Posted by SunnySunshine > 2021-02-16 22:24 | Report Abuse

Good company

Posted by Xxxting > 2021-02-17 16:28 | Report Abuse

can i buy in now or wait till drop. or just the company will be uptrend all the way

Posted by Learner King > 2021-02-17 20:57 | Report Abuse

Just buy. if it drop than just averange down. U wont be dissapointed

Posted by moolala > 2021-02-17 21:53 | Report Abuse

All time high closing, looking forward to good days ahead

Posted by observatory > 2021-02-17 21:57 | Report Abuse

@Xxxting.

If I were you, I wouldn’t rely on buy/sell recommendations by others without doing my own homework. Even if the buy advice is right, I may panic into selling at a loss during a market shakedown if I don’t understand the fundamentals of the company.

I don’t even trust analyst recommendations. But just FYI the current analyst consensus is 1 strong buy, 1 buy and 1 hold.
https://www.bursamarketplace.com/mkt/themarket/stock/REDI/analystconsensus

Actually RCE Capital is one of my favorite stocks. It has good management and good business fundamentals. The question is whether the current price is right. During the past two quarters, the stock price has run up a lot faster than its good results. It may mean the market has “discovered” and re-rated it upwards. Another reason could be with its several quarters of steady performance, there is a chance of higher dividend from current 12 cents to 13 or even 14 cents.

But don't be misled by the seemingly low forward PE of 8 to 9 times. Current forward PE should be compared against the past 5 year average of only 6.5 times.

On another valuation measure Price to Book. At a closing price of RM2.89 today, the PB is 1.4 based on the latest book value per share at RM2.05. This corresponds to a respectable ROE of 16% to 17%. As a comparison, Malaysian largest bank Maybank has a lower PB ratio of 1.1, though an even lower ROE at 8% to 9%.

But RCE should have a discount against Maybank. RCE is in the lucrative but higher risk personal loan business targeting civil servants only. Maybank, on the other hand, is in a safer integrated bank business and a must-have in the portfolios of many fund managers. Besides the small size of RCE means it could experience larger business volatility, such as if a large bank decides to compete aggressively in its niche.

Personally, if I were to discover this stock only by now, I will still buy a small slice first, while further study it in depth to decide whether I should add or exit.

Posted by maximus . > 2021-02-17 21:58 | Report Abuse

break new high edy....momemtum is getting stronger

Posted by Learner King > 2021-02-17 22:23 | Report Abuse

@ observatory u like school teacher long story write but more like talk strategy on paper only. Investing is all about speed, it on the uptrend momentum now u still need to futher study how long to missed the boat? I been invested and followed this stock since 2016 until now and i never left. u can search my history comments here to see wheever i telling the truth. I think i know this stock better than u. Even that so called choivo capital talk like analysis pro like u also left this counter already but im still here as always. :)

Posted by observatory > 2021-02-17 23:06 | Report Abuse

@ Learner King. Sorry if my writing has taken up too much space on your screen. Unfortunately, this is my way of thinking about stocks. I’m a long term fundamentalist and have no talent for momentum. I stay on what I know best.

Given your emphasis on speed, I suppose you’re a momentum follower. But since you’ve professed to hold it since 2016, I wonder if you started on momentum before turning into fundamentalist and recently back to momentum again? Or your momentum timescale is measured in years? :)

BTW I don’t necessarily own stocks that I comment on, and I haven’t commented on many stocks that I own. But what we have in common is I too like this company. RCE has been a favorite before I even registered an account with this forum. Cheers!

Posted by SunnySunshine > 2021-02-17 23:59 | Report Abuse

observatory, thumbs up to your comments, fully agreed to what you said on the investment strategy

Posted by moolala > 2021-02-18 10:32 | Report Abuse

I think RCE earnings growth will increase when discretionary spending picks up, ie when MCO is over and govt servants more willing to start spending

Posted by GL8888 > 2021-02-18 12:53 | Report Abuse

General opinion is keep to shares?

Posted by Learner King > 2021-02-18 13:31 | Report Abuse

@observatory i invest base on fundamental but i also learning that when the momentum come the right way to invest is jump on the boat and let it flow, because this stock is only started breakout since Quarter 2 result out, it has been consolidate for more than 3 year with price always stuck at 1.2-1.9, but since it break rm2 last year November the price is keep going up and finally appreciate by the Market, so i believe this year is RCECAP year. As long as nothing big shit happen or bussiness going wrong i belive the market should give it at PE 10 to be fair.

