Financial Highlights

The table below sets out a summary of the company Group’s key financial highlights based on the company Group’s historical audited financial information for the Financial Years Under Review:

• The revenue increased from RM4 million in FYE 2021 to RM7 million in FYE 2023, indicating that the company is expanding its market share.
• The gross profit margin rose from 97.09% in FYE 2021 to 98.17% in FYE 2023, driven by the consolidation of market players, which positively influenced the Group’s commission revenue margin.
• The PAT margin increased from 63.88% in FYE 2021 to 68.92% in FYE 2023.
• The company has no borrowings during the Financial Years Under Review and up to the LPD. Therefore, gearing ratios are not applicable.

Major customers and suppliers

Major Customers

The company's top 5 major customers for FPE 2024 are as follows:

The company sells the services to both SRS corporate users and SRS end-users. SRS corporate users generally use electronic reload and bill payment services in large volumes as they sell the company services to their users.

The company Group is dependent on Iqka Collection Services and Real One Group. While the company Group does not have long-term contracts with these companies, the company has maintained a mutually beneficial and trusted working relationship of 8 years and 10 years with Iqka Collection Services and Real One Group, respectively, as at the LPD. Further, as the company offers its services via the SRS platform, the switching of digital platforms would be an inconvenience to the SRS corporate users as they will need to reinstall and train their employees/agents to use a new digital platform. Thus, SRS corporate users are less likely to stop using the services if the company continues to provide them with an SRS platform with minimal disruptions and provide prompt customer service.

Major Suppliers

The company's top 5 major suppliers for the Financial Years/Period Under Review are as follows:

The company is not dependent on any of the major suppliers, save for Enzon which supplied 34.38%, 39.85%, 41.58%, and 43.42% of the company Group’s total purchases. While the company Group has no long-term contract with Enzon, they have maintained a mutually beneficial and trusted working relationship for 8 years with Enzon at the LPD. Therefore, if Enzon stops supplying to the company, there may be a temporary supply disruption to the company's business operations if the company is unable to find a suitable replacement in a timely manner. The company requires such a replacement supplier to provide electronic reloads at commercially acceptable prices and in the necessary volume.

Meanwhile, the company is not dependent on the other major suppliers, as their contribution to the company's purchases is not significantly high compared to that of Enzon. The company is also able to source similar services from other suppliers if necessary. However, the company prefers to work with these major suppliers as transacting in large volumes with these suppliers enables the company to obtain greater discounts for electronic reloads as well as better terms and rates for the incentive or commission from rendering bill payment services. During each Financial Years Under Review, the company procured electronic reloads and bill payment services from over 30 suppliers, respectively.

For the Financial Years Under Review, the company has not experienced any material dispute with its major suppliers.

Industry Overview

Electronic reloads refer to reloads of digital products that are performed electronically. These digital products include:

• Mobile airtime and data - Mobile airtime and data are typically used for prepaid mobile network plans, requiring upfront payments for services like calls, messages, and mobile data. Electronic reloads for airtime provide access to telecommunication services, while reloads for mobile data grant internet access for a specific duration or bandwidth. These enable users to browse the internet, send emails, use mobile apps, and engage in other online activities. In contrast, postpaid mobile network plans operate on a contractual basis, offering a specified amount of airtime for a fixed period. Users are billed monthly, regardless of their actual airtime usage.
• Digital television (“TV”) services - Refer to Satellite TV and Internet Protocol (IP) TV services which are typically accessed via the internet, wherein the purchase of electronic reloads for digital TV services entails payment for accessing prepaid digital TV content for a specific duration or specific channel(s).
• Games - Refer to video and mobile games, wherein the purchase of electronic reloads for games involves replenishing or reloading in-game currency or credits utilized within games or games platforms. Many games and games platforms utilize virtual currencies or credits that players can earn, purchase or acquire through playing the games. These credits are often used to purchase in-game items, unlock features or enhance the gaming experience.

Meanwhile, bill payment services involve payments for various services such as postpaid mobile network plans, utilities, internet, digital TV, quit rent, assessment, installment plans, and loans. These bill payment services are offered via a digital platform so that users can use the credits available in the respective digital payment platforms to make these bill payments. It does not include bill payments paid through electronic wallets (“eWallet(s)”) or paid electronically using other methods. It also does not include bill payments for the digital platform operators’ products and services such as payments for postpaid mobile network plans through a mobile application operated by a telecommunication operator.

The industry value chain for electronic reload services in Malaysia begins with service providers selling their electronic reload credits to either distributors or providers of electronic reload services. Distributors will sell electronic reloads in bulk to providers of electronic reload services. Meanwhile, providers of electronic reload services who purchase the electronic reloads will sell directly to end-users, reload retailers (which include mobile phone, sundry, and apparel shops,) and/or mobile application operators (who are operators of other mobile applications).

Meanwhile, the industry value chain for bill payment services begins with the service providers appointing a payment solution provider to collect bills on their behalf. These payment solution providers will then work with providers of bill payment services to collect bill payments on their behalf from users of their digital platform, and this may include end-users, retailers (which include mobile phone, sundry and apparel shops) and/or mobile application operators (who are operators of other mobile applications).

According to the research from PROVIDENCE, the electronic reload and bill payment services industry in Malaysia, as indicated by the commissions generated from electronic reload and bill payment services through the sale of electronic reloads or through facilitating bill payment services, has been growing at a CAGR of 12.9% between 2019 and 2023. Moving forward, PROVIDENCE estimates that the electronic reload and bill payment services industry in Malaysia will grow at a CAGR of 11.5% between 2024 and 2026. The industry is expected to be driven by the large and growing customer base of prepaid mobile network plan users, increased usage of the internet, economic growth, and rising disposable income, as well as the advantages of performing transactions via digital platforms.

The key drivers in this industry:

• A large and growing customer base of prepaid mobile network plan users will drive the demand for electronic reload services
• Increased internet usage will encourage the purchase of electronic reloads and bill payments via digital platforms
• Economic growth and rising disposable income in Malaysia

The key risks and challenges in this industry:

• The industry players are exposed to the inherent risks of the electronic reload and bill payment services industry
• The industry players may be affected by adverse developments in political, economic, and government policies

Future plans and strategies for RICHTECH DIGITAL BERHAD

The company Group’s business prospects and plans are set out as follows:

1. To expand the user base of SRS end-users by intensifying marketing and promotional activities as well as collaborations with retailers
2. To continuously grow sales by seeking collaborations with SRS corporate users that offer a complementary range of services and have established networks of customers
3. To extend the service offerings on the SRS platform to include new products and services such as introducing a marketplace for apparel on the SRS platform

MQ Trader View

Opportunities

1. The company has established a large network of users
2. The SRS platform is developed, operated, and managed in-house, is easily accessible, and offers a wide range of services

Risk

1. The company is dependent on its major customers and suppliers
2. The company may be affected by technological advancements and changes in market preferences and trends
3. The company is exposed to the risk of network disruptions or failures that could adversely affect operations

​

Click here to continue the IPO - Richtech Digital Berhad (Part 1)

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