$RGB / 0037 (RGB INTERNATIONAL BHD) sharing from remisier
@Penglam @Ryunanda
*RGB International (RGB MK/BUY/RM0.395/TP:RM0.66)*
_Special Dividends Surprise; On Track For Record Earnings Year💐_
🔹 *3Q24 result within expectations.* RGB reported softer revenue of RM94.2m (-45% yoy, -5% qoq) and core net profit of RM17.1m (-41% yoy, -16% qoq). The yoy decline in was mainly due to weaker SSM sales. 9M24 bottom line profit of RM63m made up only 56% of our 2024 full-year forecast, but deemed within expectations as we anticipate a much stronger 4Q24.
🔸*SSM sales still on track to hit our 2024 forecasts.* In 3Q24, SSM sales appeared weaker yoy, normalising from 2023’s exceptional bulk sales order. The decline was also partly due to typhoon in Philippines which causes ports closure throughout Aug-Sept and delaying some shipments. For 3Q24, SSM sales is e.400 slot machines. We foresee significant uplift in 4Q24 following complete delivery of a huge orderbook secured from PACGOR earlier.
🔹 *TSM continues to impress with meaningful margin uptick.* TSM segment’s revenue of RM26.7m was lower (-11% QoQ). Nevertheless, PBT margin expanded meaningfully to 34.3ppt (+14.1ppt qoq), presumably reflecting lower opex, better performance and lower machine depreciation after progressive restructuring into a lease-to-own model.
🔸 *Record high 1.8sen dividend declared 🎁, implying a sizeable 4.6% yield.* Positively, RGB declared 1.2 special dividend and 0.6sen interim dividend, bringing 9M24 dividend to 3 sen. This implies a dividend yield of 7.6% and payout ratio of 73%. *Prospective dividend yield is lush at c.12% for 2024 based on current share price.*
🔹 *Saving the best for a fantastic 4Q24.* We expect 4Q24 earnings to be substantially stronger, mainly bolstered by higher SSM delivery. To recall, RGB earlier secured a US$81.3m contract from PACGOR for 1,968 slot machines and accessories. We understand that delivery have been fully completed in 4Q24 which will translates into significant earnings.
🔸 *Bargain financial matrixes still supporting our investment thesis.* RGB’s current bargain valuation of 5.4x 2024F PE (4x ex-cash PE) and net cash of RM156m (c.25% of market cap) is still deep-in-value and offers palatable potential capital upside. Stock is poised for re-rate especially with strong earnings visibility in 4Q24.
🔹 *MACC cases resolved, officially👨🏻⚖️.* In October, RGB issued an announcement to clarify on earlier investigation conducted by MACC, stating that MACC had written to the lawyer that they have completed their investigation on RGB and no action is to be taken.
🔸 *Maintain BUY with unchanged target price of RM0.66,* which implies 9x 2024F PE (pre-pandemic’s mean)