That is why i dont agree when u said "But don't be misled by the seemingly low forward PE of 8 to 9 times. Current forward PE should be compared against the past 5 year average of only 6.5 times. "

u are telling me the fair PE is 6.5 and which i think is ridiculous if u are telling me u are fundamentalist and the this is the how u defined PE? Sorry i totally disagreed.

Sorry for my bad english. I may not so good in language but trust me i know this company and this counter better than averange people's. Thanks

Posted by x3mg33 > 2021-02-18 17:25 | Report Abuse

I suggest both sifus book the price now and see what the price is at year end. Loser belanja eat sri lanka crab at lalachong. on mo?

lai lai lai open bet

Posted by moolala > 2021-02-18 21:18 | Report Abuse

I would personally value it at PE 15, considering that its results are still solid. Compared to Aeoncr, or Elk-desa trading at pe13-15, but reporting subpar earnings, and dividends have been reduced, rcecap even increased dividends. Banks earnings are going down the drain, most even withheld dividends.

Posted by moolala > 2021-02-18 21:19 | Report Abuse

I've sold all my other financial stocks and bought into rce below 2, enjoying the sweet dividends

Posted by observatory > 2021-02-19 00:52 | Report Abuse

@Learner King. Thanks for your explanation. Since you pointed out, now I got your point.

Just to set the context right, refer to my comment on Jan 1. My view then was at RM2.75 in Jan 1 (quite similar to today price), at a forward PE of 8.7X, the price was fair for me. Just no longer undervalued. But still too early to sell. Just that I stopped topping up after many quarters of accumulation.

But there is no contradiction to also warn that the past 5 year average PE was only 6.5X. My personal risk appetite is different from the general market risk appetite. I’m undisturbed even if the price retreats to the previous RM1.5 – RM1.7 range, as long as it’s due to market sentiment reversal not deterioration in fundamentals. But the same cannot be said for people who don’t study the company and are advised to get in at RM2.80.

Besides my “fair PE” can be very different from the collective market “fair PE”. The market price is determined by the collective power of funds willing to take liquidity risk to invest in this small-cap niche business, where the float is only 40% (the Azman family controls the remaining 60%). So the average 6.5X in the last 5 years partly reflects this liquidity discount. If that’s the market verdict I’m happy to stay at 6.5 times for years to come while collecting dividends. But my circumstances may be different from another person.

Not to mention I suspect the break-out since Nov is not due to the RCE factor alone. While the past 2 quarter results are good, they are not spectacular. I notice Nov 2020 coincided with the start of recovery play. Even laggard like CIMB stock price rebounded from below 3 to over 4.X. Looking further say the tech sector. While I might still top up MPI at RM20 in Nov, I would be edgy with a price near RM40 and PE approaching 50X now. People in such a position, who may want to take some chips off the table yet hate to leave the party, may decide to switch some money into good quality and relatively cheaper counters like RCE. In this way in a market euphoria is like water that flows everywhere and lifts all boats. Even Air Asia is currently up 60% from its low in Nov. But has Air Asia fundamentals improved that much in the last 3 months?

Anyway, this is just my view. I’ve been in the market long enough to be proven wrong with enough times that the future is a range of possibilities.

But if you don’t mind, since you’ve been following this company for several years, I would like to get your view on two questions that I’ve come across. One is since earlier years RCE has relied on Yayasan Dewan Perniagaan Melayu Perlis and Yayasan Ihsan Raykay to reach end customers. The dependence has declined over the years, but any idea of the current proportion? More importantly, how does RCE manage the credit risk if these intermediaries were to default?

The other question concerns how to avoid a repeat of the difficult period in 2013-14. Stiff competitions then from Bank Rakyat and the like resulted in lax credit standard and subsequent rise in impairment. It took BNM’s intervention to limit loan tenure to not more than 10 years to prevent the race to the bottom. RCE management has turned conservative after that lesson. But what stops other banks from encroaching into RCE market share as a source of their growth? While RCE may enjoy its connection with the AmBank, other banks could tap into equally or even much lower funding sources.

Posted by observatory > 2021-02-19 00:55 | Report Abuse

@x3mg33, not sure if your good suggestion is partly directed at me. But I ain’t any sifu. However I’m happy to give a prediction since you’ve asked for one. I predict with 99% confidence that by year end the price will be different from today. And I’m not shy to say that my past predictions have outperformed many analysts!

