Radiant Globaltech Bhd (RGTECH) is principally involved in the provision of retail technology solutions, including hardware and both third party and in-house software for the retail industry. It also provides maintenance and technical support services for the retail hardware products and software solutions that it sells. RGTECH's principal market is in Malaysia with operational presence in Vietnam and Cambodia, having department stores, hypermarkets, supermarkets, grocery convenience stores, retail convenience stores and chain retail stores as its customers.
We derive a fair value of RM0.27 based on a 16x PE multiple to its FY2019F EPS of 1.7 sen, earnings of which are expected to be supported by a two-pronged growth strategy focused on South East Asian (SEA) regional expansion and higher margin business segments going forward, its in-house software offerings in particular. The IPO is expected to raise approximately RM29.5m from the issuance of 128.1m new shares. Besides apportioning 39.4% of IPO proceeds for business and capital expansion for operations in Malaysia an Vietnam, 10.2% of IPO proceeds is allocated for expansion of its retail software business that are earmarked for long term future growth.
Growth drivers. RGTECH’s growth will be focused on i) continued expansion of retail hardware operations in the Southeast Asian (SEA) region, ii) aggressive pursuit of growth in retail software business in the SEA region, and iii) further expansion into different customer types within the retail industry.
Competitive strengths. RGTECH’s competitive strengths include: i) total solutions provider in retail technology solutions, ii) flexible software platform which enables customizations and enhancements, iii) nationwide and regional customer support network iv) strong portfolio of customers with long term relationships, v) experienced and technically-strong key senior management team, and vi) incentives attached to granted MSC-Malaysia status.
Catalysts. Key drivers may include: i) improvement in standards of living ii) growth of retail industry in Malaysia, Vietnam, Cambodia and Indonesia, iii) the need for automation in achieving greater operating efficiency, iv) ability to provide a better shopping experience to retailers' customers, and v) continuous advancements of retail technology solutions.
Key risks. Key downside risks, among others, include i) dependency on the retail industry for success and growth, ii) impact of the rising trend in the online retail industry, iii) competition and evolution of technological developments, iv) fluctuations in foreign exchange rates, and v) maintenance of MSC-Malaysia status and renewal of Pioneer Status upon expiry on 8 Dec 2019.