Background

Founded in 2003, Panda Eco System Bhd (PESB) is principally involved in the development, customisation, implementation, and integration of retail management solutions. Its customer segments include grocery retail stores, general merchandise retailers, specialty stores, and convenient stores.

IPO Statistic

The IPO entails a public issue of 109.3mn new shares and offer for sale of 61.8mn existing shares. Collectively, they account for 25.5% of the group’s enlarged issued share capital.

Competitive Advantages

1. Comprehensive Range of Retail Management Solutions
2. In-House Developed Retail Management Software
3. Solutions With Flexibility & Convenience to Customers
4. Experienced & Technically Strong Management Team

Valuation

At the IPO price of RM0.16/share, PESB is priced at a trailing PE of 15.5x CY22 core EPS. As we assign a target PE multiple of 15.0x against its CY24F EPS, we derive a fair value of RM0.185/share. This takes into account PESB’s earnings growth prospects (FY23F/FY24F/FY25F: +3.8%/+16.2%/+15.8%) as it is poised to benefit from: i) the growth of Malaysia’s retail industry both via brick-and-mortar and online channels, and ii) government initiatives to spur digitalisation, especially to SMEs and micro enterprises. Additionally, we have also taken into consideration PESB’s track record, experienced and technically strong management team, and rich margin and ROE. Not Rated.

Business Overview

Founded in 2003, Panda Eco System Bhd (PESB) is principally involved in the development, customisation, implementation, and integration of retail management solutions. Its customer segments include grocery retail stores, general merchandise retailers, specialty stores, and convenient stores. Retail management solutions are used to support retail operational processes such as point-of-sales management, customer relationship management, electronic commerce platform management, supply chain management, management of information on store operations, inventory and warehouse management, as well as financial and accounting management.

The group’s key solution is its Retail Management Eco-system which comprises:

i. HQ Centralised Management, Store Operations and Financial Management Solution: for Management and Monitoring of business operations and daily activities of a network of retail stores, Management of Point-of-sale, and Management of Financial Information;

ii. Omni-channel Engagement Solution: Enables Customer Relationship management, management of e-commerce platforms, mobile applications and digital content, as well as management of delivery assignments for orders made through e-commercia platforms; and

iii. xBridge B2B solution: enables electronic document exchange between retailers and their suppliers.

Additionally, PESB is also involved in the trading of third-party software, trading of information technology (IT) hardware, as well as software customisation, implementation and integration of process control, and automation solutions.

From FY19 to 1HFY23, PESB had implemented its Retail Management Ecosystem for 1,377 retail stores operated by ~137 retailers throughout Malaysia. Overseas, the group had also implemented its Retail Management Eco-system for 2 retail stores in Batam, Indonesia in 2016, and 1 retail store in Brunei in 2021. And recently since July 2023, the group had commenced implementation of its Retail Management Eco-system for 1 grocery retail chain in Indonesia.

Source: TA Research - 14 Nov 2023