Posted by observatory > 2021-02-19 01:01 | Report Abuse

@moolala, Aeon Credit 5Y average forward PE is 10-11X. It's during this bad time that its forward PE goes up to 16X as expected earning drops faster than the share price. But forward PE is based on FY21. As earning normalizes post FY21, PE could go lower even as share price recovers.

RCE at 15X forward PE will be RM4.80 or about 2.4 times Price to Book. That is about 40% more valuable than today Public Bank which is1.7X PB. That is possible if more funds start to prefer RCE than the time tested grandfather stock.

Posted by Learner King > 2021-02-19 04:13 | Report Abuse

@observatory OK for how to you valued the forward PE is up to you because everyone got their own opinion but i just want to showed that i disagreed with how you value it but is ok since you explain to me why u value it that way.

And please dont compare with cimb , mpi or airasia bla bla bla, if u want to say it that way most of the stocks in Bursa now is higher from it low since last year mco ok!Some even until 1000% 0r more growth. in share price. Now we are talking about this company fundamental.

And for the question that you ask I just want to WOW, are you sure u really got study this company and read their every quarter financial report at least from 2016 year start?

For the first question you ask said that "since earlier years RCE has relied on Yayasan Dewan Perniagaan Melayu Perlis and Yayasan Ihsan Raykay to reach end customers", are you sure they only relied on this 2 reunion only? Please go and do more study and the information can easily been found if u google it lol.

For this question:More importantly, how does RCE manage the credit risk if these intermediaries were to default? ", please go and read tru their each Quarter Report please, they been explaining in every quarter and continue the same strategy to how to reduce the risk and i like their strategy is easy to understand.

For this question" The other question concerns how to avoid a repeat of the difficult period in 2013-14. Stiff competitions then from Bank Rakyat and the like resulted in lax credit standard and subsequent rise in impairment. It took BNM’s intervention to limit loan tenure to not more than 10 years to prevent the race to the bottom. RCE management has turned conservative after that lesson. But what stops other banks from encroaching into RCE market share as a source of their growth? While RCE may enjoy its connection with the AmBank, other banks could tap into equally or even much lower funding sources."

Sorry because my english is not very good so i hope i dont get wrong from u said i will try to give my opinion on it, how to avoid is same like the question u ask how to manage risk please go read tru their report there answer is there liao

They did make mistakes in 2013-14 because uncontrolled borrowing and failure to review customers' repayment ability resulted in losses, I believe this is also one the reason why the market has given it such a low PE in recent years. But since than they have changed their strategy and i think their strategy is very successful base on the past few years result can see a growth every year. Although the company did not make huge growth,but it has grown step by step till today.

And for ur question about the bank get into rce market, as for now i dont see it going to happen, sorry i dont know how to explain it english and im not a analysis like u. But they is some one else have writen a article about how unique is rcecap business model that curently dont see bank can go into rcecap market. And rcecap and ambank is 2 independent company. Rcecap is not rely on Ambank at all. Thanks.

I really recommended you study more of this company if u really like it because most of the question u ask just now i think in kinda easy to get the info from online now, which is not even a question for me, it only become a question when u not study enough, for me investing is not rocket science, for me is more easy to understand how their bussiness model is better. This is why i like rcecap. It may not be a company like glove or other goreng stock can go up easily 100 % until 1000% . But i like it because i know i can sleep well when i buy it and dont need to worry when the share price drop :)

Ok it write too long and took me about 2 hours for this and probably still a very bad english but i have try my best haha.

Do u understand chinese or can write in chinese? haha, i prefer write in chinese word next time. Too tired to write in english to talk to people like you like 专家

Posted by observatory > 2021-02-19 09:38 | Report Abuse

@Learner King. Thanks for taking 2 hours to respond to me!

In summary, your answer is all answers are already in the quarterly reports and google. Thanks for telling me that! Apparently your English is very good despite your repeated claim of otherwise. I’ve read the same quarterly and annual reports every quarter and every year. Yet I’ve missed the answers. Perhaps I lack the intelligence or expertise to read through the obscure risk management policies and processes to translate into simple English on how they work out for the specific risks I care.

