First of all, i wonder if you also have same question like me:
1) Another Pump-and-Dump stock?
2) 0.17 per share, penny stock?
3) Safe or not?
Well, I have put in some great deal of effort to dig out all the possible data/figures/news about RGB. To me, I have make up my own mind to answer for all above questions. You may have yours too after you go and dig out all the data/figures/news like i do. I hope so. (At least, in the first place, you should know this company is dealing in gaming industry and supplying and maintaining slot machine in casino)
Having read all the data, i classified RGB as another
Fully Recovered Company - just like HOVID & TMC Life
I split RGB business into 3 significant event:
From 2003 - 2007 - The Glory
From 2008 - 2011 - The Doom
From 2012 - Now - The Fight Back
The Glory of 2003 - 2008:
I do not know if you have come accross any company that offer
2 bonus share for every 1 existing share ( usually what i heard is every 2 entitled 1, or others). This was exactly what was given out by RGB (formerly known as
DreamGate). The share price was around RM 1.82...after bonus ex, it was adjusted down to about
RM 0.61 per share on
25 Sept 2007. I think the management was certainly generous enough.
| PARAMETERS | | 12/31/04 | 12/31/05 | 12/31/06 | 12/31/07 |
| Revenue RM | | 115,346,563 | 154,099,508 | 215,380,288 | 276,306,540 |
| Net Operating Profit After Tax (NOPAT) | | 18,238,101 | 27,792,178 | 31,470,228 | 39,434,985 |
| Earning Per Share (EPS) RM | | 0.0650 | 0.0993 | 0.1119 | 0.0456 |
| Dividen Per Share (RM) | | 0.010 | 0.015 | 0.012 | 0.0068 |
| Outstanding Shares | | 279,184,351 | 280,000,000 | 281,210,000 | 864,334,000 |
| Share Price 31 December | | 1.82 | 1.23 | 1.33 | 0.59 |
| Total Asset | | 156,737,565 | 237,987,954 | 283,965,391 | 403,733,250 |
| Total Liability | | 158,507,998 | 133,582,132 | 145,266,499 | 226,616,935 |
| Total Equity | | 85,142,548 | 104,405,822 | 138,698,892 | 177,116,315 |
| Net Cash from Operating Activity | | 15,343,161 | 37,420,477 | 48,049,074 | 67,197,052 |
| Cash and Cash Equivalent at the end of period | | 20,356,469 | 15,065,613 | 18,632,131 | 41,029,049 |
| Free Cash Flow (FCF) | | -41,529,934 | -40,651,458 | -13,421,254 | -54,445,319 |
* Listed in 2003, i can see the gradual growth of this company. Everything looks great, except for no FCF. Well, i suppose, this was due to heavy CAPEX during the early expansion.
| CAPEX | | 56,873,095 | 78,071,935 | 61,470,328 | 121,642,371 |
* Noticeable outstading shares surge from 281 million to 864 million due to bonus issue of every 1 share entitled for 2 bonus issues.
* By realigning back the bonus issues, the EPS actually hit as high as RM 0.1368 per share. The highest in their listing history.
The Doom of 2008 - 2011:
As you may have know, DreamGate had their main operation selling slot machine and managing casino club in Cambodia. When things all going well, then a
new law banning their citizen from entering casino. Then come USA subprime crisis..The share price
"COLLAPSED" all the way to as low as RM 0.06 per share. I think the team must be having nightmare and was not able to sleep well, just like David Ho of Hovid back in 2012 Carotec case.
