CIMB has positive write up on RGB. Free cash flow before capital expenditure RM60m a year. Company already in net cash position. On track to hit record profits. If management increases dividends as they have consistently declared that they will, 0.60 may well be a reality.
@MinorityS 60cents is too much to ask for la, that would be PE40 + already, in the near term, it need to break and stay afloat the 20cents barrier first.
0.60 not my figure. It was what the boss told the financial press earlier this year. He set the deadline of 2018. Achievable, I think, if they can support it with a generous dividend policy. Fantastic cash flows. More than a million RM each week.
Meanwhile, CIMB Research, in an Oct 20 note, said RGB International management believed that its newest markets in Timor Leste and Nepal promised good long-term potential.
RGB International Revival of the slot giant ■ A play on the liberalisation of casinos and gaming clubs in emerging Asian countries ■ After suffering badly from a sudden change in Cambodian gaming regulations in 2009, RGB successfully turned around and was back to the black in 2012 ■ RGB represents some of the largest gaming machine manufacturers in the world such as Aristocrat and Shuffle Master, often on a country-exclusive basis ■ Its balance sheet has been deleveraged and is net cash ■ Dividends are gradually rising; trades at 2.9x FY15 Bloomberg consensus EV/EBITDA Beneficiary of gaming liberalisation Management believes RGB is well positioned to benefit from the increasing liberalisation of casino and gaming clubs in emerging Asian countries, particularly the Philippines, Cambodia and more recently, Laos, Nepal and Timor Leste. Management is optimistic about the long-term potential of its two newest markets, Nepal and Timor Leste. Every new outlet it opens in these countries could add 5-10% in incremental EPS annually, according to the company. A turnaround story RGB ran into operational difficulties in 2009 when the Cambodian government imposed a sudden ban on sports betting and electronic gaming machines in slot clubs in Phnom Penh and Siem Reap. At the time, RGB had more than 3,000 machines in Cambodia. The turnaround strategy required RGB to mobilise its idle machines to other markets in ASEAN, which took three years. RGB returned to the black in 2012. Complementary business model RGB’s income stream is derived from: 1) the sale of electronic gaming machines, where it represents some of the largest manufacturers in the world (Aristrocrat and Shuffle Master), often on an exclusive country-distributorship basis; and 2) machine concessions in gaming clubs where it receives a share of revenue. RGB has operations in 37 outlets with 6,400 machines, mainly in Cambodia and the Philippines. Deleveraged balance sheet RGB’s balance sheet was badly damaged when it borrowed heavily to fund a new casino venture in Cambodia, which eventually failed. The balance sheet has since been restructured and the company has paid down the loan gradually. Management plans to use proceeds from a recent share placement to further pare down debt. Combined with healthy operating cashflow and low capex, RGB’s balance sheet has been fully deleveraged and was in net cash position as at end 2Q15. Dividend and valuation Dividends have been rising gradually since 2014, and management is looking to continue raising dividend payout as debt continues to be pared down. There is currently only one broker that covers RGB. Based on consensus EBITDA, the stock trades at 2.9x FY15 EV/EBITDA, compared to the Asian gaming sector average of 13.8x CY15EV/EBITDA and the Malaysian gaming sector average of 7.5x CY15EV/EBITDA.
Revival of the slot giant Background Formerly known as “Dreamgate Corporation” Started in 1986, RGB was a pioneer in the ASEAN slots industry. It was listed in 2004 on MESDAQ as Dreamgate Corporation Bhd and was transferred to the Main Board in 2008. It changed its name to RGB International in 2010. RGB’s business model has two income streams – a) the sales and marketing (SSM) and manufacturing of electronic gaming machines and casino equipment (of third-party and in-house gaming machines) and b) technical support and management (TSM), which provides technical support services and also operates multiple machine concessions in ASEAN. RGB’s major shareholders are the founders Datuk Chuah Kim Seah and Chuah Kim Chiew, and Gerak Juara Sdn Bhd. Collectively, they own 38% of RGB. RGB ran into operational difficulties in 2009 when the Cambodian government imposed a sudden ban on sports betting and electronic gaming machines in slot clubs in Phnom Penh and Siem Reap. At the time, RGB had more than 3,000 machines in Cambodia. The turnaround strategy required RGB to mobilise its idle machines to other markets in ASEAN, which took three years. RGB returned to the black in 2012. RGB’s business model Sales and marketing (SSM)
The SSM division distributes third-party slot machines and casino accessories/equipment. The largest third-party brands that it distributes are Aristocrat and SHFL entertainment (previously and better known as Shuffle Master). RGB has exclusive distributorship rights for Aristrocrat machines in
Philippines’ three major integrated casinos, Laos, Goa (India) and certain slot machine clubs in Malaysia. For SHFL, it has exclusivity for Malaysian slot machine clubs, Laos, Cambodia, Vietnam and Philippines. Besides these two well-known brands, RGB also represents other international brands such as Zitro, WMS and R.Franco. (Fig 1) RGB’s largest customers by geography are the Philippines, followed by Indochina and Malaysia/Singapore (Fig 2). Demand for gaming machines come from 1) new casinos or slot clubs, and 2) replacement market.
TSM provides technical support services and also operates multiple machine concessions in ASEAN. It earns revenue on a profit-share basis, which differs by country. This business model is resilient vs. the typical volatile VIP segment as slots have smaller bet sizes. As at 30 Sep 2015, the TSM division had 6,426 electronic gaming machines across 37 outlets, with the largest countries being Cambodia and Philippines (Fig 5). Generally, RGB signs a five-year concession with the hall operator with a renewal option of five years, thus assuring consistent cashflow for the group. Historically, there have been few
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
mcmann
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Posted by mcmann > 2015-10-26 09:59 | Report Abuse
huh tp30cts ?