TP lowered but BUY maintained

FY22 results missed expectations on weaker-than-expected sales. We cut FY23-24E earnings by 18-20% and introduce FY25E. Ramssol’s new training and motorcycle online marketplace businesses may contribute meaningfully going forward, and would anchor our projected 3-year (FY22-25E) earnings CAGR of 38%. Maintain BUY with a lower TP of MYR0.46, as we roll forward valuation FY24E on unchanged 12.7x PER.

Below expectations

Ramssol posted a core net profit of MYR0.5m in 4Q22 vs. a loss of MYR0.5m in 4Q21 due to significantly lower administrative expenses, despite registering a 66% YoY decline in revenue. The group however incurred higher depreciation expense and effective tax rate in 4Q22, which dragged the overall performance. FY22 core net profit fell 55% and made up just 74% of our full-year estimates. No dividend was declared, which was expected.

New businesses yet to contribute meaningfully

FY22’s underperformance was largely due to sharper-than-expected decline in PeopleTech’s revenue, as Oracle and Lark-centric solutions saw declining demand and project completion, while the rollout of DarwinBox HCM solutions have yet to become a significant contributor to the segment’s revenue. The other new businesses were still at nascent stage and also did not contribute to the group’s earnings as at 4Q22.

Cutting earnings

We cut FY23-24E earnings by 18-20% as we adjust for lower PeopleTech revenues going forward. We however expect Ramssol’s new businesses to contribute meaningfully from FY23E onward, through its EduTech training services to government agencies, as well as RiderGate, the first one-stop online motorcycle marketplace in Malaysia. Moreover, the recent acquisition of a 51% stake in Infinite Loop Media S/B for MYR400k could improve its marketing prowess whilst reducing the related expenses.

Source: Maybank Research - 27 Feb 2023