Ramssol Group Bhd’s current share price accurately captures the potential incremental earnings from RiderGate and GoSaaS, which is a provider of Oracle services) collaboration, according to CGS-CIMB.
“This is as mentioned in our report ‘contributions from new ventures priced in’ dated Nov 2,” it said in its Company Note today (Dec 4).
CGS-CIMB reiterates its HOLD call with a GGM-derived TP of RM0.40 employing a FY25F ROE of 11.4%, cost of equity of 10%, and long-term growth rate of 6%.
“We cut our FY23F net profit forecast by 6.1% to account for higher interest expense during the year, but keep our FY24-25F earnings estimates,” it said.
The research house said the group’s 9MFY23 core net profit came in at RM5.9 million below expectations at 68.2% of its FY23F estimate and 74.4% of Bloomberg consensus’.
“This was largely a result of higher-than-expected interest expense of RM0.9 million from elevated debt levels, which is RM14.7 million in September 2023 compared RM7 million in December 2022.
“Based on our discussions with management, we estimate that RM10 million of the proceeds from the company’s share issuance in Sep 2023 were or will be used to repay a significant portion of its debt, which should translate to lower interest expenses in FY24F.
Major HCM projects in Thailand and Indonesia completed 9MFY23 revenue of RM22.7 million, up by 4.4% year-on-year (YoY) was within expectations, with the YoY growth driven by new projects secured in Thailand and Indonesia.
“This resulted in higher sales from the company’s human capital management (HCM) solutions, student management solutions, and HCM technology applications.”
Major project milestones for the Thailand and Indonesian projects were achieved in 2Q23, resulting in a 39.6% QoQ decline in 3Q23 revenues to RM6.1 million.
The research house added MMSDA collaboration is a positive development for RiderGate.
“On 24 Nov 2023, Rams Solutions Sdn Bhd, a wholly-owned subsidiary of Ramssol, entered into a Memorandum of Agreement (MOA) with Malaysia Motorcycle and Scooter Dealers Association (MMDSA) to facilitate the referral of Ramssol’s RiderGate used-bike selling platform to motorcycle dealers in Malaysia.
“In our view, the MOA is positive step for RiderGate, potentially providing it access to a larger customer base and help it gain market share in Malaysia’s used-bike market.”
Key upside and downside risks for CGS-CIMB’s call higher or lower-than-expected market share growth of RiderGate, and better or weaker-than-expected synergies from the GoSaaS collaboration.
