RGB: Investment Firm Reaffirms “Buy” Rating Amidst Anticipated Recovery and Strong Order Book
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.59 (+174.4%) |
| Last Traded | RM0.22 |
| Recommendation |
A leading investment firm has reiterated its “Buy” recommendation, with a target price of RM0.59, for a company whose 9M25 core PATAMI (profit after tax and minority interest) came in at RM28 million, meeting market and consensus expectations by representing 70% of estimates. However, the third quarter of 2025 (3Q25) saw a significant decline, with core PATAMI falling to RM3 million, a 75% quarter-on-quarter (QoQ) and 81% year-on-year (YoY) drop.
Performance Review
This weaker 3Q25 performance was primarily attributed to softer electronic gaming machine (EGM) deliveries, which saw only approximately 300 units shipped compared to 700 units in 2Q25. Overall, 9M25 shipments totaled about 1,500 units, mainly for the replacement market. Revenue for 3Q25 also decreased by 25% QoQ to RM71 million. The EBITDA margin for 3Q25 contracted by 8.1 percentage points to 14.8% due to weaker operating leverage and an unfavorable project mix, further compounded by a higher effective tax rate. This contrasted with the overall 9M25 EBITDA margin, which improved by 4 percentage points to 26.3%, buoyed by stronger contributions from the higher-margin technical support and management (TMS) segment.
Challenges during the quarter included cautious customer sentiment, particularly in the Philippines, impacted by heightened regulatory scrutiny following the May 2025 midterm elections, ongoing amendments to the Philippines Inland Gaming Operator (PIGO) framework, and changes in integrated resort (IR) ownership. Temporary border restrictions in Thailand and Cambodia also constrained TMS activities.
Future Outlook and Investment Perspective
Despite the recent softness, the investment firm views 2025 as a transition year, with a strong recovery anticipated in 2026. This optimism is driven by several factors, including the expected resumption of deferred projects, the opening of new integrated resorts, ongoing upgrade programs, and the introduction of new gaming products that were initially delayed.
The firm maintains a positive long-term outlook, citing the company’s growth prospects, attractive valuation, and dividend yield. The company also boasts a robust net cash position of RM114 million, representing 34% of its market capitalization. Trading at approximately 3x its 2026E PER, the stock is believed to have largely priced in near-term earnings weakness, offering an attractive risk-reward profile. Key downside risks include lower sales volume, concentration risk, and regulatory pressures.