| PARAMETERS | 12/31/08 | 12/31/09 | 12/31/10 | 12/31/11 |
| Revenue RM | 227,809,209 | 170,202,054 | 158,614,334 | 118,210,665 |
| Net Operating Profit After Tax (NOPAT) | -3,613,303 | -65,795,106 | -78,015,933 | -29,617,307 |
| Earning Per Share (EPS) RM | -0.0033 | -0.0671 | -0.0440 | -0.0267 |
| Dividen Per Share (RM) | 0.0 | 0.0 | 0.0 | 0.0 |
| Outstanding Shares | 872,026,000 | 924,206,000 | 1,146,692,000 | 1,151,171,000 |
| Share Price 31 December | 0.16 | 0.16 | 0.06 | 0.08 |
| Total Asset | 410,074,917 | 443,585,605 | 307,677,591 | 251,370,414 |
| Total Liability | 226,764,976 | 301,114,028 | 214,797,798 | 185,603,932 |
| Total Equity | 183,309,941 | 142,471,577 | 92,879,793 | 65,766,482 |
| Net Cash from Operating Activity | 89,204,670 | 104,648,510 | 3,051,590 | 53,345,580 |
| Cash and Cash Equivalent at the end of period | 34,126,894 | 21,131,341 | 14,895,135 | 22,524,378 |
| Free Cash Flow (FCF) | -9,760,636 | -30,924,190 | -14,461,233 | 28,795,151 |
*The BIG COLLAPED of the share price was self-explained by above set of data. However, the management didnt give up. They have readjust their business plan and focusing on phillipines and other asia gaming hub.
Although suffering big losses, the company continue to generate NET Cash flow from the operation. And managed to get a POSITIVE FCF of RM 28 million in 2011. Notable the share was as low as RM 0.06 per share? Can you sleep well if your once RM 0.61 share,
collapsed nearly 1000%???? Many may have cut loss somewhere. Well, no right or wrong, investment do have risk.
THE FIGHT BACK 2012 - NOW
Here is the interesting part, the recovery and prosperity again of RGB. Let me share with you below financial data:
| PARAMETERS | 12/31/12 | 12/31/13 | 12/31/14 |
| Revenue RM | 187,397,855 | 139,634,672 | 214,646,537 |
| Net Operating Profit After Tax (NOPAT) | 6,036,085 | 5,965,791 | 18,156,283 |
| Earning Per Share (EPS) RM | 0.0058 | 0.0058 | 0.0159 |
| Dividen Per Share (RM) | 0.0 | 0.0005 | 0.0025 |
| Outstanding Shares | 1,151,891,000 | 1,153,312,000 | 1,164,528,000 |
| Share Price 31 December | 0.09 | 0.11 | 0.135 |
| Total Asset | 230,556,785 | 217,319,150 | 267,814,072 |
| Total Liability | 162,033,976 | 127,763,180 | 147,413,050 |
| Total Equity | 68,522,809 | 89,555,970 | 120,401,022 |
| Net Cash from Operating Activity | 50,106,607 | 51,182,009 | 48,606,501 |
| Cash and Cash Equivalent at the end of period | 21,888,226 | 23,850,928 | 41,032,000 |
| Free Cash Flow (FCF) | 18,729,794 | 27,557,230 | 34,033,434 |
* The company has now known as RGB International Berhad, with 3 consecutive years of profit, has regained the ability of distributing out dividend in year 2013.
* Notable FCF from operation?:-) This is the forth year the company have FCF!!!
* Notice also the CASH & CASH EQUIVALENT has regained to RM 41 million, the same level right before crisis in 2007!
* Let compare the share dilution part on EPS, based on 2014 total share issues vs 2007 before crisis, the dilution has increase 1.35 times. If i would to readjust back the EPS, current RM 0.0159 x 1.35 = RM 0.021 per share. If this assumption is correct, then isnt this share should be trading at RM 0.45 per share?? Will see valuation below if this figures is possible.
