ACE-bound Ramssol’s fair value derived at 63 sen

by NUR HAZIQAH A MALEK / graphic by MZUKRI MOHAMAD

ACE Market-bound Ramssol Group Bhd has been given a fair value (FV) of 63 sen ahead of its listing, with the company expected to raise about RM25.1 million at an offer price of 45 sen per share for 55.8 million new issuance shares.

Public Investment Bank Bhd (PublicInvest) derived the 63 sen FV based on a 15 times price-to-earnings (PE) ratio to the company’s financial year 2022 forecast (FY22F) earnings per share of 4.2 sen.

“We are ascribing a circa 70% discount to Bursa Malaysia Technology Index’s PE multiple of 47 times.

“We believe the discount is justifiable on account of its smaller market cap compared to other listed technology players,” the investment bank stated in a research report yesterday.

Ramssol is slated for listing on the ACE Market of Bursa Malaysia Securities Bhd on July 13, 2021.

The local leading human capital management (HCM) solutions and technology provider is seeking a listing with an enlarged issued and paid-up share capital of over 223 million shares on the ACE Market.

Pursuant to its listing, the company’s market capitalisation stands at RM100.4 million based on its IPO price of 45 sen.

Besides utilising 10% of the proceeds for business expansion into the Philippines, 25.3% and 16.3% of the proceeds are allocated for the expansion of Feet’s and Lark platforms in South-East Asia, and research and development expenditure respectively.

“Ramssol’s growth will be dependent on regional expansion, expansion of all its existing business segments, enhancements of its in-house employee engagement mobile application and the development of bolt-on modules for its cloud-based HCM solutions,” the research note stated.

PublicInvest noted that the pricing of Ramssol’s projects for consulting and implementation of HCM solutions varies from customer to customer and is based on various factors, including types of HCM or student management software, modules to be implemented, duration of project, number of consultants required and complexity of the solutions in terms of the end-users’ employee or student management workflow processes.

Ramssol sells Feet’s and Lark on a monthly subscription basis, while the subscription package of Zoom is resold on an annual renewal basis.

“In general, staff costs are the largest component in the cost of sales, consistently constituting more than 50% of its total cost of sales,” the investment bank stated.

Ramssol’s second-largest revenue component is software licences, which constituted between 20.34% and 47.41% of its total cost of sales in FY17 to FY20.

PublicInvest added that the overall gross profit margin of the group could be potentially lifted with the provisions of HCM technology applications, and information and technology-related training which are usually pegged with higher gross profit margin.

As of May 24, Ramssol’s total secured orders stood at RM51.52 million, including orders secured in FY21 of RM19.74 million, while the remaining were secured prior to January 2021.

The unbilled amount as of May 24, some RM16.24 million, is expected to be billed by FY21.

The remaining balance of RM1.64 million is expected to be billed in FY22 and RM760,000 to be billed in FY23 and FY24.

PublicInvest noted that Ramssol’s competitive strengths include having a proven project track record involving large organisations across multiple industries.

“It also has a regional presence in South-East Asia with extensive knowledge, competence in enhancing the sufficiency of an organisation’s human resource (HR) functions with its suite of HCM solutions and technology, and having an experienced key senior management team,” the bank said.

Among the catalysts for Ramssol’s growth include the digitalisation of HR functions, workplace digital transformations and application of data analytics that drive overall business productivity.

Meanwhile, key downside risks include competition from other solutions providers and software vendors.

“Other key risks include potential security breaches for its in-house and third-party HCM technology applications, potential infringement of its or third-party’s intellectual property rights, exposure to foreign-exchange transaction, dependency on software vendors and potential impact on its financial performance should its Multimedia Super Corridor Malaysia status be changed,” the bank wrote.