RGB: Efficiency Gains Drive Positive Outlook, Target Price Raised
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
The company reported its 2025 core net profit (PATAMI) at RM37 million, reflecting a 58% year-on-year decline. This performance came in slightly below the investment bank’s estimate but was broadly in line with market consensus expectations. Full-year revenue for 2025 also saw a significant drop of 54% year-on-year, primarily attributed to softer electronic gaming machine (EGM) sales, with total unit shipments halving from 4,600 units in 2024 to 2,300 units in 2025.
Performance Challenges and Mitigating Factors
The slowdown in EGM sales was influenced by cautious customer sentiment and heightened regulatory scrutiny in the Philippines. This included the impact of midterm elections in May, ongoing amendments to the Philippines Inland Gaming Operator (PIGO) framework, and changes in integrated resort ownership. Additionally, temporary border restrictions in Thailand and Cambodia further affected technical support and management (TMS) activities, collectively weighing on overall performance.
Despite these revenue headwinds, the company demonstrated resilience in managing costs. Its 2025 EBITDA margin notably improved by 6.7 percentage points, reaching 23.4%. This positive trend was largely driven by stronger contributions from the higher-margin TMS segment. However, higher-than-expected interest expenses and an elevated effective tax rate partially offset these operational gains, impacting the bottom line.
Strong Sequential Recovery and Future Outlook
The fourth quarter of 2025 (4Q25) marked a significant sequential rebound. Revenue for 4Q25 surged 53% quarter-on-quarter to RM109 million, propelled by a recovery in EGM deliveries, with approximately 600 units shipped compared to 300 units in 3Q25. This improvement was supported by the stabilization of operations following severe flooding in the Philippines. The company’s core net profit for 4Q25 increased substantially by 206% quarter-on-quarter to RM8.9 million, benefiting from stronger revenue and improved margins. The company also declared a 0.1 sen dividend per share (DPS) for 4Q25, bringing the total 2025 dividend payout to 1.1 sen.
Looking ahead, 2025 is considered a transition year, with a robust recovery anticipated in 2026. Projections indicate a strong 173% year-on-year growth in core net profit for 2026, driven by an expected rebound in EGM deliveries to 4,200 units as market conditions stabilize. The company’s current valuation is viewed as undemanding, underpinned by solid recovery prospects and a decent dividend yield, estimated at 13% assuming a 50% payout ratio.
Investment Recommendation
Key downside risks to this positive outlook include potential lower sales volumes, concentration risk, and ongoing regulatory pressures. However, given the strong recovery prospects and attractive valuation, TA Securities maintains a BUY recommendation on the stock, with a revised target price of RM0.25.
