All-time high quarterly earnings lifted 9MFY21 core net profit to RM9.9m (+37% YoY) which beat expectations. RGB sold 18.6k EDCs and has 91k under its care. Total transaction value in 3QFY21 was +4% 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.

Exceeded expectations. All-time high 3QFY21 revenue of RM29.1m translated into strongest core net profit of RM4.1m (+7% QoQ, +484% YoY), brought 9MFY21 sum to RM9.9m (+37% YoY) which beat expectations, accounting for 91% and 85% of our and consensus of full year forecasts, respectively. The outperformance was due to stronger-than-expected EBITDA margin. One-off adjustments in 9MFY21 are net trade receivable impairment loss (-RM236k), bad debt recovered (-RM13k), PPE disposal loss (+RM5k), forex gain (-RM26k) and special issue expenses (+RM270k).

Dividend. None (3QFY20: None).

QoQ. Top line gained 40% to RM29.1m as electronic data capture (EDC) growth of 87% was sufficient to offset the declines in electronic transaction processing (ETP) and solution & services (S&S) with 22% and 8%, respectively. Despite higher admin expenses (+16%) and effective corporate tax rate, bottom line gained 7% to RM4.1m.

YoY. Sales jumped 87% as all product lines expanded, led by EDC with 112%, followed by ETP and S&S with 60% and 27%, respectively. In turn, earnings leaped nearly 6-fold despite higher D&A (+58%), connectivity and staff costs,

YTD. Turnover advanced 26% mainly driven by EDC (+45%) and S&S (+12%), more than sufficient to offset the softness in ETP (-5%) mainly attributable to the absence of inbound tourists. However, core net profit gained at a much faster pace of 37% despite higher D&A (+48%) and admin expenses (+16%).

EDC. Sold 18.6k units in 3QFY21 (2QFY21: 5k) to partner banks and has circa 91k EDCs under management. The sequential strength was due to aggressive rollouts by banks during the easing of movement control as proliferation of cashless payment was accelerated by the pandemic.

ETP. Total transaction value in 3QFY21 was higher by 4% QoQ at RM602m 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 on 30 Apr and expect to be completed by mid-21. The acquisition of Wannatalk and ScanPay allows RGB to build a complete ecosystem after integrating with them with its core capability in payment. As a B2B2C SaaS provider, RGB would be able to form partnerships with various digital players to enjoy long-term recurring revenue stream.

Forecast. Based on the deviation mentioned above, we lift FY21-23 EPS by 6%, 8% and 14%, respectively. Reiterate BUY after raising our SOP-derived TP from RM2.05 to RM2.28 (see Figure #2), reflecting the upward earnings revision. RGB is a proxy to the robust domestic e payment industry which undergoing multi-year of secular growth on the back of (1) robust growth in EDC terminals; (2) regulatory push to drive e-payment adoption; (3) riding on e-wallet trend; and (4) beneficiary of China cross-border e-commerce trend.

Reiterate BUY after raising our SOP-derived TP from RM2.05 to RM2.28 (see Figure #2), reflecting the upward earnings revision. RGB is a proxy to the robust domestic epayment industry which undergoing multi-year of secular growth on the back of (1) robust growth in EDC terminals; (2) regulatory push to drive e-payment adoption; (3) riding on e-wallet trend; and (4) beneficiary of China cross-border e-commerce trend

Source: Hong Leong Investment Bank Research - 1 Jun 2021