RCECAP

What's so special with RCECAP?

RCE Cap provides personal loans to civil servants. Loans are disbursed to cooperative members to buy cars, electrical appliances,furniture and others. Repayment is by way of direct salary deduction facilitated by ANGKASA.

Here is how it looks like :

Base on Quarter Report, their main income would be loan financing , at 2004 loan financing revenue is 18 millions and net profit is 11.4 millions, 2005 is 33.94 millions with 16.339 millions, 2006 is 53.76 mils with 21.378mils, and 2007 is 95 millions with 46mils. We can see that margin of this business is so high that every revenue increase will directly contribute to the net profit. The margin can be seen ranged from 30%-50%.

At current price 0.89, the PE is around 9, which is considerably cheap to me. This stocks has been soared from 0.3x to current price within 1 years, which make you a handsome profit with over 300% if you bought at last year.

What's make this stock more attrative would be they are charging those lender at 15.90% to 16.70% p.a . Wow, they are charging like credit card, and some more they salary will be automatically deducted to pay the loan. The loan would be ranged from 7 years to 10 years.

Other News:

RCE is looking to establish a finance company with Southern BankVietnam (SBV). The firm signed an MOU with SBV to form a JV companyfor the application of licenses to set up a non-bank credit institution. RCE’scost of investment is an estimated US$5.7m (RM19.6m) for a 30% stake inthe venture, while SBV will take an 11% stake and the remainingshareholdings taken up by other strategic partners. We expect a formal agreement to be signed by end-2007 and the first branch to be set up in mid-2008.

Another thing would be they are eyeing MBSB, which may allow RCE to grow into the biggest non regularised financial institution.Currently they are getting money by either lending from financial bank or either by issuing bond, where ranging from 3%-10% and loan to the lender. If they managed to get the MBSB from EPF, that would be a big boost to the fundamental of company as MBSB is licensed to take deposits. Imagine, the cost of getting money is decreasing from 10% to 3.75% or lower, i would not be surprise if they managed to acquire share in MBSB and analysis report would give a "Buy" with Price RM2.

I will buy this counter if the price is good for me. I believe i still have chance to buy with price lower than 0.89.