Chairman’s Letter to Shareholders

Dear Shareholders,

On behalf of the Board of Directors, I am pleased to present to you the Annual Report of RCE Capital Berhad and its subsidiaries (“the Group”) for the financial year ended (“FYE”) 31 March 2020.


On the global front, the vulnerability of financial systems remain heightened as concerns of a stagnant global economy and elevated geopolitical tensions persisted. These have increased the volatility of global financial assets and commodity prices. Following these developments, central banks in major economies and emerging markets shifted to dovish monetary policies as trade tensions weighed on global growth prospects.

Nevertheless, during the major part of FYE 2020, monetary easing across key economies managed to cushion global financial conditions and stimulate the global economy as trade tensions between the two biggest economies continued. With the low interest rate environment, most businesses have adapted to the adverse circumstances given their prudential leverage and adequate buffers despite slower global demand. The slower demand in turn did put pressure on corporate profits and investment decisions.

Unfortunately, the COVID-19 pandemic which started in January 2020 and subsequently spread across the globe further exacerbated global economic prospects. The pandemic has caused countries to shut down their economies and the full impact of this unprecedented event will only be known when their economies restart.

On the home front, Malaysia’s economy expanded at a moderate 4.3% in 2019 (2018: 4.7%), reflecting a relatively resilient economic growth despite the volatility in the financial markets arising from both global and domestic economic activities. The growth was mainly underpinned by stronger private sector activity, anchored by income and employment growth with sustained consumer-related spending and leisure-related expenditure. However, growth was partially weighed down by supply disruptions in the commodities sector resulting in weaker net exports.

Having said that, as the COVID-19 pandemic expanded to the rest of the world, the Malaysian government on 18 March 2020 implemented a Movement Control Order (“MCO”) to restrict movements and close all non-essential business offices and premises in a move to curb the spread of the COVID-19 outbreak. The nationwide MCO was originally supposed to be for two weeks however, it was further extended and relaxed to Conditional MCO allowing some businesses to open in May 2020. The order was subsequently revised to Recovery MCO for a period starting from 10 June to 31 August 2020. Without a doubt, the COVID-19 pandemic and disruptions from the MCO will not only have a profound effect on our economy but also on our way of life and how we interact with each other.


Fortunately, despite the economy grinding to a halt towards the end of the financial year arising from the MCO, the Group’s overall performance for FYE 2020 ended commendably. We recorded a higher revenue of RM282.6 million, representing an increase of 7.6% as compared to the previous financial year. This was mainly contributed by higher interest/profit income, supported by an enlarged financing base of RM1.8 billion from RM1.7 billion a year ago giving us a 5.3% year-on-year growth.

Management is always active in managing cost and this could be seen in the control of the Group’s financing costs as well as overheads. With the total reduction of 50 basis point in the overnight rates by Bank Negara Malaysia (“BNM”) on 22 January 2020 and 3 March 2020, the Group was able to reduce the weighted average cost of funds ranging from 4.2% to 5.7% (FYE 2019: 5.1% to 6.3%). Optimisation of overheads has also allowed the Group to achieve a lower cost to income ratio of 22.0% from 22.2% a year ago.

Higher revenue and lower overall cost allowed the Group to post a higher profit after tax of RM110.6 million for the year which was 15.8% more compared to a year ago.

With the improved results, the Group achieved a higher earnings per share of 31.8 sen and return on average equity of 17.6%.


The Group felt honoured to be recipients of several awards during FYE 2020. It is pleasant yet humbling to be recognised in the industry for efforts contributed by all hardworking personnel in the Group. We were awarded the “Best in Online Presence” by Focus Malaysia in their Best Under Billion Awards 2019 for companies with market capitalisation of RM500.0 million to RM950.0 million which was held on 8 November 2019.

On 12 November 2019, the Group also bagged all three awards under the Financial Services sector of The Edge Centurion Club 2019 inaugural event, namely:

  • Highest Growth in Profit After Tax over three years;
  • Highest Return on Equity over three years; and
  • Highest Returns to Shareholders over three years.

The awards were only given to companies listed with market capitalisation of RM100.0 million to below RM1.0 billion in all the 12 sectors of Bursa Malaysia Securities Berhad. They are based on quantifiable performance measurements and as such, the recognition is a testament to the Group’s continued performance to bring value to the shareholders.

On top of these awards, Zamarad Assets Berhad (“ZAB”), the special purpose bankruptcy remote vehicle for the RM2.0 billion Sukuk Murabahah Asset-Backed Securitisation Programme, successfully won the “Best Islamic ABS-Backed Sukuk 2019” award presented by Alpha Southeast Asia 13th Deal & Solution Awards 2019 which was presented on 24 February 2020.

To-date, ZAB has issued three sukuk tranches totalling RM501.0 million in March, July and November 2019 with issuance ranging from RM108.0 million to RM265.0 million. Following this, the remaining programme of RM1.499 billion is available for future issuance.


