• 9MFY23 core net profit of RM5.9m was below expectations at 68.2% of our FY23F estimates on higher-than-expected interest expenses.

• MOA with MMSDA to refer dealers to Ramssol’s RiderGate platform a positive step, in our view, and could help the platform gain market share.

• Reiterate Hold, with a GGM-derived TP of RM0.40 (11.3% ROE, 10% cost of equity, 6.0% growth rate).

9MFY23 Core Net Profit Below Expectations

Ramssol’s 9MFY23 core net profit came in at RM5.9m below expectations at 68.2% of our FY23F estimate and 74.4% of Bloomberg consensus’. This was largely a result of higherthan-expected interest expense of RM0.9m from elevated debt levels (Sep 2023: RM14.7m vs. Dec 2022: RM7.0m). Based on our discussions management, we estimate that RM10m of the proceeds from the company’s share issuance in Sep 2023 were/will be used to repay a significant portion of its debt, which should translate to lower interest expenses in FY24F.

Major HCM Projects in Thailand and Indonesia Completed

9MFY23 revenue of RM22.7m (+4.4% yoy) was within expectations, with the yoy growth driven by new projects secured in Thailand and Indonesia, resulting in higher sales from the company’s human capital management (HCM) solutions, student management solutions, and HCM technology applications (Fig 4). Major project milestones for the Thailand and Indonesian projects were achieved in 2Q23, resulting in a 39.6% qoq decline in 3Q23 revenues to RM6.1m.

MMSDA Collaboration a Positive Development for RiderGate

On 24 Nov 2023, Rams Solutions Sdn Bhd, a wholly-owned subsidiary of Ramssol, entered into a Memorandum of Agreement (MOA) with Malaysia Motorcycle and Scooter Dealers Association (MMDSA) to facilitate the referral of Ramssol’s RiderGate used-bike selling platform to motorcycle dealers in Malaysia. In our view, the MOA is positive step for RiderGate, potentially providing it access to a larger customer base and help it gain market share in Malaysia’s used-bike market.

Reiterate Hold With An Unchanged TP of RM0.40

We cut our FY23F net profit forecast by 6.1% to account for higher interest expense during the year, but keep our FY24-25F estimates. We reiterate our Hold recommendation, with an unchanged GGM-derived TP of RM0.40 employing a FY25F ROE of 11.4%, cost of equity of 10%, and long-term growth rate of 6.0%. In our view, Ramssol’s current share price accurately captures the potential incremental earnings from RiderGate and GoSaaS (a provider of Oracle services) collaboration as mentioned in our report “Contributions from new ventures priced in“ dated 2 Nov 2023. Key upside/downside risks: 1) higher-/lowerthan-expected market share growth of RiderGate, and 2) better-/weaker-than-expected synergies from the GoSaaS collaboration.

Source: CGS-CIMB Research - 1 Dec 2023