RGB International set for order-book replenishment

PETALING JAYA: Gaming company RGB International Bhd’s core net profit in the first quarter of the financial year ended March 31, 2025 (1Q25) was within analyst forecasts and a “buy” call on its stock has been maintained.

Phillip Capital Research in a note to clients said the company’s 1Q25 core net profit was 11% of its forecast, deemed to be within expectations.

It noted that the number of electronic gaming machines (EGM) sold declined by 58% on a yearly basis in 1Q25 and the research outfit expects order momentum to improve over the remainder of 2025.

It has maintained its “buy” call with a higher 12-month target price of 73 sen on RGB after rolling forward its valuation horizon.

In the note, Phillip Capital Research noted that RGB delivered about 500 EGM units in 1Q25, as compared to around 1,200 units in 1Q24.

The decline was mainly attributed to geopolitical uncertainty stemming from tariffs introduced under the Donald Trump administration, which impacted customer sentiment, and a more cautious approach by clients in light of the upcoming midterm elections in the Philippines, it said.

Despite the soft start to the year, an order pickup is expected for the remainder of 2025, driven by robust order replenishment opportunities from the Philippines, including two VIP club upgrades, Phase 2 of current contracts, new integrated resorts and replacement demand across the region, it added.

Phillip said it had made no changes to its forecasts with a higher 12-month target price of 73 sen, pegged to an unchanged target price earnings multiple of nine times on its rolled-forward 2026 earnings per share.

Backed by exciting growth prospects, the current valuation is attractive, trading at four times 2026 price-to-earnings ratio.

“The stock’s high 13% dividend yield further adds to its appeal.”

Phillip Capital Research said downside risks for RGB included lower sales volume, concentration risk and regulatory pressures. The research house said the first quarter was historically a slow start and should pick up in the coming quarters.

The significantly lower tax expenses in 1Q25 were due to the absence of the unexpected franchise tax related to its current project, which was incurred in 4Q24.

Its 1Q25 earnings margin was firmer at 29% despite the lower operating leverage due to increased accessory sales and localisation efforts, it added.

“Although RGB declared a first interim dividend of 0.4 sen in 1Q25 (vs 0.6 sen in 1Q24), the payout ratio increased to 50% from 42% in the same period last year.”

At last look, RGB shares were trading at 31.5 sen apiece.