RGB: Operational Hurdles in Q3 Offset by Efficiency Gains, Robust Outlook for 2026

A recent investment bank research report indicates that despite facing significant operational challenges in the third quarter of 2025, a prominent gaming operator is poised for a stronger performance in the upcoming quarter and a robust recovery in 2026. The firm’s 3Q25 revenue and core profit after tax and minority interests (PATAMI) experienced declines of 25% and 75% quarter-on-quarter, respectively, primarily due to severe flooding in the Philippines, which delayed Electronic Gaming Machine (EGM) deliveries, and softer Technical Services Management (TSM) activity.

Additionally, geopolitical conflict along the Cambodia-Thailand border led to the closure of outlets in the Poipet region since early June 2025, resulting in a temporary earnings impact of RM0.4 million, a notable reduction from the RM1 million profit recorded in 2Q25.

Strategic Cost Optimisation and Q4 Expectations

In response to the challenging environment, the gaming operator has proactively implemented various cost-optimisation measures. These include consolidating its outlets and reducing headcount in the Cambodia market. Management has guided for a sequential improvement in 4Q25, attributing this optimistic outlook to improving weather conditions and a normalisation of operations across its key markets.

Philippines Market to Drive 2026 Recovery

The Philippines is highlighted as the core market for EGM sales, accounting for approximately 80% of the 1,500 units delivered in the first nine months of 2025. The market is expected to rebound strongly in 2026 as operations normalise. Further upside is anticipated from a new integrated resort (IR) scheduled to open in September 2026, which is currently reviewing an order for about 2,000 EGMs. Tender results for this significant order are expected in the first half of 2026.

On this positive backdrop, management projects EGM sales to surpass 4,000 units in 2026, while reiterating its delivery target of 2,000 units for 2025.

Investment Bank’s Rating and Outlook

The investment bank maintains a BUY rating on the company, with a 12-month target price of RM0.59. This target is based on a 9x Price-to-Earnings Ratio (PER) on estimated 2026 earnings per share (EPS). Analysts note that the company’s valuation appears undemanding at 3x 2026E PER, underpinned by solid recovery prospects. A decent dividend yield of 15% is also expected, assuming a 50% payout. The company’s net cash position of RM114 million as of 3Q25 represents approximately 34% of its market capitalisation.

Key downside risks include unfavourable changes in regulatory policies, lower EGM sales volume, and market concentration risks.