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.

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

Banks are not allowed to compete with them.

From reported news in internet.

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.

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

Ambank is quite active in giving out personal loans too.

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

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.

Waw,  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.

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.

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 company’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. 

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.