But one thing I’m certain of is while RCE and AmBank are two independent companies, they have close connections as I've commented. That is clearly stated in their Annual Report. They share key shareholders and board members and the AmBank group of companies are even listed in the Annual Report related party disclosures. Even though related parties are required to deal at arm's length, at least I know how it works in practice. For that, I can read beyond the English text.

BTW I’m no analyst nor even remotely connected to the finance and stock market industry beyond just a small potato investor. Lastly, I wish you prosperity through this company as that also brings continuous dividends as my pocket money too. Cheers!

Posted by moolala > 2021-02-19 10:44 | Report Abuse

@observatory, a few points:

regarding 2013-2014 I think the reason for the bad results was because BNM capped the loan amount and tenure, hence rce had to make impairments. I read this from a report somewhere. From that moment onwards they have been much more prudent in the lending practices

As to why banks do not encroach into rce's space, I think the reason is because the govt servants market is too small to have any meaningful impact to banks earnings. MBSB is trying to get into this business but not doing too well. Goes to show rce has good management

As to why the market has finally realised this gem, I think partly its because rce has increased dividends over the past few years. If you check back early 2010-2015 they never increase dividends, fixed 1.5c a year

just my 2 cents

Posted by Learner King > 2021-02-19 11:31 | Report Abuse

@observatory thanks for your compliment about my english but i still think my english is very bad haha. Yes u can say it Ambank and Rcecap got connection because both under same father Amcorp group. But both is doing their own business, rcecap is not helping ambank, ambank is not helping rcecap to promoted their bussiness either. I'm trying very hard to explain to you using my bad english.

Yes dividend Part myself i confidant will be at least 7 cent twice this year if nothing go wrong and business still going well, but i cannot guranteed it because how also im not the management of rcecap hence i didnt know if they will suddenly change it or not. But they did have a dividend policy which will take out 40% from their profit to give to shareholders, so 7 cent twice this year should be no problem, if they suddenly decided to give out 8 cent or more or even special dividend i will be more and more happy :)

Posted by Learner King > 2021-02-19 11:32 | Report Abuse

If got free warrants or bonus shares also not bad haha

Posted by observatory > 2021-02-19 17:19 | Report Abuse

Thanks for the inputs. This is becoming a lively discussion. I like reading differences in opinion and throwing up challenges so that the forum doesn’t become an echo chamber.

Checking back my records, in the 2013 Chairman’s Statement, Azman Hashim explained revenue dropped almost 30% due to intense competition. In that same year, impairment jumped almost 150% from a year earlier. The BNM’s guideline to lower loan tenure to 10 years was only mentioned in the 2014 Chairman’s Statement.

Actually, the government sector is not small given Malaysia has a bloated civil service with 1.6 million civil servants. In fact, when asked about how could RCE grow by just focusing on the public sector employees, the CEO explained that RCE only has about 5% of the market (his measure is based on headcounts where RCE has about 80,000 users). So other players are active too.

As I’ve read before, Bank Rakyat is the largest share in the personal financing space (in total, i.e. not limited to government servants). You can find the terms offered by Bank Rakyat. Borrowers who opt for a salary deduction scheme can get a fixed-rate at 4.99% for financings of 3 to 10 years tenure. Note 4.99% is within the range of RCE borrowing cost at 3% to 5.8% as reported in the last quarterly report.

https://www.bankrakyat.com.my/c/personal/financing_i/personal_financing_i_public_sector-4/personal

I can’t find RCE loan terms on its website. But I’ve read analyst reports citing it charges as high as 13% to 14%. If that’s true the situation could not sustain. In fact, last quarterly report Note 13 mentions the group benefits from higher early settlement income, which means some customers have refinanced given better terms elsewhere. This is why I’ve raised the possibility of increased competition.

As for RCE and AmBank relations, as revealed in Annual Reports, in some years the related party transactions with the AmBank group of companies measured over 10 million or more. Granted they have to be conducted according to the arm’s length principle. I also have no doubt the transactions are mutually beneficial. In the finance business trust and reputation are crucial. The association with AmBank group benefit RCE when they go to the market to raise fund and potentially lowering the funding cost. Note I raised this point earlier as a plus for RCE.

RCE Capital dividend guidance is 20% to 40% payout ratio. So 40% is actually the upper limit. In FY19 and FY20 they were 33% and 35% respectively. The trend is increasing. I check the consensus EPS for FY21 and FY22 is 33 and 35 cents. Assuming a maximum payout of 40%, 33 cents * 40% = 13.2 cent dividend, and 35 cents * 40% = 14 cents. In the past several years the dividend history is 3+3, 4+4, 5+5 and 6+6. If the pattern continues, the next one could be 7+7 =14 cents by 2022 if not 2021.

