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 evenĀ  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:Ā  could be restricted Ah Long licence , like ourĀ  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 martĀ  - 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 ā€“ the 450-odd credit cooperatives and government-owned financial institutions such as Bank Rakyat, Malaysia Building Society,  Bank Simpanan Nasional and Agrobank ā€“ have to use Angkasaā€™s services for the deductions.

RCE Capital Bhdā€™s attractive lending yields to drive earningsĀ  January 28, 2010, ThursdayĀ  KUCHING: RCE Capital Bhdā€™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.Ā  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.Ā  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.Ā  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.Ā  It pointed out that RCE Capitalā€™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.Ā  CIMB observed that more than 90 per cent of RCE Capitalā€™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.Ā  It added that with the assistance of Angkasa, monthly repayments were made through the deduction of borrowersā€™ salaries.Ā  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 Capitalā€™s market share of civil servant loans was merely 2.8 per cent.Ā  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.Ā  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.Ā  It said the financing came mainly from its RM1.5 billion asset-backed programme and RM420 million medium-term notes.Ā  Nevertheless, RCE Capitalā€™s other investment was its 7.9 per cent stake in AmFirst Real Estate Investment Trust (REIT) apart from its financing business.Ā  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).Ā  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.Ā  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.Ā  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 Capitalā€™s net profit registered a slower CAGR of 24.9 per cent in 2005 to 2009.Ā  Positively, CIMB estimated that RCE Capitalā€™s bottomline growth remained strong at 31.5 per cent in financial year 2009, supported by a 63.3 per cent expansion of revenue.Ā  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.Ā  It said the key earnings drivers were expected to be healthy expansion of the loan base and attractive lending yields.Ā  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 Capitalā€™s growth is expected to come from consumer lending, especially personal loans to public sector employees.Ā  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.Ā  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.

Waw,Ā  the CIMB analysis all in one paragraph .

Another long story.

Thanks anyway.

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.

Sky, i am a bit concern on this sentence. What if these banks go and reduce their lending rates and hence squeeze RCECAPITAL margin?

RCEcap mostly gives term loans that int rates are fixed.

Lower banking rates mean cost of funds cheaper for them.

Good and bad. Since interest is on the rise.

Buy generally the profit margin is very high as compared to a bank loan.

We call it a safety net.

I believe BANK RAKYAT, BANK SIMPANAN and RCECAP are providing term loans to those government servants through ANGKASA. I believe BANK RAKYAT , BANK SIMPANAN have lower financing cost via deposit taking.

What if BANK SIMPANAN reduce their term loan rates to fence off the competition from RCECAP? RCECAP cannot fight with them as RCECAP financing cost is much more higher then them becos RCECAP doesn't have deposit taking license.

RCE has a borrower base of about 60,000, where the average loan per borrower is about RM17,000. The maximum personal loan is RM100,000. The companyā€™s sales network increased to 58 from 51 for the financial year 2009 ended March 31.

From the sos i gather, might be expired or not halal.

Overview:
1. this company is licensed under the Moneylending Act 1951.
2. the company is under the purview of Ministry of Housing and Local Government.

The Moneylending Act initially enacted with good intentions to protect citizens from unscrupulous Money Lenders, for instance imposing ridiculous terms and conditions loans borrowed from this entities.

The Moneylending Act is the bible from A to Z to all Moneylenders.

It is also known (at least to Money Lenders) as one of the most poorly drafted legislation, least understood (there is only a handful of law firms specializing/dealing in the Moneylending Act), draconian and also obsolete legislation which continues to be embroiled with disputes.

Since the inception of the Moneyleding Act, it has evolved into other businesses such as raising funds for IPO. Although there is no specific mention in the Act that such businesses can be done, exemption is given by the respective Ministry. In areas of taking collateral, there is also no mention of shares being used by the Money lender as collateral but numerous money lenders are doing it.

Why Moneylending Act and not BAFIA?
Reason being the regulatory and capital requirements are extremely different.

Why borrow from a license Moneylender instead of a commercial bank?
For reasons unbeknown to me at least, moneylenders seems to take in all sorts of customers regardless of their credit.

So what interest do they charge?
The interest charged by Money lenders are fixed by law.

s.17A Moneylending Act

Secured = 12%p.a
Unsecured = 18% p.a

So what about the loan documentation?
The law also sets down one type of agreement to be signed between the moneylender and the borrower.

