Ramssol Group Berhad’s RiderGate platform and its collaboration with GoSaaS Inc may take time to ramp up, but have promising incremental earnings potential, according to CGS-CIMB.
“We expect RiderGate platform contributions to begin from 2024F, contributing 8.1% and 13.8% of revenues in FY24F and FY25F, respectively,” it said in its Company Note today.
The research house believes the Malaysian used motorbike market is currently underserved, lacking a dedicated digital platform.
“Currently, online secondhand motorbike sales are primarily done via online marketplaces such as Mudah and Carousell, which provide minimal buyer protection (e.g. vehicle inspections, verification that bikes are not stolen).
“We see good potential for this venture and estimate that it can add incremental revenue contributions, under the AutoTech segment, of RM4.3m and RM8.9m in FY24F and FY25F, respectively,” it said.
CGS-CIMB revises its FY23-25F core net profit estimates by -5.5% to 21.1% to factor in the potential incremental earnings from RiderGate and GoSaaS, and believes that the current share price captures this.
It reiterates its HOLD rating with a higher TP of RM0.40, from RM0.38 previously , which implies a 16.9x CY24F P/E.
“Our GGM valuation methodology employs an FY25F ROE of 11.3%, cost of equity of 10%, and long-term growth rate of 6.0%, which in our view, better captures the potential future earnings contribution from RiderGate and the GoSaaS collaboration, given that these factors would likely take time to ramp up.
“Higher forecasted earnings from RiderGate and GoSaaS collaboration is offset by larger share base,” it added.
CGS-CIMB noted that Ramssol’s subsidiary, RAMS Solutions Sdn Bhd entered into a collaboration agreement with GoSaaS Inc to provide Oracle’s software offerings to Malaysian and SEA clients.
“As a specialised Oracle implementation partner, we believe GoSaaS’s enterprise resource planning (ERP) software implementation capabilities would allow Ramssol to accelerate its expansion into these more lucrative segments,” it said.
The research house added its FY23F revenue estimates downwards by 11.5% to account for the delays in RiderGate’s launch, which we initially expected to be in 3Q23, and softer demand for HCM software such PeopleTech amid the volatile economic environment in 2023.
“We revise our FY24-25F revenue estimates upwards by 32.4% to 49.3% to account for incremental revenue contributions from RiderGate and the GoSaaS collaboration from FY24F onwards.
“Factoring in the amortisation of development costs for RiderGate (RM3.6m p.a. from FY24F onwards) over the FY23-25F forecast period, our core net profit and EPS estimates are revised -5.5% to +21.1% and -24.3% to -0.9%, respectively.”
CGS-CIMB added risks include higher-than-expected or lower-than-expected initial market share and/or market share growth p.a. of the RiderGate platform.