As I’ve mentioned before, despite RCE being a good company I would hesitate to extrapolate its good results too far too fast. REC has benefited from several onetime factors. The higher early settlement income is one. Another is borrowing cost has become lower and lower. But the Sukuk funding is determined by the government bond yield + a spread. Can it go lower? After falling so much, 10Y MGS has gone up. It started touching 3% in the last few days.

https://www.bnm.gov.my/government-securities-yield?p_p_id=my_gov_bnm_yield_display_portlet&p_p_lifecycle=0&p_p_state=normal&p_p_mode=view&_my_gov_bnm_yield_display_portlet_tradingDateTxt=2021-02-15

But last let me say this. I'm not here to challenge anyone or prove something. I want to list the concerns as I see and I hope to get answers from people who have thought about them. The better I know about the company (for goods and bad), the more confident I'm in holding on to the shares.

Posted by moolala > 2021-02-19 17:42 | Report Abuse

Thanks for the input observatory, I have always found your analysis detailed and useful. Lets hope for the best for rce!

Posted by kywoo > 2021-02-19 18:17 | Report Abuse

Mr. Observatory. As a shareholder myself, I would like to thank you for putting so much effort in doing research on the company. I would say that for most part, you are right in your research facts. However you may be wrong in 3 arears which I would like to highlight to all the readers.

(1) There is no way Bank Raayat or any bank can give out a clean loan of up to 10 years at an effective rate of 4.99% per annum as you have pointed out. At that rate, the bank will certainly lose money as cost of fund is volatile over a 10 years period. Don't forget that the actual cost of fund plus overhead cost and provisions will be much higher than 4.99%. Just like Hire Purchase financing, there is an add on rate and an effective rate depending on the period of financing. Effective interest of 12% p.a. over 5 years or more is very reasonable. Nowadays it is not easy to get a clean loan anywhere.

(2) You wrongly assume that when a borrower settle a loan with RCECap they will go to another bank for refinancing. In fact almost all of them will just get a bigger loan after they settle the smaller outstanding balance with the company. This is where the company makes some extra money from the early repayment. A very good deal for both parties.

(3) You have said that RCECap has enjoyed a PE of 6.5 in the past years and you are quite happy with that. I totally disagree with you. A fantastic company like RCECap should deserve a PE of no less than 10. The average PE of all counters in Bursa is 15. Some counters are rated with PEs of 30 or 50 or even 100. Even Aeon Credit can command a PE ranging from 12 to 15. In all honesty it would be sheer madness to rate Aeon at 15 and RCECap at 6.5 The market can be irrational in the short run but will be rational in the long run. RCECap is going up in price lately because the market is revaluating it according its fundamentals and future performance. As far as I am concerned I will keep on accumulating this counter ( subject to cash availability ) as long as the PE is below 9 or 10 and I am sure I am on the right track to make good money.

Posted by Learner King > 2021-02-19 19:22 | Report Abuse

@kywoo Thank for pointed it out to Mr. Observatory, especially point number 3! Haha your english is better than i.


kywoo Mr. Observatory. As a shareholder myself, I would like to thank you for putting so much effort in doing research on the company. I would say that for most part, you are right in your research facts. However you may be wrong in 3 arears which I would like to highlight to all the readers.

(1) There is no way Bank Raayat or any bank can give out a clean loan of up to 10 years at an effective rate of 4.99% per annum as you have pointed out. At that rate, the bank will certainly lose money as cost of fund is volatile over a 10 years period. Don't forget that the actual cost of fund plus overhead cost and provisions will be much higher than 4.99%. Just like Hire Purchase financing, there is an add on rate and an effective rate depending on the period of financing. Effective interest of 12% p.a. over 5 years or more is very reasonable. Nowadays it is not easy to get a clean loan anywhere.

(2) You wrongly assume that when a borrower settle a loan with RCECap they will go to another bank for refinancing. In fact almost all of them will just get a bigger loan after they settle the smaller outstanding balance with the company. This is where the company makes some extra money from the early repayment. A very good deal for both parties.

