PETALING JAYA: Phillip Capital Research says it expects RGB International Bhd
to post its strongest quarterly earnings performance yet when it releases its results for the fourth quarter of financial year 2024 (4Q24) on Feb 26.
The research house, in initiating its coverage on the distributor of electronic gaming machines and equipment, said RGB is slated to deliver a core profit after tax and minority interests (Patami) of about RM51mil for 4Q24, bringing its full-year 2024 core Patami to around RM108mil, up 91% year-on-year (y-o-y).
“The strong earnings growth is underpinned by the completion of 1,968 electronic gaming machines (EGMs), valued at US$81mil, delivered to the Philippine Amusement and Gaming Corp (Pagcor) in 4Q24,” Phillip Capital Research said in a note to clients yesterday.
According to the research house, RGB stands out as Asia’s preeminent distributor of EGMs with a dominant 70% to 80% market share across the region.
Given strong demand for EGMs in the Philippines, the research house said: “For 2024 to 2026, we expect this strong momentum to persist, projecting a higher sales volume of 4,500, 5,200 and 5,500 units, respectively, primarily supported by a robust pipeline of resort openings in the Philippines and a growing replacement market.”
“We also expect a blockbuster year for RGB, forecasting a 32% compounded annual growth rate in profit over the 2023 to 2026 time frame,” the research house said.
Furthermore, RGB is in a prime position to capture 60% to 70% of new EGM orders from its largest market, the Philippines.
This will be driven by a robust pipeline of new integrated resorts set to open, ongoing upgrades following the privatisation of Pagcor’s casino operations and growing global replacement market.
With the recent legalisation of gambling in the United Arab Emirates (UAE) and Japan, Phillip Capital Research estimates the total addressable market for EGMs is projected to expand by about 17,000 over 2024 to 2027.
This growth builds on the existing EGMs currently in operation, reflecting the significant potential from newly opened markets.
Meanwhile, the average selling prices for EGMs have increased from around US$20,000 to more than US$30,000 compared with pre-Covid levels.
Despite that, RGB can maintain its margins thanks to its strong market position, said the research house.
“Our projections have yet to consider the revenue contributions from its latest online casino venture, new revenue streams from other countries, or margin improvements driven by a more favourable product mix in EGM accessories, leaving room for further upside potential to our earnings forecast for RGB,” the research house added.
The research house has a “buy” call on the stock with a target price of 71 sen.
RGB closed at 44 sen yesterday, giving it a market capitalisation of RM673.5mil.
Phillip Research Capital said it likes RGB for its exciting growth prospects, describing it as an undervalued gem.
This was backed by the group being a prime beneficiary of regulatory changes in the Philippines and Cambodia, significant opportunities in new markets such as Sri Lanka, Thailand, UAE and Japan.
