Ramssol’s expansion into the Philippines a natural choice

Ramssol group managing director and CEO Cllement Tan Chee Seng (pic) told StarBizWeek that expanding into the Philippines was a natural choice as the group, headquartered in Malaysia, already operates across Singapore, Thailand, Vietnam and Indonesia.

Ramssol Group Bhd is optimistic about its growth prospects in light of the rapid pace of workplace digital transformation, which has been accelerated by the Covid-19 pandemic.

The human capital management (HCM) solutions and technology provider, en route to be listed on the ACE Market on July 13, will use part of its RM25.1mil initial public offering (IPO) proceeds to fund its business expansion into the Philippines (RM2.5mil) within the next 24 months, as well as growing its relatively new HCM technology applications (RM6.3mil) unit in South-East Asia.

Ramssol is the first technology company to be listed in 2021.

From the IPO proceeds, RM4.1mil will be for research and development (R&D) expenditure, RM7.6mil for working capital and the balance RM4.6mil for listing expenses.

Ramssol plans to focus on the provision of HCM and student management solutions as well as HCM technology applications in the Philippines.

Ramsoll group

Ramssol group managing director and CEO Cllement Tan Chee Seng (pic) told StarBizWeek that expanding into the Philippines was a natural choice as the group, headquartered in Malaysia, already operates across Singapore, Thailand, Vietnam and Indonesia.

“Our customers include large enterprises, government-linked companies, multi-national companies, conglomerates, as well as educational institutions in South-East Asia.

“They may have businesses across multiple countries, and we think it is important to have our presence where our customers’ business are, ” he says.

Tan explains that the group has started discussions with Oracle (Philippines) Corp to explore business opportunities and understand the market dynamics in the Philippines.

“Upon setting up, we will actively participate in events, exhibitions or trade shows in the Philippines.

“The expansion to the Philippines is expected to grow our business regionally and strengthen our position as a regional HCM solution and technology specialist in South-East Asia, ” he adds.

However, Tan points out that the group’s plans in the Philippines may see a slower pace due to the Covid-19 pandemic.

He also notes that there are competitors supplying similar services in the Philippines, and the group “has to make sure its expertise, software used, service quality, delivery time, and pricing strategies are competitive.”

Meanwhile, the group’s HCM technology applications unit consists of Feet’s (an in-house employee engagement mobile application), third-party collaboration platform Lark, information technology (IT)-related training focusing on office automation, and the reselling of enterprise unified communications platform Zoom.

Ramssol presently offers Feet’s in Malaysia and Indonesia, and plans to expand its usage to Singapore, Thailand and Vietnam.

“As at May 24, 2021, we had secured four organisations with 3, 700 subscribers in Malaysia (comprising both paid users and users under free trials), and four organisations with 1, 200 subscribers in Indonesia, ” says Tan.

The group also plans to grow the presence of Lark to Thailand, Indonesia and Vietnam as well as expand its IT staff augmentation and IT-related training businesses, and increase sales of software licences from large organisations.

Meanwhile, for its financial year ended Dec 31, 2020 (FY20), the group posted a 68% year-on-year jump in net profit to RM7.53mil (from RM4.5mil in FY19), on the back of a 64% hike in revenue to RM25.3mil (from RM15.44mil in FY19).

In FY20, the group’s HCM and student management solutions unit remained as the largest revenue contributor with RM15.3mil (or 60.6%), followed by the HCM technology applications unit (RM9.1mil or 36%), and the IT staff augmentation services unit (RM876, 000 or 3.5%).

The sterling financial performance in FY20 was mainly due to the HCM technology applications unit, which secured education institution Megatech as a new customer.

Together with Megatech, the group provides IT-related training to unemployed Malaysians under the Penjana Kerjaya Programme introduced by the Human Resources Ministry in August 2020.

“We expect HCM technology applications will continue to create positive growth going forward, ” says Tan, who points out that for the four years from FY17 to FY20, Ramssol’s revenue grew from RM6.8mil to RM25.3mil at a compounded annual growth rate (CAGR) of 55%.

“We hope to achieve consistent performance in the coming years and our outstanding order book as at May 24, 2021 is RM19.4mil, ” he says.