Perhaps two of the most infamous Agreements are:
Schedule J (unsecured)
Schedule K (secured)

How does RCE benefit from arrangements from the so called "Kooperasi."
1. Interest Rates are fixed above the normal lending rates by banks (unless exemption obtained for a lower interest rate, which i am not aware of).
2. default, very unlikely. Especially when dues are directly deducted from your salary!
3. low cost leading to higher profit margins. every month only collect interest+installment payment, how easy life is!
4. increase in lending rate by normal commercial banks will drive more ppl to seek out Moneylenders as alternative.
5. ability to borrow from commercial banks and profit from it!

Con.
1. it takes only one Moneylender to be haul to court leading to a landmark decision which will cause the collapse of this industry.
2. changes/amendments to the Moneylending act
3. dissolution of the arrangement
4. higher default rate(unlikely, unless gomen forgot to pay salary)
5. finally the cream of it all... RCE losing its license.

darkknight, good to see you going full steam on RCECAP. Good luck in your ride. 

Good Summary.

i agreed with you on the con. However, since RCECAP is own by Datuk Hashim which is one of the influential guy in Malaysia like Syed Mokhtar. So i can say the risk on losing its license is highly unlikely.

Possible that any business tied to a 'personality' has repercussion when anything happens to him (e.g. Steve Jobs, Tony F). So make sure he has a succession plan or check out on how healthy he is.Ā 

Its true. i have learn one lesson, sometimes we cannot look too far it will makes thing become too complicated. As long as short term (5 years time frame) still looks good then i will enter already.

Always remember there is no counter which is perfect.

Share with you one counter which i have targeted last time TCHONG but i didn't bought any cos considering too many issues. I watching it climb from RM 1.50 UNTIL RM 4.50 

So in the end. it is more on how we manage risk.

(Reuters) - An initial public offer by India's SKS Microfinance is likely to set the stage for more such offers in the world's largest microlending market, but it has also sparked a debate on the ethics of profiting from the poor.

This should bring make RCECAP interesting!

In this world or at least in reality, i believe 90% (optimistic figure) of those people who give would expect something in return, one way or the other. The rest of the 10% i leave it to your creativity.

For RCECAP, shareholders/investors actually plough money into a company and expect return from their investment. Which begs the question who would want to invest in a money losing business.

---

the question lingers, if RCECAP was such a good business what is its potential for growth in the short, medium and long run especially with a business lending exclusively (or a majority) to Civil Servants.

the formula looks like sure win, but can it grow 

So by parallel deduction & reasoning. Implementing GST = Increase in Govt Wages = Increase in RCECAP priceĀ 

(Reuters) - An initial public offer by India's SKS Microfinance is likely to set the stage for more such offers in the world's largest microlending market, but it has also sparked a debate on the ethics of profiting from the poor.

This should bring make RCECAP interesting!

just ask forumer opinion will this stocks worth to keep for long term.... can i categorise this as low risk ? thks

hi , hope someone can help me. I just check [RCECAP] they announced to pay dividend 17.5 cent (9cent need deduct 25% and 8.5 cent no need ) , is it mean 

i buy 1000 units RCECAP now ( 0.65 )  = RM 650
and I will get the dividend    RM 67.50  +  RM85 = RM152.50 ???

wrong. 17.5 %from par value RM 0.10. means 17.5% X 0.10 = 0.0175 sen. 0.0175 sen X 1000 units = RM17.50 nia.

ah long also can listed in BURSA..this is call Boleh land

So Maybank is not Ah Long? PBBank not?


So they are Long Ah ?

lol obviously he doesn't consider commercial banks as ah long

Better load some before the surge upwards...

got any reason they going to shoot up soon?

got any reason they going to shoot up soon?

Because they are too big to big called as Ah Long?

The only problem I see now is their biggest competitor being MBSB. What say the rest here?

i think they have their own market...and won't like grab the others' market...
bank rakyat, BSN, bank pertanian had offered such loans since long time ago...

all these are cronies linked company... ...
rcecap is amcorp linked company..if not, there is still risk of funding issue...
but now funding will not be a problem...
i assume most of their borrowings are from ambank...

This stock is falling from its heyday of 70's cents.
Nothing much has changed and yet its at 40~50cts range for now.