FY22 core net profit of RM14.6m (+24.9% YoY) matched ours but missed street. Bottom line expanded at a faster pace thanks to favourable revenue mix with higher contribution from high-margin ETP business. EDC sales was soft as rollouts by partner banks remained lacklustre. Total transaction value +33.2% YoY supported by robust e-commerce transactions. As a B2B2C SaaS provider, RGB would be able to form partnerships with digital players to enjoy long-term recurring revenue stream. Reiterate BUY with unchanged TP of RM1.88.

Match HLIB but below street. 4QFY22 core net profit of RM1.6m (-66.9% QoQ, - 9.0% YoY) lifted FY22’s to RM14.6m (+24.9% YoY) matched our full year forecast at 95.1% but disappointed consensus at 89.8%. One-off adjustments in FY22 are net impairment losses on trade receivables (+RM535k), bad debt recovered (-RM22k), forex loss (+RM796k) and PPE disposal gain (-RM1k).

Dividend. None (3QFY21: none). RGB has yet to adopt a dividend policy.

QoQ. Top line grew 25% to RM28.5m attributable to the improvements in electronic data capture (EDC) and solution & services (S&S) which gained 108.9% and 9.2%, respectively. These were more than enough to offset the decline in electronic transaction processing (ETP) that contracted 40.1%. However, core earnings deteriorated by 66.9% to RM4.9m attributable to the higher admin expenses (+57.0%) and effective corporate tax rate.

YoY. Sales expanded 62.6% thanks to higher contributions from all segments: EDC (+83.9%), ETP (+39.9%) and S&S (+22.7%). Despite the higher revenue, core earnings fell by 9% for the same reasons mentioned above.

YTD. Turnover increased by 12.3% as the gains in ETP (+81.7%) and S&S (+14.1%) were more than sufficient to offset the loss in EDC (-10.5%). Despite the higher D&A (+12.0%), bottom line expanded at a faster pace of 24.9% thanks to favourable revenue mix with higher contribution from high-margin ETP business.

EDC. Contributed 50.7% of group revenue in FY22. RGB sold 43.6k units in FY22 (FY21: 49.6k) as rollouts by partner banks remains lacklustre. Number of EDC under rental and management has increased to 104.4k in FY22 (FY21: 92.1k).

ETP. Contributed 33.2% of group revenue in FY22. Total transaction value in FY22 was lower by 14.4% YoY to RM2.7bn thanks to robust e-commerce transactions, especially China cross-border transactions.

Outlook. 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. Unchanged. Reiterate BUY with unchanged SOP-derived TP of RM1.88 (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 - 1 Sept 2022