Ramssol also recorded a profit after tax and minority interest or Patami margins of 29.11% and 29.74% for FY19 and FY20 respectively, due to the increase in revenue contribution from the provision of HCM and student management solutions as well as HCM technology applications.

“Going forward, we will continue to look for opportunities by consolidating and expanding our businesses, and strengthening our existing competitive advantages, ” says Tan.

For FY20, Malaysia was the highest revenue contributor (45.53%), followed by Thailand (29.82%), Indonesia (13.07%) and Singapore (11.37%) and the Netherlands (0.21%).

Regarding the lockdowns in the countries where Ramssol operates, Tan says some work was restricted such as physical sighting of confidential documents, and delays in the extract of information required from its customers, which had caused slight delays to its project delivery schedule.

Ramssol’s selling shareholders are Tan (48.08%), executive director and chief operating officer Lee Miew Lan (32.05%), Wong Kum Loong (6.23%) and executive director and chief information officer Liew Yu Hoe (2.58%), who collectively own 88.93% of the group.

It should be noted that the world’s largest glovemaker Top Glove Corp Bhd’s executive chairman and founder Tan Sri Lim Wee Chai is a substantial shareholder with a 5.14% stake.

Post-IPO, the selling shareholders’ collective stake will be 56.7%.

Tan, aged 37, and Lee, aged 46, co-founded Ramssol in 2010. The group started operations in Singapore in 2011, and Malaysia in 2014, before expanding to Vietnam, Thailand and Indonesia.

Its IPO shares offered to the Malaysian public were oversubscribed by 102.88 times. Based on the IPO price of 45 sen, the total market capitalisation of Ramssol upon listing shall be RM100.37mil.

Ramssol does not have a formal dividend policy.

Meanwhile, PublicInvest Research says Ramssol’s growth drivers will be dependent on regional expansion, expansion of all its existing business segments, and enhancement of its in-house employee engagement mobile application as well as development of bolt-on modules for its cloud-based HCM solutions.

The research unit notes that as at May 24, 2021, Ramssol’s total secured orders of RM51.52mil included orders secured in FY21 of RM19.74mil whilst the remaining RM31.78mil was secured prior to Jan 1, 2021. The unbilled amount as at May 24, 2021 of RM16.24mil is expected to be billed in FY21 with the remaining balance of RM1.64mil to be billed in FY22 and RM0.76mil to be billed each in FY23 and FY24 respectively.

The research unit has derived a fair value of 63 sen for Ramssol’s stock, pegging it to 15 times the price-earnings (PE) multiple to the group’s FY22 estimated earnings per share (EPS) of 4.2 sen.

“We are ascribing a 70% discount to Bursa Malaysia Technology Index’s PE multiple of 47 times. We believe that the discount is justifiable on account of its smaller market cap as compared with other listed technology players.

“Leveraging on its competitive strengths, Ramssol’s future prospect remains optimistic moving forward as the group strives to empower HR operations not just with digitalisation innovation, but with inclusion of artificial intelligence (AI)-enabled analytics, ” says PublicInvest Research.

TA Securities Research has forecasted Ramssol’s revenue and net profit from FY20 to FY23 to grow at a three-year CAGR of 14.9% and 9.7% to RM38.5mil and RM11.2mil respectively.

“This is based on a sales growth assumption for FY21/FY22/FY23 of 10%/15%/20% respectively, driven by ongoing initiatives by organisations to digitalise their operations, and its product and market expansion plans, ” says the research unit.

TA Securities Research also notes that post-IPO, Ramssol would be in a net cash position of RM24.6mil.

It notes that at the IPO price of 45 per share, Ramssol is priced at a trailing PE of 11.8 times against its FY20 core EPS.

TA Securities Research has derived a fair value of 62 sen for Ramssol’s stock, based on a target PE multiple of 15 times FY22 estimated EPS.

Meanwhile, Malacca Securities Research points out that Ramssol’s key customers include notable entities such as Capitaland Ltd, RHB Bank Bhd, Capitaland Singapore (BP&C) Pte Ltd, National University of Singapore, Paramount Corp Bhd, ThaiFoods Group PLC and Export Import Bank of Thailand.

“The majority have long-term business relationships with Ramssol, spanning up to eight years, ” says the research unit, which has derived a fair value of 60 sen for Ramssol’s stock, by pegging its FY22 estimated core EPS of four sen to 15 times PE.