Radiant Globaltech Bhd ("RGB"), an integrated retail technology solutions provider is making its debut on the ACE market. Recommend BUY with a target price of RM0.36 based on 17.8x PER FY19 as per the 1-year forward average of FBM Small Cap Index and Bursa Malaysia Consumer Product Index. 

Established in 1994, RGB has evolved from trading of retail hardware such as point of sales (POS) terminals to the provision of retail software together with maintenance and technical support services within the retail industry. RGB's solid track record is backed by its strong and reputable clientele such as AEON Big, AEON, Giant, Cold Storage, Parkson, Padini, Guardian, Watsons and 99 Speedmart. Most are already long-term business partners with Giant being the longest with 18 years. 

Since 2005, the group has been active in Southeast Asia ("SEA"), particularly Vietnam and Cambodia (eg: Parkson Vietnam, AEON Vietnam and Cambodia). The regional presence coupled with customer support service offices across 6 countries in SEA have equipped' the group with a solid foundation to tap into other SEA countries, with near term focus on the growing retail market in Indonesia. 

Driven by higher margins in retail software segment, RGB intends to leverage on its large retail hardware customer base to cross-sell in-house and third-party software products. 

Around 39% or RM11.6m of the total IPO proceeds amounting RM29.5m is earmarked for business and capital expansion in Malaysia and Vietnam operation while about 10% (RM3m) to be utilised on the expansion of retail software business. 

Post listing, RGB's gearing ratio is expected to improve from 0.37x to 0.17x. In line with the Company's on-going expansion in the regional market, earnings growth is expected to be boosted mainly by its overseas markets, pushing its EPS by an estimated 25% higher for FY19. 

Source: Rakuten Research - 24 Jul 2018