(3) You have said that RCECap has enjoyed a PE of 6.5 in the past years and you are quite happy with that. I totally disagree with you. A fantastic company like RCECap should deserve a PE of no less than 10. The average PE of all counters in Bursa is 15. Some counters are rated with PEs of 30 or 50 or even 100. Even Aeon Credit can command a PE ranging from 12 to 15. In all honesty it would be sheer madness to rate Aeon at 15 and RCECap at 6.5 The market can be irrational in the short run but will be rational in the long run. RCECap is going up in price lately because the market is revaluating it according its fundamentals and future performance. As far as I am concerned I will keep on accumulating this counter ( subject to cash availability ) as long as the PE is below 9 or 10 and I am sure I am on the right track to make good money.
19/02/2021 6:17 PM

Posted by Foker > 2021-02-19 19:52 | Report Abuse

Learner King, Aeoncr real PE is much lower at around 8. Don't do gung-ho yet.

Posted by Foker > 2021-02-19 19:53 |

Post removed.Why?

Posted by Foker > 2021-02-19 19:54 | Report Abuse

Congrats to those who bought Rcecap when it was lower around RM 1.90. But using Aeoncr as a reference is not accurate

Posted by Learner King > 2021-02-19 20:22 | Report Abuse

@Foker Using Aeoncr as a reference is kywoo not me, but i agreed with him laa. I dont know know how u calculate can get so called real PE is around 7 only, and i disagreed that u said Aeoncr is better than Rcecap.

Posted by Foker > 2021-02-19 20:26 | Report Abuse

Hahaha, 5 years later we talk

Posted by Foker > 2021-02-19 20:26 | Report Abuse

I will be there to laugh at u

Posted by Foker > 2021-02-19 20:27 | Report Abuse

Observatory sifu will agree with me

Posted by Learner King > 2021-02-19 22:32 | Report Abuse

@Foker Ok from the way u talk i know im wasting my time talking to you. Bye

Posted by kywoo > 2021-02-20 00:41 | Report Abuse

I used to own some Nestle, Hong Leong Industry and Maybank shares. I have sold all my Nestle shares and made a small fortune from it. I have also sold my Maybank shares but made a loss from it. Maybank was really a big disappointment to me especially when they skipped dividend payment and reported lower profits. Now I am holding mainly 3 counters ie Allianz, RCECap and Hong Leong Industries. I am allocating about 30% of my resources to each of the counter as I happen to like them equally. As Warren Buffet said, holding 3 or 4 counters at any point of time is a better investment strategy than owning a lot of counters. If one has say 20 or 30 counters one would not be able to monitor their performance and hence lose control of one's concentration.

Posted by observatory > 2021-02-20 01:19 | Report Abuse

Mr kywoo, thanks for sharing your investment decision. Not sure why my earlier comment disappeared. I deleted and reposted after correcting typos. I just found the reposted message missing.

*****

Mr. Kywoo! It’s nice to see you joining. You’re a very knowledgeable and focused investor. It’s a real pleasure to have you sharing your opinion and pointing out where I went wrong. If you don’t mind I'd like to take this opportunity to dwell into those points further details just to clear some doubts.

On point 1, yes I’ve overlooked it. It makes more sense now. Using Loanstreet flat to effective rate calculator, a 4.99% fixed rate over a 10-year tenure works out to have an effective rate of 8.67%.

4.99% fixed rate demands taking a takaful. Without takaful, it is 5.85%, equivalent to an effective rate of 9.99%.

The only fee mentioned is a stamp duty of 0.5% of total financing. The product disclosure sheet states that no collateral is required although a guarantor is needed.
https://www.bankrakyat.com.my/c/personal/financing_i/personal_financin...

So if the above calculation is correct, the effective rate is slightly under 10%. But not reaching 12% as in your experience. It’s still lower than 13% to 14% by RCE that I read somewhere. But that was quite a while back and RCE might have adjusted its rate down too as borrowing cost reduces.

Back to the question that prompts me to raise this example in the first place. Are Bank Rakyat, Bank Islam, BSN etc have the means and incentives to lower pricing and/or lending standards among public sector employees? How could RCE defend its profitability and market share, although it certainly helps that RCE has good management and pride itself for speedy loan approval.

On Point 3, you’ve misquoted me when you wrote “You have said that RCECap has enjoyed a PE of 6.5 in the past years and you are quite happy with that”.

What I wrote was “the past 5 year average PE was only 6.5X”. From the chart I saw, the forward PE over the last 5 years went as high as 9 to 10 times and as low as below 5. The average forward PE is 6.5X. (Median forward PE would tell a better story but I don’t have the data).

