Chairman’s Letter to Shareholders

Dear Shareholders,

On behalf of the Board of Directors, I am pleased to present you the Annual Report of RCE Capital Berhad and its subsidiaries (“the Group”) for the financial year ended (“FYE”) 31 March 2021.


The year 2020 was an unprecedented one with the COVID-19 pandemic (“pandemic”) turning the world into a global health crisis. In response to this, governments around the world imposed various levels of lockdowns to contain the spread of the virus which have severely impacted economies and businesses as activities across many sectors were forced to a near standstill. Various restrictive containment measures have led to weaker global demand and interrupted cross-border supply chains. Amidst these challenges, large fiscal and monetary stimulus measures were implemented across the globe to alleviate the impact induced by the pandemic.

On the home front, Malaysia is not spared from a significant economic downturn in 2020 as we are a trade-dependent nation. Widespread measures to curb the pandemic have dampened international demand and disrupted production, resulting in a sharp contraction in trading activities. Micro, small and medium-sized enterprises (“MSME”) were the hardest hit. They did not have adequate liquidity buffers to remain afloat until the economy could be reopened. Hence, a series of stimulus packages such as Bantuan Prihatin Nasional and wage subsidy programme were introduced by our Government, to protect businesses and livelihoods from this economic fallout. As a result, Malaysia’s gross domestic product (“GDP”) growth registered a 5.6% contraction in 2020 (2019: 4.3% growth).

In addition to these direct fiscal measures, the Government mandated a blanket 6-month financing moratorium for both businesses and consumers across the entire banking industry to smoothen cash flow constraints and support recovery for MSME. Being part of the community, the Group also offered 6-month targeted moratorium to genuinely affected customers. Notwithstanding that, our underlying asset quality remains healthy as customers are civil servants with job security in this challenging operating environment.

To further stimulate our economy, Bank Negara Malaysia (“BNM”) slashed the Overnight Policy Rate (“OPR”) to its lowest ever at 1.75%, ensuring sufficient liquidity and stable market environment. Towards the end of 2020, the Government also announced Malaysia’s largest-ever budget allocation of RM322.54 billion for Budget 2021 to help revive our economy. Having said that, the Group remains mindful to ensure organisational resilience throughout the recovery process.


Despite operating in the worst economic climate since the last global financial crisis in 2007 to 2008, the Group performed well and was able to register an increase in revenue. Revenue of the Group was RM293.5 million for FYE 31 March 2021, representing a growth of 3.3% as compared to a year ago. This was largely contributed by higher early settlement income arising from refinancing activities by customers and backed by a marginal financing base growth of 1.4% to RM1.85 billion.

Our management always strives to manage costs in relation to both financing and operational requirements. Between 5 May 2020 and 7 July 2020, BNM dropped the OPR by a total of 75 basis points to 1.75%. In tandem with this, the Group managed to reduce its weighted average financing cost to 2.6% to 5.5% (FYE 2020: 4.2% to 5.7%). Management’s continuous optimisation of operational costs allowed the Group to achieve further improvement in cost to income ratio at 21.1%, down from 22.2% a year ago.

On the other hand, lower allowances for impairment charge of RM15.6 million was recognised (FYE 2020: RM23.1 million), taking into account a better forecast Real GDP, a forward looking variable used for the expected credit loss calculation. It was also a result of sound credit underwriting as the Group has been ensuring the underlying asset quality is able to fit in our credit risk management and underwriting criteria.

Correspondingly, the Group posted a higher profit after tax of RM124.6 million for the financial year under review, a 12.7% increase as compared to a year ago. The overall improvement in financial performance resulted in a higher earnings per share of 35.0 sen and a return on average equity of 17.2%.


In May 2020, the Group completed the conversion of its major business partners’ financing from conventional to shariah. This milestone was ten years in the making when a financing relationship was first forged with them. It is also a significant milestone as we can now declare that we operate in an end-to-end shariah-compliant financing ecosystem.

Following this, the Group embarked on its journey to meet the qualitative and quantitative requirements set by Shariah Advisory Council (“SAC”) of Securities Commission Malaysia. To ensure a proper follow through on those requirements, the Group also appointed a reputable shariah consultant to advise and review our conversion processes. Hence, the Group is hopeful to be included as a shariah-compliant counter in November 2021 upon passing the review by SAC.

Meanwhile, three more sukuk tranches amounting to RM350.0 million were issued by Zamarad Assets Berhad, a special purpose bankruptcy remote vehicle for RM2.00 billion Sukuk Murabahah Asset-Backed Securitisation Programme, in September 2020, November 2020 and July 2021 respectively. The issuance amount of these tranches ranged from RM107.0 million to RM127.0 million. Following its sixth tranche, the remaining programme limit for future issuances stands at RM1.14 billion.


