwar Ibrahim announced an increase in civil servants’ salaries by at least 13% from Dec 1 this year. The increase would cost the government an additional allocation of over RM10 billion.