LET look into the 10 years company performance using some financial ratio:
| PARAMETERS | 12/31/04 | 12/31/05 | 12/31/06 | 12/31/07 | 12/31/08 | 12/31/09 | 12/31/10 | 12/31/11 | 12/31/12 | 12/31/13 | 12/31/14 |
| DUPONT's ROE (%) | 21.42% | 26.62% | 22.69% | 22.27% | -1.97% | -46.18% | -84.00% | -45.03% | 8.81% | 6.66% | 15.08% |
| Return of Asset (%) | 11.64% | 11.68% | 11.08% | 9.77% | -0.88% | -14.83% | -25.36% | -11.78% | 2.62% | 2.75% | 6.78% |
| Return of Invested Capital (ROIC) (%) | 22.25% | 18.27% | 18.00% | 15.61% | -1.23% | -34.48% | -39.38% | -26.82% | 5.56% | 5.11% | 16.00% |
| PE Ratio using Magic Formula | 34.27 | 15.35 | 12.98 | 14.65 | 52.74 | -7.61 | -5.37 | -10.55 | 15.15 | 14.76 | 9.14 |
| Earning Yield (Magic Formula) (%) | 2.92% | 6.52% | 7.70% | 6.83% | 1.90% | -13.14% | -18.61% | -9.48% | 6.60% | 6.78% | 10.94% |
| Current Ratio | 1.39 | 1.27 | 1.35 | 1.00 | 0.81 | 0.54 | 0.62 | 1.12 | 1.25 | 1.21 | 1.41 |
| Debt To Equity Ratio | 1.86 | 1.28 | 1.05 | 1.28 | 1.24 | 2.11 | 2.31 | 2.82 | 2.36 | 1.43 | 1.22 |
| Asset Turn Over | 0.7359 | 0.7808 | 0.8253 | 0.8036 | 0.5599 | 0.3988 | 0.4223 | 0.4229 | 0.7777 | 0.6235 | 0.8849 |
| Receivable Turn Ratio (days) | 138 | 147 | 154 | 149 | 186 | 223 | 218 | 211 | 108 | 146 | 99 |
| Inventories Turn Over (times per year) | 5.31 | 7.14 | 11.21 | 19.66 | 15.52 | 10.32 | 10.97 | 7.13 | 13.25 | 15.85 | 14.30 |
| Cash return on Invested Capital (CROIC): | -50.66% | -26.72% | -7.68% | -21.55% | -3.31% | -16.21% | -7.30% | 26.08% | 17.24% | 23.60% | 29.99% |
| Free Cash Flow (FCF) to Revenue: | -36.00% | -26.38% | -6.23% | -19.70% | -4.28% | -18.17% | -9.12% | 24.36% | 9.99% | 19.74% | 15.86% |
| Inventories Over Revenue | 12.60% | 9.81% | 5.34% | 2.69% | 5.08% | 9.43% | 7.49% | 12.66% | 4.29% | 3.12% | 8.27% |
| Net Receiveable Over Revenue (%) | 37.87% | 52.40% | 46.77% | 45.38% | 46.82% | 59.66% | 55.36% | 41.43% | 33.13% | 35.50% | 31.13% |
| Dividend Payout Ratio | 15.38% | 15.11% | 11.08% | 14.91% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 8.62% | 15.72% |
| Revenue Over Capex | 2.03 | 1.97 | 3.50 | 2.27 | 2.30 | 1.26 | 9.06 | 4.82 | 5.97 | 5.91 | 14.73 |
| Net Income Over CAPEX | 0.32 | 0.36 | 0.51 | 0.32 | -0.04 | -0.49 | -4.45 | -1.21 | 0.19 | 0.25 | 1.25 |
* I personally see Fantastic Turn Around of this Company. I believe many have seen too.
VALUATION: (THIS IS MY OWN VALUATION. PLEASE DO NOT TREAT IT AS BUY, SELL TRADE CALL). I was recently been called "OPERATOR", I treat this as Compliment!
I tried to do some own valuation using several method, based on 2014 earning, current share price of RM 0.165 and total shares before the most recent private placement of new shares.
(1) Simple PE method & Magic Formula derivation:
0.165/ 0.0159 = 10.4 times.