The Group remains committed to high standards of disclosure and continue to adopt good corporate governance practices across all business units. The Investor Relations Team (“IR Team”) is dedicated to convey the latest announcements on business activities, corporate and financial developments in a timely manner and ensure accessibility on the Group’s website at

Communication with stakeholders, investors and analysts are regularly conducted by the IR Team as we value constructive feedbacks for the Group’s improvement. Quarterly briefings with analysts and fund managers are regularly held, while roadshows with institutional and prospective investors are held occasionally, to ensure up-to-date corporate information is effectively delivered.

Maybank Investment Bank Berhad, KAF-Seagroatt & Campbell Securities Sdn Bhd and RHB Research Institute Sdn Bhd have been providing coverage on the Group’s performance since September 2016, January 2018 and January 2020 respectively.


Sustainability is one of the key elements that we take into account in all our business practices. For the FYE 2020 Sustainability Statement, we have also reported all identified material sustainability matters of the Group and stakeholders in compliance with Bursa Malaysia Securities Berhad Main Market Listing Requirements relating to Sustainability Reporting. Our materiality assessment is carried out every two years and will be reviewed in the next financial year.

This year, we have developed a Sustainability Matters Register (“SMR”) to document our Economic, Environmental and Social risks and impacts while assessing the relevance and effectiveness of the measures, actions and indicators employed to address each matter identified in the previous financial year. The SMR is subject to semi-annual review or as and when there are significant changes to the market condition, business strategy and operations.

Our commitment towards conservation of the environment, corporate social responsibility and good governance has garnered us notable recognition following the inclusion of RCE Capital Berhad in the FTSE4Good Bursa Malaysia Index on 22 June 2020.

For further details, the Sustainability Statement can be found on pages 23 to 42 of this Annual Report.


We have been rewarding our shareholders with consistent dividend payments since 2007 and from FYE 2019 onwards we have been guided to pay dividends of between 20.0% to 40.0% of the Group’s profit after tax. This is made possible by the Group’s continued performance as well as balancing the cashflow needs and financial obligations of the business.

The Group paid a first interim single-tier dividend of 5.0 sen per share, amounting to RM17.4 million on 5 December 2019.

On behalf of the Board, I am pleased to have declared a second interim single-tier dividend of 6.0 sen per share for FYE 2020 amounting to RM21.3 million, paid on 27 July 2020. The aggregate dividend for FYE 2020 amounts to 11.0 sen per share or RM38.7 million in total. This is equivalent to a total payout ratio of 35.1% and is within our dividend guidance.


With the COVID-19 pandemic weighing across all industries and businesses, the International Monetary Fund (“IMF”) indicated that a global recession awaits in 2020. Nonetheless, a recovery of global economic output is expected in 2021, given that affected countries will be working relentlessly to contain the pandemic, strengthen their healthcare system and initiate various stimulus packages to repair their economy and to prevent it from further contraction.

At this point, most governments have announced and implemented supplementary fiscal stimulus packages together with their central banks to ease monetary policy by ensuring sufficient credit is injected to the real economy. These coordinated and synchronised actions would be able to relieve the current stress in the global financial market.

Meanwhile, BNM estimated that growth in the Malaysia Gross Domestic Product will range between -3.5% to -5.5% in 2020, as the COVID-19 pandemic continues to weigh on all sectors of the economy. In these uncertain times, disruption in businesses are unavoidable as we head towards unfamiliar social and economic landscapes post the COVID-19 pandemic.

Despite strong economic headwinds and the uncertainties that may lie ahead, we continue to brace ourselves as a responsible financier in a niche market. Quality financing growth will continue to be our priority so as to ensure the Group is able to deliver sustainable returns to the shareholders. This is possible by conducting periodical assessment of our products with prudential credit scoring evaluation to remain competitive and relevant in this challenging market environment.

The events that unfolded recently will accelerate the country’s push towards embracing technology and the digital economy. As such, the Group will continue to focus on streamlining its operations, distribution channels and risk management framework to enhance operational efficiencies and customer experience. Therefore, we will continue to explore the digital space and welcome innovations that will add value to the Group as a whole.


I would like to take this opportunity to welcome Mr. Thein Kim Mon and Mr. Lum Sing Fai to the Board of Directors of the Company. Both Mr. Thein and Mr. Lum were appointed as Independent Director and Non-Independent Non-Executive Director respectively on 30 September 2019. Mr. Thein has over 42 years of experience with extensive exposure in audit and risk areas in several financial institutions both foreign and local. Mr. Lum on the other hand has more than 30 years of experience in corporate finance as well as in the banking and financial industry. With both of them on board, I believe the existing Board’s synergies will be further strengthened and I look forward to their contributions to the Group.

On behalf of the Board, I would like to extend my deepest gratitude to all of our stakeholders, including our shareholders, customers and business partners for your continued support throughout the year. I would also like to thank the management team and employees for their commitment, efforts in creating value and drive for sustainable growth during these challenging times.

In addition, I wish to convey my appreciation to the regulators for their guidance and support and my fellow Board members for their contributions and advice.

Last but not least, I would like to express our outmost appreciation to all frontliners from the healthcare industry, enforcement officers and other essential services group who had worked selflessly and tirelessly in our fight against the COVID-19 pandemic.

Shahman Azman