Maintain BUY

Recent management update suggests sequential revenue strength as Ramssol’s new businesses may start to materialise meaningfully, supplementing an already good 1Q23 results. That said, execution remains a key factor before we turn more bullish on our earnings forecasts. BUY with an unchanged TP of MYR0.46 (12.7x FY24E PER).

1Q23 results recap

1Q23 net profit grew by 102% YoY to MYR2.1m on the back of a much lower administration expense (-30% YoY), which more than offset the lower revenue. This was due to the recent 51%-stake acquisition of Infinite Loop Media S/B on Feb 2023, which contributed to lower marketing expense for Ramssol. Revenue fell by 23% YoY due to lower contribution from human capital management-related businesses, while the new businesses have yet to gain meaningful traction.

Expecting sequential revenue improvement

Management hinted on a stronger sales traction in the coming quarters across all business segments. On the PeopleTech segment, Ramssol is rolling out more than 10 concurrent projects for the implementation of HCM solutions for various domestic and international clients. On EduTech, the group is launching the digital version of its anti-corruption training as part of increasing its training capacity to more agencies. It is also expanding more collaboration with various associations to widen its market reach. Lastly, the development of RiderGate is on track, as it is now shifting to the formation of collaborations with various other stakeholders i.e. insurance, payments and fintech companies, as well as related government agencies to complete the ecosystem, prior to eventual market launch, which could likely happen by 3Q23.

Maintaining earnings

We maintain our earnings projection for now, as we have adequately reflected a stronger sequential sales growth in our forecast. We project 48% revenue growth in FY23E, to be anchored by maiden contribution from EduTech and AutoTech segments (29% rev mix), and PeopleTech to grow by 5% (71% rev mix). That said, operating margin could be suppressed due to escalating associated opex from the new businesses.

Source: Maybank Research - 16 May 2023