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KUALA LUMPUR: TA Securities Research has set its fair value for Revenue Group Bhd
(RGB) at 46 sen a share, which is nine sen above its initial offer price of 37 sen.
It said at the IPO price of 37 sen a share, RGB is priced at 12.3 times its annualised audited 1HFY18 EPS of three sen a share.
“We value RGB at a fair value of 46 sen a share based on a target price-to-earnings (PE) of 13 times and CY19 EPS of 3.5 sen a share.
“The lower PE multiple assigned for the group, versus local listed peer GHL Systems Bhd (Not Rated) that is trading at a forward PE multiple of 24.8 times against CY19EPS, is premised on its smaller market capitalisation,” it said.
RGB is a cashless payment solutions provider in Malaysia which provides multi-channel payment solutions. Its customers include an e-money payment scheme, financial institutions, online store merchants and physical store merchants.
In terms of products and services, the group is principally involved in: 1) the distribution, deployment and maintenance of Electronic Data Capture (EDC) terminals, 2) the provision of electronic transaction processing services for credit cards and debit cards and 3) the provision of solutions and services related to payment infrastructure.
From FY15-FY17, RGB’s revenue was driven by its EDC terminals segment and this was followed by the electronic transaction processing segment and solutions and services segment.
On average, they respectively accounted for 60.3%, 33.3% and 6.3% of the group’s revenue.
TA Research said more recently, however, the electronic transaction processing segment had taken the lead as the group’s largest revenue contributor.
In 1HFY18, revenue from the segment increased by 58.3% on-year to RM7.7mil and this was driven by the higher transaction volume and transactional value processed.
In terms of margins, the group recorded double-digit PBT margins from FY15-FY17. Margins were on an uptrend with F15/FY16/FY17 at 18.9%/23.0%32.3%.
The 4.1 percentage point on-year margin expansion in FY16 was due to lower administrative expenses while the 9.3 percentage point on-year margin expansion in FY17 was due to a one-off RM2.1mil gain on disposal of investment properties.
Meanwhile, in 1HFY18, PBT margins expanded by 14.4 percentage point on-year to 28.7% mainly on the successful negotiation for lower bank charges from a few banks alongside the rise in online transaction volume.
“Going forward, we project the group’s FY18/FY19/FY20 earnings to grow by 23.7%/15.0%/24.8%, implying a CAGR of 21.1%. This will be driven by the electronic transaction processing segment.
“Our base case assumptions are for the group’s transactional value processed in FY18/FY19/FY20 to grow by 60%/18.6%/18.6% with FY18’s growth tracking the 54.9% on-year growth recorded in 1HFY18 while FY19/FY20’s growth is benchmarked against expectations for the volume of electronic payment transactions within Malaysia to grow at a CAGR of 18.6% from 2018 to 2022.
“On the dividend front, while the group has not established a dividend policy, we assume a dividend payoutratio of 10% and this translates into a yield of 0.4%/0.8%/1.1% across FY18/FY19/FY20.
“Meanwhile, in terms of financial strength, we expect the group’s balance sheet to remain healthy with a robust net cash position of above RM20mil across FY18-FY20,” said TA Research.
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