Highlights

HLBank Research Highlights

Author: HLInvest   |   Latest post: Tue, 26 Oct 2021, 12:34 PM

 

Revenue Group - Ending in Line

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Seasonally weaker 4QFY21 brought FY21 core net profit to RM11.6m (+30% YoY) which matched expectations. RGB sold 2.0k EDCs and has 93.3k under its care. Total transaction value in 4QFY21 was +5% QoQ on the back of robust e commerce transactions. As a B2B2C SaaS provider, RGB would be able to form partnerships with various digital players to enjoy long-term recurring revenue stream. Maintain BUY with higher TP of RM2.28.

Within expectations. 4QFY21 revenue of RM17.6m translated into a core net profit of RM1.8m (-56% QoQ, +3% YoY), this brought FY21 sum to RM11.6m (+30% YoY) which matched our and consensus expectations, accounting for 102% and 96%, respectively. One-off adjustments in FY21 are net trade receivable impairment loss (+RM267k), bad debt recovered (-RM18k), forex gain (-RM18k), PPE disposal loss (+RM5k) and special issue expenses (+RM270k).

Dividend. None (4QFY20: none). RGB has yet to adopt a dividend policy.

QoQ. Top line lost 40% to RM17.6m as electronic transaction processing (ETP) gain of 5% was not sufficient to offset the declines in electronic data capture (EDC) and solution & services (S&S) with -52% and -21%, respectively. In turn, bottom line fell by 56% to RM1.8m also due to the higher corporate tax rate of 29% vs 3QFY21’s 21%.

YoY. Sales dropped 25% as EDC and S&S recorded lower contributions by -37% and -49%, respectively and completely erased the 143% expansion registered by ETP. However, core earnings were marginally higher by 3% despite higher admin expense (+9%) thanks to lower effective corporate tax rate (4QFY20: 32%).

YTD. Turnover advanced 11% mainly driven by EDC (+17%) and ETP (+13%), more than sufficient to offset the softness in S&S (-10%). In turn, core net profit gained at a much faster pace of 30% despite higher D&A (+38%) and admin expenses (+14%).

EDC. Sold 2.0k units in 4QFY21 (3QFY21: 18.6k; 4QFY20: 11.5k) to partner banks and has circa 93.3k (3QFY21: 91.0k; 4QFY20: 72.0k) EDCs under management. The weakness was due to MCO3.0/Phase 1 restrictions which hampered rollout plans.

ETP. Total transaction value in 4QFY21 was higher by 5% QoQ at RM632.7m thanks to robust e-commerce transactions cushioning the lower offline transactions as a result of significantly lower inbound travellers.

Outlook. RGB has submitted the application for Main Market transfer to SC and expects to complete the exercise by 1HFY22. The acquisition of Wannatalk and ScanPay allows RGB to build a complete ecosystem by integrating its core capability in payment. VSTB will facilitate RGB to further expand and develop a more robust B2B2C environment by providing innovative products and services to its clients, such as on-demand insurance, catering to the special needs of individual and businesses. As a B2B2C SaaS provider, RGB would be able to form partnerships with various digital players to enjoy long-term recurring revenue stream.

Forecast. As we update our model with FY21 figures, FY22 PATAMI projection is adjusted by -1% while FY23’s remain unchanged. Reiterate BUY with unchanged SOP-derived TP of RM2.28 (see Figure #2). RGB is a proxy to the robust domestic e-payment industry which undergoing multi-year of secular growth on the back of (i) robust growth in EDC terminals; (ii) regulatory push to drive e-payment adoption; (iii) riding on e-wallet trend; and (iv) beneficiary of China cross-border e-commerce trend.

 

Source: Hong Leong Investment Bank Research - 20 Sept 2021

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