Although Ramssol Group Bhd (RAMSSSOL)’s PeopleTech segment saw better-than-expected earnings growth in 2Q23 on the back of improved HCM solution sales, its other segments’ landmark initiatives have yet to provide meaningful earnings contribution.
“Pending management updates at the upcoming analyst briefing, we maintain our earnings forecasts. Project execution remains a key risk,” said Maybank Investment Bank (Maybank IB) in a recent report.
Excluding unrealised FX gains, RAMSSOL registered a 2Q23 core net profit (CNP) of RM2.1m. Cumulatively, 1H23 CNP came in at RM4.2m.
“We believe the outperformance was largely driven by the increased rollout of its human capital management (HCM) solutions under the PeopleTech segment,” said Maybank IB, stating a Target Price of RM0.46 and the Buy rating.
Although details are scant at this juncture, 2Q23 group turnover growth of 57% QoQ/56% YoY is likely attributable to increased domestic DarwinBox sales as sequentially, Malaysia revenue grew an impressive 125% QoQ.
This was the culmination of various Oracle and Lark-centric project rollouts that management had alluded to in 1Q23, in addition to its stated efforts to aggressively market DarwinBox in the quarter.
“Noting however that revenue for the latter may be lumpy and recognised on a milestone basis, we opine that the outperformance may not follow through into 2H23,” said Maybank IB.
Earnings contribution from its AutoTech segment remained limited in 1H23 as development of its RiderGate initiative was only recently completed and management is still in the process of forming collaborations with key stakeholders prior to its slated soft launch in 3Q23. Meanwhile, Maybank IB also gathered cohort courses for its EduTech training programs and continues to see smooth progress/take-up rates.
“There are several risk factors that may have some implication to our recommendation, target price and earnings forecasts for Ramssol. These include heavy reliance on HCM software vendors in the provision of its HCM services to clients, and risk of security breaches on its applications,” said Maybank IB.
In addition, elevated development and administration costs to meet project milestones may necessitate further equity fund-raising exercises.