The Group remains committed to upholding the highest standards of disclosure and corporate governance practices. Our Investor Relations team (“IR team”) ensures timely announcements of business activities and corporate developments on the Group’s website at

The IR team engages in regular communication with stakeholders, investors and analysts to provide constructive feedback for management consideration in decision-making and strategy planning. Communicating information and developments to external investors is important when the external environment is uncertain. Throughout the financial year and various stages of the Movement Control Order, the IR team conducted quarterly briefings to analysts and fund managers via video communications and other online tools.

Analysts from Maybank Investment Bank Berhad, KAF Equities Sdn Bhd and RHB Investment Bank Berhad have been covering the Group since September 2016, January 2018 and January 2020 respectively.

The Group also held its first virtual Annual General Meeting on 22 September 2020.


Sustainability is integral to our business growth and it was proven to be crucial in FYE 2021 amidst the disruptive pandemic. Having embarked on our sustainability journey for the fourth year, we have made incremental improvements in identifying risks and opportunities in the areas of economic, environmental, social and governance.

Following that, we have carried out our second materiality assessment with participants selected from stakeholder groups. Identified elements were then factored into our Sustainability Reporting of material sustainability matters, with adherence to Bursa Malaysia Securities Berhad Main Market Listing Requirements.

In view of macroeconomic uncertainties, we have continued to document risks and impact associated with the abovementioned areas in our Sustainability Matters Register to ensure all the matters remain relevant.

On 22 June 2020, RCE Capital Berhad was included as one of the constituents of FTSE4Good Bursa Malaysia Index. This inclusion was a testament to our commitment towards conservation of the environment, corporate social responsibility and good governance.

For further details about our sustainability efforts, please refer to Sustainability Statement that can be found in this Annual Report.


For many years, we have had a policy of rewarding our shareholders with consistent dividend payments. Since FYE 2019, prudent financial management has guided our policy of paying dividends of between 20.0% and 40.0% of the Group’s profit after tax. Our financial management takes into account balancing cash flow needs and business obligations.

The Group paid the first interim dividend of 6.0 sen per share on 7 December 2020, amounting to RM21.5 million. Following this payout, the second interim dividend of 7.0 sen paid on 29 July 2021, amounting to RM25.5 million. The total dividend amount paid of RM47.0 million equates to a total payout ratio of 37.7%, which is within the dividend range.


We are hopeful that the pandemic will ease in 2021/2022, largely due to global vaccination efforts. However, the economic impact of the pandemic will likely extend over a longer time frame. Despite a long economic shadow cast by the pandemic, the International Monetary Fund projects that global GDP will grow by 6.0% in 2021 after much of the world reopens. The USD1.90 trillion domestic stimulus package in the United States, growth in China and the gradual return of international air travel and tourism will further support this recovery.

Domestically, BNM estimates that Malaysia’s economy will grow between 3.0% and 4.0% in 2021. Despite the resurgence of COVID-19 cases and the Full Movement Control Order (“FMCO”) from 1 June 2021 to 28 June 2021, Malaysian economy is expected to rebound in late 2021. It will be driven by various phases of the National Recovery Plan (“NRP”) following the FMCO. These include less stringent containment measures subsequent to phased vaccine rollout, improved cross-border trade activities and continued accommodative policies. The NRP will support employment and income recovery, thus boosting consumer sentiment and ensuring a progressive normalisation in economic activities.

Nevertheless, the Group strives to be a responsible financier. Our focus will consistently be on quality financial growth to deliver sustainable returns to our shareholders. Additionally, the Group will continuously focus on improving operations, expanding distribution channels and tightening risk management framework to enhance customer experience as well as value creation.

The timely and effective use of technology can help streamline businesses, therefore, digital and transformational innovations that can help us achieve increased operational efficiencies remain central in our annual capital expenditure. The Group recognises that as we embrace the ‘new normal’, the digital economy will inevitably play a bigger role.


I would like to take this opportunity to welcome Tan Sri Mazlan bin Mansor to the Board of Directors of the Company. The Company appointed Tan Sri Mazlan as an Independent Director on 1 October 2020. Tan Sri Mazlan has served in the Royal Malaysia Police for almost 41 years until his retirement as the Deputy Inspector-General of the Royal Malaysia Police in August 2020. His addition will complement the existing Board and I look forward to his contributions to the Group.

On behalf of the Board, I extend my deepest gratitude to all our shareholders, customers, business partners and other stakeholders for their continued support throughout the year. I would also like to thank my fellow Board members, the management team and our employees for their relentless commitment and efforts in creating value for the Group amid these challenging times.

Furthermore, I would like to take this opportunity to convey our appreciation to the regulators for the guidance as well as support extended to us.

Finally, I would like to express our utmost appreciation to the healthcare, law enforcement and essential services/ front liners for their tireless and selfless work in the fight against the pandemic.

Shahman Azman