CGS-CIMB has given a review for the upcoming initial public offering (IPO) slated on Nov 27 for Panda Eco System Berhad (Panda), an integrated retail management solutions company based in Melaka with three service hubs in both West and East Malaysia, focusing on retail management eco-system.
The research house, in its “Trading Lens” noted the IPO price of RM0.16 values Panda at FY22 P/E of 15.2x (vs. Bursa Malaysia Technology Index FY22 P/E of 24.1x, according to Bloomberg).
The opening price of the IPO comprises a total offering size of 171.1 million shares and is expected to raise RM17.5 million with a market capitalization of RM107.4 million.
The closing date of the IPO application will be on 15 November 2023 and the group will be listed on the ACE Market on 27 November 2023.
From the IPO proceeds raised, RM3 million will be used for expanding the company’s headquarters, RM2.8 million is for working capital, RM 2.7 million each will be for estimated listing expenses as well as research and development, RM2.6 million will be dedicated for establishing additional service hubs and workforce expansion, RM1.9 million for regional expansion in Asean including Indonesia and the Philippines. The remaining RM1.7 million for the expansion of its CTS department.
The group, which was incorporated in 2003 focuses on two business divisions, retail management eco-system and other services.
Under the first division is the retail management eco-system including HQ centralised management, store operations, financial management solution, which make up 66% of 6M23 sales as well as xBridge B2B solution (16%) and Omni-channel engagement solution (9%). Other services comprises of outright sale of IT hardware and third-party software, as well as software implementation charges.
“In terms of revenue model, Panda charges one-off licensing fees (53% of 6M23 revenue) and subsequently recurring fees (47%) based on continuous subscription, software updates and support maintenance which is recognised over time on a monthly basis.
CGS-CIMB said the group was profitable in FY19-22 with a core net profit CAGR 2% supported by a revenue growth of 16%.
“FY22 net profit rose 15% year-on-year (YoY), after excluding one-off gains on disposal of other investments amounting RM1.8 million in FY21 while gross profit (GP) margin levels are commendable, with an average 58% in FY19-22.
“1HFY23 core net profit improved 26% YoY, after excluding one-off listing expenses of RM0.6 million. This was due to higher GP margin of 59% in 1HFY23 vs 57% in 1HFY22 and 56% in FY22.
“This is largely driven by the higher margin contribution of the one-off services and modules. However, revenue contribution from the one-off services and modules has been on a declining trend since FY19, and made up 53% of 1HFY23 revenue (FY22: 60%).
Overall, the research house said Panda has a healthy operating cashflow and balance sheet, and has been in a net cash position in FY19-22.
“As at end-June 2023, net cash position stood at RM10m, representing 10% of its targeted market capitalisation (NCPS: 1.52 sen).
“(Post-IPO), the group will continue to expand and strengthen its presence in the Retail Management Ecosystem, being its key growth driver. It also intends to develop cloud-based model and expand its solutions over the next three years after listing,” it said.
Panda garnered 6% market share in the local retail management solutions industry based on its FY22 revenue, and as at Oct 10
(LPD), the company has implemented its retail management eco-system for a cumulative 1,410 retail stores.
CGS-CIMB said Panda’s key competitive advantages comprehensive understanding of retail operations and processes, in-house locally
developed software, diverse modular solutions, opportunities to cross sell as well as agile in adapting to customer’s needs.
“Its key risks include slower-than-expected expansion in retail chain stores, cybersecurity risk and normalisation of effective tax rates (due to the expiry of tax exemption status since 2020),” it added.
