Inter-Pacific values Radiant Globaltech at 27 sen ahead of listing

The retail tech solutions provider offers some resilience amid a volatile business environment


Radiant Globaltech Bhd, which is en-route to list on the ACE Market of Bursa Malaysia, has been valued at 27 sen by Inter-Pacific Research Sdn Bhd.

The retail technology solutions provider is viewed as a proxy to consumer spending and offers some resilience amid a volatile business environment.

“Our fair value of 27 sen for Radiant Globaltech is based on 14 times its financial year 2019 (FY19) earnings per share, implying a potential upside of 18%,” Inter-Pacific noted in its initial coverage note.

Radiant Globaltech’s offer price is set at 23 sen a share and the stock is set to be listed on July 24.

The research believes there’s an upside to Radiant Globaltech due to its chances to gain from recurring maintenance services segment income and opportunity for margin expansion with more sales of its in-house software products.

The group is involved in the provision of retail technology solutions which include products and services used by businesses in the retail sector.

It provides hardware and software for the retail industry, as well as maintenance and technical support services for retail sector hardware and software.

Radiant Globaltech’s principal market is Malaysia, but it has also established its presence in Cambodia and Vietnam in 2013 and 2016 respectively. It intends to use its initial public offering (IPO) proceeds to expand retail hardware operations and aggressively pursue growth in retail software business as well as diversify into new market segments for its product line.

The group intends to pursue growth in its retail software and hardware business operations in South-East Asia, leaning towards recurring income and higher margin operating segments.

“Radiant Globaltech’s potential upside includes strong uptake of in-house products leading to profit expansion, as well as upbeat retail spending in Malaysia, Cambodia and Vietnam.

“Risks revolve around the dependency on industry’s cyclical retail health,” Inter-Pacific noted.

Radiant Globaltech’s focus would also be on expanding its customer base for its profitable retail software business segment by leveraging on its large base of hardware customers (approximately 978) to cross-sell its software products.

Secondly, the group aims to have a foothold among airport retailers, utility retailers and shopping centre retailers to further expand their businesses.

Inter-Pacific noted the rising trend towards the online retailing industry has a negative sales impact on departmental stores, supermarkets, and grocery and hypermarket stores — which will then appear as a risk to the group.

“The retail industry is the main end-user market of the retail technology solutions industry, so any factors that could affect retail spending and sales volume would have an impact on the retail technology solutions industry as well,” it added.

The company’s key industry competitors include Cuscapi Bhd, Radiant Globaltech’s main peer in the retail technology industry.

Other closest comparable companies are Code Soft Technology Sdn Bhd, Gross Synergy Sdn Bhd, Inter-Register Communications (M) Sdn Bhd, Powercomp Distribution Sdn Bhd and QR Retail Automation (Asia) Sdn Bhd, as these companies have the most similar product offerings to Radiant Globaltech.

“The closest peer comparison would be Cuscapi, a management solution provider in the food, automotive, retail, point-of-sale hardware and hospitality division.

“However, the company has been loss-making in the past three years and does not make a suitable comparison,” Inter-Pacific said in its report.

In terms of earnings preview going forward, Inter-Pacific expects growth in all operating segments and a revenue growth forecast of 12% per annum.

“We envisage earnings to be flat in FY18 owing to one-off IPO expenses of RM2.5 million. Subsequently, earnings growth of 45%, or RM10.2 million in FY19, and since the group does not have a formal dividend policy, we assume no distribution of dividends,” Inter-Pacific added.