Taking a bet on RGB as it rides on casino boom

RGB International Bhd looks to be on an upward trend again, closing at an 8-month high of 38 sen on April 24.

Can the counter surpass its 52-week high of 43 sen seen in August last year?

In May last year RGB was trading at a low of 21 sen.

The casino equipment and electronic gaming machines manufacturer may test the historical resistances at 40 sen and 42.5 sen next.

The only recent Bursa announcement was on April 19, RGB said it has approved and ratified the entering of a Deed of Assignment (DOA) on Jan 1, 2023 by its wholly-owned subsidiary, RGB Ltd (RGBL) with Timor Holdings S.A. (THSA).

This DOA was for acquiring a 20% interest in the product leasing agreement, involving the acquisition of 86 units of electronic gaming machines in exchange for 20% share in the rental revenues from the net winnings, at a total purchase price of RM9.8 million.

The acquisition allows RGB Group to ride on the growth opportunities in the Philippines.

This enhanced the machine placement portfolio of the group’s technical, support and management (TSM) division as these machines are located at some of the top-performing gaming outlets in the Philippines.

The Group expects to recoup this investment within the next 24 months and the acquisition will contribute positively to its earnings.

However, the acquisition is a related party transaction as Datuk Seri Chuah Kim Seah was a Director of THSA (resigned on 1 January 2024) and is a major shareholder of THSA via his interest in 1 Georgetown Ltd. (1GL), which is a major shareholder of THSA.

He is also a Director of RGBL and 1GL.

That said, minority shareholders may be comforted with the fact that the company has improved substantially.

Its net profit surged to RM36.5 million in the financial year ended Dec 31, 2023 from RM4.7 million a year ago.

This was on the back of a significant jump in revenue to RM707.8 million versus RM272.5 million.

However, RGB booked in some losses as it decided to kitchen sink these costs given the aging receivables, even though some of the debtors have agreed to a repayment schedule.

Consequently, it made a provision for impairment loss on trade receivables amounting to RM13.9 million and RM21.2 million for the quarter ended Dec 31, 2023.

RGB plunged into the red with a net loss of RM26.8 million from a net profit of RM9.4 million a year ago.

Revenue was also lower at RM108.6 million compared with RM119.8 million a year ago.

Investors may want to take a bet on RGB given its ability of ride on the booming casino scene.