Since our initial coverage of Revenue back in January 2021, Revenue’s share price has surge well above our expectations, to an all-time high of RM2.10.
In this article, we digest and provide an update on Revenue’s latest quarter result, announced on 19 February 2021.
UPDATE ON LATEST QUARTER (OCT – DEC) RESULTS
In comparison to the previous quarter, the Group’s revenue increased marginally by 6%, while its net profit jumped by as much as RM1.6m or 64.6%.
The improved profitability margins were due to a better sales mix, as they recorded:
- Increase in electronic transaction processing income and
- Higher rental and maintenance of EDC terminals
Both these segments yield better profit margins, as compared to outright sale of EDC terminals.
UPDATE ON 1H2021 (JUN – DEC) RESULTS
Revenue’s 1H2021 results were relatively stagnant as compared to 1H2020 as the business was impacted by the lockdowns and unfavorable business environment.
The drop in profitability was mainly due to the higher operating expenses incurred as the Group’s operations grew after consolidating several new businesses it acquired i.e. Buymall, Anypay, Wannatalk, etc in previous years.
On the bright side, we note a healthy development/contribution from the Group’s latest acquisitions. From its 1H results, we note an improvement in contribution from the Solution segment and higher profits derived from its associates.
Historically, the Solution segment consistently fetches a premium in margins as compared to the other segments.
CORPORATE UPDATES
On 11 February 2021, the Group completed the special issue of 45m shares at RM1.30 to identified third party/(ies).
On 16 February 2021, it was announced that Kenanga Investors Berhad (“Kenanga”) acquired 39.6m shares in the Group by way of private placement. Post the acquisition, Kenanga is a significant shareholder in the Group with a 9.1% in stake.
Besides the above, there were no other major news/developments on the Group, since our initial coverage.
VALUATION UPDATES
With reference to Revenue’s latest quarter results, we have made several adjustments to our projection on Revenue’s FY2021 full year results, as below.
Assumptions:
| Previous | Revised | Reasons |
|---|---|---|
| Revenue growth rate assumed between 20% – 30% | Revenue growth rate assumed at a slower pace between 5% – 15% | Reimposition of nationwide lockdown in January 2021, and slower pick up in retail activities |
| GP Margin assumed between 47% – 49% | GP Margin assumed to improve to a range of 52% – 54% | Higher contribution from the ETP and Solutions segments |
| Operating cost assumed to increase by 15% – 20% | Operating cost assumed to increase by 10% – 15% | Better clarity from the 2Q results |
| Share of profits from associates was derived from the 40% guaranteed profits committed by Wannatalk | No change | 1H2021 profits from associates were RM94k |
| Net margin assumed to range between 12.0% – 14.4% | Net margin assumed to improve to a range of 13.6% – 16.3% | Improved GP margins and better cost control |
| Diluted share base was 399.9m | Diluted share base revised to 435.6m | Taking into account the special issuance of 45m shares, and conversion of 1.18m warrants |
At RM2.10, the market is valuing Revenue at 62.8x PE on our best-case assumption that Revenue makes RM14.5m profit in FY2021 (1H2021 net profit was RM6.1m).
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