Maintain BUY

Ramssol plans to undertake a private placement of new shares to fund the development of its in-house enterprise solution for a client. We maintain our earnings at this juncture, given limited disclosures, but applaud the group’s direction to diversify its revenue base. Maintain BUY with an unchanged TP of MYR0.60, on 12.7x FY23E PER (close to -1SD its 1-Yr mean).

To provide enterprise solutions for GT-Max Motors

Ramssol has entered into a Commission Agreement with GT-Max Motors (M) S/B for the provision and maintenance of a software application (mobile and web-based) called ‘Rider Gate’, which comprise of enterprise resource planning, warehouse management systems, payment getaways and related financial systems. GT-Max is a motorcycle retailer, selling motorcycles, accessories and auto parts; and repairing services. Ramssol will commence the provision of ‘Rider Gate’ in 3Q22 and expects to complete the development within 18 months. The revenue recognition will be on project progression basis, with recurring fees from each transaction from all services done via the platform and maintenance.

Undertaking a private placement exercise

In order to fund the development cost of ‘Rider Gate’, Ramssol plans to undertake a private placement exercise to issue new shares of up to 10% of its current share base (up to 22.3m new shares). At an indicative issue price of MYR0.445 (latest closing price), it may raise up to MYR9.9m. We understand that the contract value with GT-Max Motors has yet to be finalised, and as such, are unable to ascertain the financial impact at this juncture. Part of the unutilised proceeds will be used for the group’s working capital purposes. We also note that Ramssol is currently in a net cash position (net cash of MYR0.049/share as at 2Q22).

Maintaining our forecasts

We maintain our earnings forecasts for now, pending greater detail on this development. We however applaud Ramssol for continuing to develop in-house enterprise software solutions for the market and diversifying beyond its HCM software reselling business. That said, its exclusive partnership to resell DarwinBox HCM solutions for the Malaysian market could bode well for its earnings outlook in 2H22.

Source: Maybank Research - 23 Sep 2022