February 8, 2011

RCECAP - Kenanga lowers target price on RCE Cap

Stock Name: RCECAP
Company Name: RCE CAPITAL BHD
Research House: KENANGA

Kenanga Research has lowered the rating on RCE Capital to "hold" and the target price to RM0.56, believing the company's current business outlook for the lending to civil servants, remains challenging.

In a statement today, it said financial year 2012 would be the year for RCE to be on the defensive.

"That said, RCE's management and the Koperasi Wawasan Pekerja Pekerja Bhd(KOWAJA) should have the urgency to work closely with the Cooperatives Commission of Malaysia (CCM) towards resolution for a full compliance of the GP6 and GP7 (new guidelines).

"This is so that, the company is not at a point of seeing a negative impact, on the group's future profitability," Kenanga added.

It also lowered its financial year 2012/2013 forecasts by 16.2 per cent/16 per cent respectively.

"Our revised financial year 2012/2013 net profit estimates are four per cent/14 per cent respectively below consensus," it said.

Kenanga cut its target price from RM1.10 previously to RM0.56, representing four times the financial year ending 2011 price earnings ratio, and lowered the rating from "buy" to "hold".

The research house explained that further hard work is needed before RCE can start disbursing loans, as well as cutting its product pricing, which it thinks is the main hurdle to securing the full compliance status. -- Bernama

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