Ah Long in term of = Big Ear Hole ?

This Ah Long is very special one.

The government is helping them to collect back payments.

Bad loans are quite low.

The annual loan growth rate is more than 20%.

ON par with PBB or even  higher.

Yup. Actually i was thinking of entering QL resource which have almost 20% growth rate. But after considering RCE which have even high growth rates and low PE i choose RCECAP.

One thing , they have the monopoly in this type of business.

Banks are not allowed to compete with them.

From reported news in internet.

I just wonder the banks ruling do apply to RCECAP? I mean like the tier 1 tier 2 capital adequecy ratio?

They do not come under the Banking Acts.

They are not allowed to take FD deposits from outsiders either.

One thing , they have the monopoly in this type of business.

Banks are not allowed to compete with them.

From reported news in internet.

Reason:  could be restricted Ah Long licence , like our  Genting Casino.

Thats y i am wondering how do they get their cash from? Borrowings from banks? That is the answer i want to find out.

From private placements and could be supported by Ambank ( same boss )

Ambank is quite active in giving out personal loans too.

i was wondering if they can borrowed from banks? But i checked at their report they have around 200 over million of cash in hand.

Why not .

Even banks like PBB and CIMB also take loans by way of bonds.

They also borrow from you ( FDs )

another piece of news that might affect RCECAP positively...

No commercial bank access into civil servant mart  - 06 March 2010

RCECAP 9296

Reasons for me to pick up RCECAP

As of 31-December-2009.

1. NET ASSET PER SHARE = 50 CENTS.

2. 3 Months EPS ended 31-December-2009 2.67 CENTS. Base on 2.67 cents we can roughly project 2010 EPS to be around 10.68 cents.

My entry price 67 cents. Which is trading at PE of around 6.27 TIMES!!!

Remarks : As the interest payment is expected to be a constant income so we don expect reduce in EPS in future.
EPS TRACK RECORD

2003   -5.89 CENTS (Just started their Ah Long business)

2004   4.09 CENTS (Adjusted for bonus issue and share split)

2005   2.78 CENTS (Adjusted for bonus issue)

2006   3.69 CENTS (Adjusted for bonus issue)

2007   9.98 CENTS  

2009    9.36 CENTS

2010 (E) 10.68 CENTS

EPS will not really reflect in terms of growth as there are a lot of bonus issue and share split just for reference purpose. Net Profit will be the right tool to gauge RCECAP GROWTH RATES.

Conratz threader became Ah Long............

One thing , they have the monopoly in this type of business.

Banks are not allowed to compete with them.

From reported news in internet.

Reason:  could be restricted Ah Long licence , like our  Genting Casino.

They do not come under the Banking Acts.

They are not allowed to take FD deposits from outsiders either.

Public-listed RCE Capital has made a profitable business out of funding three cooperatives to reach government servants

The approved lenders – the 450-odd credit cooperatives and government-owned financial institutions such as Bank Rakyat, Malaysia Building Society,  Bank Simpanan Nasional and Agrobank – have to use Angkasa’s services for the deductions.

RCE Capital Bhd’s attractive lending yields to drive earnings  January 28, 2010, Thursday  KUCHING: RCE Capital Bhd’s (RCE Capital) strong business model which focuses on the provision of financing to civil servants at attractive interest rates of 10 to 12 per cent will continue to enhance its earnings.CIMB Investment Bank Bhd (CIMB) in a research report yesterday cited that earnings prospects for RCE Capital remains bright.  It observed that consensus was projecting solid net profit growth of 12 per cent to 18 per cent per year over the next three years, supported by 18 per cent to 29 per cent expansion of the loan base. The research firm also noted that default rates were low at about 3 per cent.  Meanwhile, CIMB stated that RCE Capital was a small financial services company with RM1.28 billion in total assets and a loan base of RM952 million.  It said most of its income was generated from the lending business, with interest income comprising 77.1 per cent of its total revenue and commission income made up 18.8 per cent of revenue.  It pointed out that RCE Capital’s business focused on consumer financing, which accounted for 96 per cent of its loan base as compared with 2.5 per cent from the factoring operations.  CIMB observed that more than 90 per cent of RCE Capital’s loan book came from personal loans to public sector employees through Angkatan Koperasi Kebangsaan Malaysia (Angkasa), a centralised collection agency for cooperatives in Malaysia.  It added that with the assistance of Angkasa, monthly repayments were made through the deduction of borrowers’ salaries.  The research firm noted that this arrangement gave RCE Capital the upper hand of the repayments of borrowing, thus minimising default risks. At the same time, CIMB noted that RCE Capital’s market share of civil servant loans was merely 2.8 per cent.  It said the biggest player is Bank Kerjasama Rakyat Malaysia Bhd (Bank Rakyat) with 50 per cent followed by Bank Simpanan Nasional at 12 per cent and Bank Pertanian Malaysia 5 per cent.  On the flipside, CIMB highlighted that as RCE Capital did not have a deposit-taking licence, its operations was primarily financed by debts. It pointed out that the group had total borrowings of RM920.7 million as compared with a loan book of RM924.1 million.  It said the financing came mainly from its RM1.5 billion asset-backed programme and RM420 million medium-term notes.  Nevertheless, RCE Capital’s other investment was its 7.9 per cent stake in AmFirst Real Estate Investment Trust (REIT) apart from its financing business.  To recap, AmFirst REIT is a property investment company with a portfolio that includes Bangunan AmBank with a value of RM226 million, Menara AmBank (RM292 million); The Summit (RM284 million); Kelana Brem (RM105 million) and Menara Merais (RM64 million).  CIMB said these properties had high occupancy rates averaging 89 per cent whilst AmFirst REIT recorded a 60.9 per cent increase in revenue to RM93.1 million in financial year 2009.  CIMB also observed that RCE Capital experienced explosive loan growth in 2005 to 2009 with a compound annual growth rate (CAGR) of 69.7 per cent as its focus on the lending to civil servants started to produce results.  It believed that the development helped RCE Capital to expand its revenue by a CAGR of 31.6 per cent in the same period. However, due to the increase in overheads needed to sustain the swift business expansion, RCE Capital’s net profit registered a slower CAGR of 24.9 per cent in 2005 to 2009.  Positively, CIMB estimated that RCE Capital’s bottomline growth remained strong at 31.5 per cent in financial year 2009, supported by a 63.3 per cent expansion of revenue.  The research firm projected net earnings growth of 12 per cent to 18 per cent per year for financial year 2010 to 2012 on a 10 per cent to 16 per cent annual rise in revenue.  It said the key earnings drivers were expected to be healthy expansion of the loan base and attractive lending yields.  CIMB believed that yields on earnings assets will be sustained at the financial year 2008 to 2009 levels of 12 per cent to 16 per cent. Going forward, it noted that RCE Capital’s growth is expected to come from consumer lending, especially personal loans to public sector employees.  It highlighted that RCE Capital will continue to pursue organic growth, increase market reach and seek other growth engines such as exploring opportunistic acquisitions and investments.  On the downside, it noted that RCE Capital will face competition from commercial banks for its business, higher cost of funds as compared with commercial banks due to its business model as a non-deposit taking company, concentration risk and less sophisticated risk management system.