* I dont think this share is currently trading expensively
Genting Malaysia is currently traded at 20 times PE with much poorer growth result, if i would to put RGB at 20 times since philipines gaming industry is boomming now, the price is possibility traded at
0.318 <= MY TP 1.
(2) Since this company has
95% business transacted in oversea,
especially philippines, I take the foreign currency translation gain/loss seriously and try to compute the sum from year
2009 - 2014 into their earning account, I see the whole game plan change. Please see below and note that above figures of earning are taking into consideration of Operating Income only. Excluding currency gain/loss. For Comprehensive income, foreign currency gain/loss will be taking into consideration as per below. Judging the weak ringgit against USD and Philippine's peso, I personally suppose the upcoming financial will show very possitive gain on foreign currency part.
RGB is also benefited from weak ringgit.
| Foreign Translation Gain /Loss | | | | | | -1,042,803 | -19,109,535 | 3,277,707 | -8,254,501 | 11,394,618 | 11,115,147 |
Profit/ Earning Before Tax (Comprehensive Income) 2009 - 2014 |
| -65,727,311 | -78,578,577 | -29,529,982 | -2,121,019 | 17,924,856 | 30,811,638 |
For 2014, the income translated into RM 0.0264 sen of EPS.
So, Simple PE method
0.165/0.0264 = 6.25 times
<= VALUE SEEN HERE
PE (Magic Formula)
7.38 times <= VALUE SEEN HERE
By using 10 times PE, it is around
RM 0.26 per share <= Value Seen here!
By using 20 times PE, it is possibily traded at RM 0.528 <=Value Seen here!
(3) Market Value (share price) generaion per $ of eps retained.
| 28.00 | 7.49 | 4.82 | 1.83 | 0.50 | 0.64 | 0.29 | 0.44 | 0.48 | 0.57 | 0.65 |
* We can see the effect very clearly that, RGB
has been neglected after the DOOM from cambodia. I interprete this as market has some how "
loss confidence" to this company; or after the doom, investor totally dont botther to look at it anymore. Well, this phenomena give the right opportunity to Value investor. Share price has recovered from 0.06 to 0.165 now. It is a 275% gained! But, the stock still so undervalue.
* If i would to recalculate above using 0.165, with average of 11 years, that give an figures of 3.7. Whcih means, the current share price could have reach
RM 0.77. This is simply
over optimistic when market confidenct has not fully recover from the doom.
* If i would to recalculate using 1:1 ratio, the share should be worth
RM 0.21 per share to RM 0.23 per share (include foregin exchange gain) <= Value Seen Here!
(4) based on my own investment 30%-GO; 20%-No-GO, of ROICEY
RGB is currently at the range of 25.57% (by include recent private placement and share price at 0.165), which to me is very safe investment because it has not touch the 20% minimum threshold. After computing, I got this figures:
RM 0.445. This is 269% upsite potential should the biz continue to perform at current pace. I put RM 0.445 <= TP 2 in 1 year.
NOW, Let go back to above question:
1) Another Pump-and-Dump stock?
Ans:
I DONT KNOW. ONLY GOD AND THE OPERATOR (if any), will know!
2) 0.17 per share, penny stock?
Ans: This share is current traded at market cap of RM 214 million...similar to my other darling stock of homeriz (RM276 mil), Willow (RM 202 Million); I suppose many stock in malaysia is classified as Small Cap, Penny stock i refer to those goreng counter with lousy fundamental.
3) Safe or not?
http://rgbinternationalbhd.com/news-clipping.html
READ THE NEWS ONE BY ONE, from 2009 - 2015, and compared with the financial data, then you can judge whether the management is credible or not!
Lastly, for your information, in philippines, the biggest casino organization is PGACOR and is belongs to philippines government. So, incidence in cambodia will repeat? I think very
UNLIKELY!
Cheers,
YiStock
23/5/2015
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