RGB INTERNATIONAL BHD
KLSE (MYR): RGB (0037)
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0.37
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
ceoshare
546 posts
Posted by ceoshare > 2024-03-01 09:49 | Report Abuse
*RGB International (RGB MK/BUY/RM0.29/TP:RM0.46)*
_Kitchen Sinking Dragging Reported Earnings🚰_
🔹 *4Q23 result within expectations.* RGB reported a yoy weaker 4Q23 revenue of RM108.6m (-9% yoy, -36% qoq) and core net profit of RM13m (+39% yoy, -50% qoq). The QoQ weaker earnings are mainly due to lower SSM sales from 3Q23’s high base where there’s a bulk order delivered. 2023 record-high core profit of RM76m made up 100% of our forecast.
🔸 *Reported earnings slumped into huge losses due to impairment.* In 4Q23, RGB kitchen sink some of its aging trade receivables totalling RM35.1m. Management alluded that the impairments are merely conservative accounting practises and some of the debtors have been repaying the debts on schedule, which may allow writebacks of these impairments in upcoming quarters. More importantly, these impairments are non-cash items and does not affect core earnings.
🔹 *Declared 0.8sen interim dividend.* In 4Q23, RGB also declared an interim dividend of 0.8sen. This bring 2023 dividend to 2.0sen, which implies full-year dividend yield of 6.9%.
🔸 *Still well-positioned to capitalize on ASEAN jurisdiction’s booming gaming scene and exponential growth.* We retain our view that RGB is set to continue delivering meaningful earnings growth throughout 2024-25F. Key growth drivers arise from the Philippines’ mushrooming new IRs, friendly legislation such as higher slots capacity quotas, and supportive remote gaming policies.
🔹 *Deep-in-value financial matrixes solidify our investment thesis.* RGB’s bargain valuations of 4.6x 2024F PE (<2x ex-cash 2024F PE) and 1.2x 2024F book value offer tremendous potential capital upside. More importantly, RGB’s prospective net cash of RM175m-256m (36-53% of current market cap) is more than sufficient to support its minimum 30% dividend payout policy and lush yields of >6% in 2024-25F.
🔸 *Maintain BUY with unchanged target price of RM0.46,* which implies 7x 2024F PE, <2x 2024F ex-cash PE, and 3x 2024F EV/EBITDA. We believe there should be *potential knee-jerk selldown* reacting to the lackluster reported earnings, but we advocate investors to look beyond the non-cash impairments and *accumulate on weakness.*