As I’ve commented back on Jan 1 and again today, I deemed current forward PE that is close to 9X as fair. Fair means I’m happy to hold, but not topping up or selling. If for no fundamental reason the share price is back to around 6.5X forward PE (which is RM0.33 * 6.5 = RM2.14), I personally will feel it’s undervalued and will top up.

So our difference is at 9X to 10X is undervalued for you and fair for me. But that is our personal opinions. The market price considers factors besides what retail value investors think, such as liquidity. Yes, the market could be “wrong” in the last 5 years. By 2026 we shall see in the new PE chart of the preceding 5 years whether the average PE gets “corrected”.

This brings me to a very practical question. Mr. Kywoo, not sure if you still remember that we’ve once discussed Allianz and HLIND, the two other companies that you’ve viewed as grossly undervalued. I also happen to like both companies, except HLIND management due to its cash hoarding.

Comparing these three companies as of today:
HLIND: share price RM8.15, TTM PE 17X (was 10X pre-Covid), ROE 9% (was 20% pre-Covid), dividend yield 5.2% (42 cents), net cash RM4.27 per share.
Allianz PA: share price RM13.90, TTM PE 9X (after dilution), PB 1.1X (after dilution), ROE 13%, dividend yield 5.0% (69.6 cents)
RCE Capital: share price RM2.78, TTM PE 9X, PB 1.4X, ROE 16%, dividend yield 4.3% (12 cents)

Assuming you have not held these stocks earlier, given a sum of capital, how many percent would you allocate into each of them?

This is a sincere question. I asked because eventually, stock investment is not carried out in isolation without relative comparison. Besides we both like these three companies. The allocation decision will reflect relative preferences.

Posted by observatory > 2021-02-20 01:38 | Report Abuse

Mr kywoo, thanks for sharing. I see you are very confident with a concentrated portfolio as you’ve studied each one in depth. As I hold more stocks, I experience the challenge you mentioned.

Like you Nestle used to be my favorite holding, and I was reluctant to part even as valuation became very expensive. But I completely sold it in March to switch to many other bargains and never look back since.

Let me also put forward my 2 cents on how I would allocate between HLIND, Allianz and RCE if they are the only choices. If I start from a clean slate today, I will probably be 1/2 Allianz, 1/3 HLIND and 1/6 RCE.

Putting valuation aside, I have more confidence for Allianz to maintain good governance and capital discipline over the long term as this will be demanded by its parent. Today HLIND will be a recovery play for me. The net cash is also a potential positive wild card. As for RCE, even though I believe its valuation is only fair at the current level, my approach is usually to take a foothold when I come across a good company and observe it over time. Besides Buffett once advised buying good companies at fair prices.

Of course, this is just hypothetical. As I’ve started with them much earlier, I also own them in roughly equal proportion, besides a range of other stocks.

Posted by Xxxting > 2021-02-20 03:08 | Report Abuse

any advice for buying in tp ?i wanna buy in this counter but it might to high right now

Posted by observatory > 2021-02-20 18:49 | Report Abuse

Guys, check out The Edge today. Just as we debated the merits of RCE, their weekly edition published an article "RCE Capital shines in adversity".

Posted by donald770 > 2021-02-22 06:50 | Report Abuse

Overall still room for going north. Recent issue esos is a. plus point.

Posted by Dragon88 > 2021-04-12 15:11 | Report Abuse

good fundamental but price not moving much .....

Posted by Learner King > 2021-04-13 17:18 | Report Abuse

its normal for this counter, it only will move when close to Quarter Report time

Posted by sheldon > 2021-04-20 09:19 | Report Abuse

Too many ESOS diluting the earnings and stunting the share price.

Posted by up2_sky > 2021-05-18 09:53 | Report Abuse

may i know QR out by when?

Posted by Goh123 > 2021-05-25 17:45 | Report Abuse

Dividend 7cen

Posted by Goh123 > 2021-05-25 17:46 | Report Abuse

Gogo rcecap

Posted by ooihk899 > 2021-05-25 17:51 | Report Abuse

Q4 result good mah. That's why dividend increase loh.

Posted by Goh123 > 2021-05-25 18:31 | Report Abuse

Rm3.00

Posted by moolala > 2021-05-25 18:47 | Report Abuse

solid