Background

Go Hub Capital Berhad (GOHUB) is principally involved in delivering enterprise IT services, specialising in transportation IT solutions. This includes customized software development and the integration of hardware and software systems for the bus and rail segments. Additionally, the group also provides maintenance and support services as well as terminal management services.

IPO Statistic

The IPO entails a public issue of 107,180,000 new ordinary shares at an IPO price of RM0.35/share. There is no offer for sale.

Public issue:

• 20,000,000 new shares for application by the Malaysian public;

• 12,000,000 new shares for application by eligible parties; and

• 75,180,000 new shares for private placement to selected investors.

Main Competitive Advantages

1. Capable to provide a diverse range of IT services to the public transportation sector;

2. Strong market presence with large customer base; and

3. Experienced management team.

Valuation

At an IPO price of RM0.35/share, GOHUB is priced at a trailing PER of 17.3x FY23 core EPS. We value the company at 17x CY25 EPS, arriving at a fair value of RM0.55/share.

Business Overview

GOHUB is principally involved in delivering enterprise IT services, specialising in transportation IT solutions. This includes customized software development and the integration of hardware and software systems for the bus and rail segments. Additionally, the group also provides maintenance and support services as well as terminal management services. The group mainly serves domestic market.

Utilisation of Proceeds

The estimated gross proceeds of RM37.5mn raised are expected to be utilised for the following:

Key Competitive Advantages

1) Capable to provide a diverse range of IT services to the public transportation sector

GOHUB has strong expertise in providing enterprise IT services to serve the public transportation sector. These services include terminal operating systems, ticketing systems, fare collection systems, and fleet monitoring systems.

2) Strong market presence with large customer base

The group mainly provides IT solutions to the bus and rail segments of the public transportation sector. Key customers include bus terminal operators, stage bus operators, and rail operator. Meanwhile, the group has ventured into sea transportation segment as well.

3) Experienced management team

The group is led by an experienced management team headed by its chief executive officer, Mr. Tan Cherng Thong, who has more than 20 years of working experience in the provision of public transportation IT solutions.

Key Risks Relating to Business and Industry

1) Continuity of order book is not assured;

2) Highly dependent on public transportation sector; and

3) Regulatory changes.

Financial Highlights

The revenue for FY22 surged by 30.7% YoY to RM26.5mn from RM20.3mn a year ago, mainly driven by higher revenue from centralised ticketing system and a new contract secured from a railway operator. As a result, the group’s core profit jumped 283.8% YoY to RM6.4mn from RM1.7mn a year earlier. In the subsequent year, the group saw its revenue further grew by 65.5% YoY to RM43.9mn, primarily due to higher revenue from centralised ticketing and automated fare collection systems as well as increase in utilisation rate of the terminal operating system at a few bus terminals under its coverage. The core profit increased 26.1% YoY to RM8.1mn in FY23 thanks to higher revenue.

Moving forward, we forecast the revenue and core profit to be stronger, underpinned by its unbilled order book of RM35.4mn as of 10 May 2024 as well as better outlook of public transportation infrastructure in Malaysia.

Future Plans and Business Strategies

The group’s future plans and business strategies are as follows:

1) Further expand into other regions of Malaysia

The group will actively look for opportunities to expand its presence within Malaysia, focusing on identified domestic transportation-related initiatives with potential for collaboration and growth.

2) Expansion of Workforce

The group intends to hire more skilled professionals such as software engineers, project consultants, and technicians in order to beef up its human resource capabilities.

3) Further Strengthen Marketing Efforts

The group intends to participate into more international exhibitions that focusing on transportation, traffic management as well as smart city infrastructure. Meanwhile, the group will implement a series of business development activities to increase its brand awareness.

4) Acquisition of Star Central Office Tower and setting up of new integrated centre

The group plans to relocate its operations to the Star Central Office Tower which is located at Cyberjaya, Selangor. Besides, the group also plans to establish a new integrated centre in the Klang Valley that will serve as its new test laboratory, demonstration and training centre.

5) Further strengthen the design & development and acquisition of new IT equipment and software

The group will continue focusing on design and development as well as acquisition of new IT equipment and software in order to stay competitive.

Outlook

According to an independent market research report prepared by Protégé Associates, which was enclosed in the IPO prospectus, the enterprise IT services industry in Malaysia is estimated to grow from RM23.5bn in 2024 to RM29.5bn in 2028 at a CAGR of 5.7%, mainly driven by digital transformation journey in various sectors. For GOHUB, the growth prospects will be bolstered by the government's ongoing efforts to pursue digitalisation with the aim of enhancing Malaysia's public transportation infrastructure and systems.

Balance Sheet

On a pro forma basis, post-listing with utilisation of IPO proceeds, the balance sheet is expected to improve from a net debt position of RM10.0mn to a net cash position of RM12.2mn.

Dividend Policy

The group currently does not have any formal dividend policy.

Earnings Forecast

We estimate the group to record earnings growths of 19.3%, 33.3% and 21.7% to RM9.7mn, RM12.9mn, and RM15.7mn for FY24, FY25 and FY26 respectively, supported by its unbilled order book of RM35.4mn as of 10 May 2024 and better outlook of public transportation sector. We expect the domestic market will remain as the primary revenue generator.

All in, our FY24-26 earnings projections are premised on the key assumptions below:

• Revenue growth of 12.0%, 15.0%, and 16.0% for FY24/FY25/FY26 respectively; and

• Gross margins of 52.0%, 54.0%, and 54.5% for FY24/FY25/FY26, respectively.

Valuation

Currently, there is no listed company from Bursa Malaysia that is directly comparable with GOHUB. Nevertheless, we use ITMAX, a provider of public space networked systems that specialise in traffic management, surveillance and communication network, for peer comparison. We assign a target PE multiple of 17x to GOHUB and arrive at a fair value of RM0.55/share. This is after considering the group has:

a. Capability to provide a diverse range of IT services to the public transportation sector;

b. Strong customer base; and

c. Experienced management team.

Source: TA Research - 19 Jun 2024