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Singapore Investment


 RGB 0037 RGB INTERNATIONAL BHD  has come out to play in a big way

Investors expect RGB International Bhd to trend higher after it surged to a new multi-year high and closed above the 30 sen psychological mark on June 20.

The stock also broke out from the 1-week bullish rectangle pattern, indicating that the near-term bullish trend may persist.

Over the past year, the counter jumped a whopping 204.6% to close at 34 sen on June 21.

It was trading at a 52-week low of 10 sen most of 3Q last year but has now touched its multi-year high.

Those are indications from a technical point of view.

Fundamentally, the electronic gaming machine and equipment has been drawing investors’ interest with its revival.

The company returned to the black with an impressive net profit of RM10.5 million in 1QFY23 from a net loss of RM3.3 million a year ago.

Revenue surged close to 3x yoy to register RM95.2 million versus RM32 million.

Interestingly, RGB has been a net-cash company since 2015, as it reduced its borrowings and completed its capex cycle.

Its FY22 FCF yield was 14%.

In terms of growth, investors are excited over its position ride on the Philippines' gaming boom.

It has large exposure to the potential US$10 bil GGR market in the Philippines.

RGB International is the distributor for two main slot machines suppliers; Light & Wonder (LNW) and Aristocrat in the Philippines.

Interestingly Philippines is RGB’s biggest market as it accounted for 73% of the company’s FY22 revenue while Malaysia contributed 27%.

RGB distributes gaming products, such as slot machines and baccarat, to casinos and resorts in the Philippines FCF yield was 14% and it has been net-cash

Already, RGB hopes to benefit from the casinos scheduled to open in the next few years as well as from the privatization of 41 casinos by the Philippines gaming regulator (PAGCOR).

New casinos and integrated resorts have been in talks with RGB to either purchase or lease their machines as RGB is the exclusive distributor for the LNW and Aristocrat.

These brands dominate 70% of the gaming machines in the Philippines.

RGB also provides turnkey technical set-up for new venue, which made up 35% of group revenue.

RGB will also be on a strong growth trajectory after it has won an order to deliver 2,500 additional machines solely to Solaire North in 2023, and is currently in talks with IEC (1009 HK) for its new orders in the Philippines.

RGB’s addressable market has also expanded with the introduction of PIGO, whereby operators could offer remote access gaming via slot machines in their properties,

It is also expanding preventive maintenance with major customers, such as Genting Malaysia and possibly in the Philippines.

Meanwhile, Thailand and Vietnam could be the next targets, as the countries are pushing to set up new casinos.

Also on RGB’s radar is Japan and the UAE.

Further cost optimisation. RGB’s marketing expenses have historically accounted for c.50% of its gross profit, thus eroding profitability.

But 1Q23 saw such expenses fall to 39% of gross profit.

It is looking to roll out potentially 2,000 slot machine systems in 2023 and 2024. This could allow RGB to earn from the manufacturing services and royalty fees.

Essentially signs are looking good for the counter to touch more highs.


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