Ramssol Group Bhd - Missed expectations
Fri, 28-Feb-2025 07:54 am
by Jayden Tan • Apex Research

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RAMSSOL (0236)

Target Price (RM)

0.780

Recommendation

Hold

Summary

  • Ramssol reported FY24 core net profit of RM13.5m (+105.8% yoy), missing expectations at 79% of our RM17.1m forecast and 84% of consensus RM16m, due to weaker sales from Malaysian customers deferring projects. 

  • 4QFY24 CNP declined -23.4% yoy and -85.8% qoq, impacted by higher operating costs and sluggish HCM project deliveries. Revenue rose +33.1% yoy but fell -46.3% qoq

  • Lowering FY25F/FY26F earnings by -10%/-16% to reflect expectation of weaker project pipeline and higher operating costs from new product rollouts.

  • Downgrade to HOLD with a lower TP of RM0.78 (from RM0.86), adjusting valuation to 21.0x P/E on FY25F EPS of 4.0 sen, amid cautious sentiment on HCM solutions sustainability and Thailand business profitability clarity.

 

Results missed expectations. Ramssol reported a core net profit (CNP) of RM13.5m (+105.8% yoy), falling short of our in-house estimate of RM17.1m (79% achievement) and the consensus forecast of RM61m (84% achievement). The shortfall primarily stemmed from lower sales among Malaysian customers, who deferred projects due to year-end procurement patterns. Separately, we noted an unusual entry in Ramssol’s Thailand segment reporting, where the EBIT figure exceeded reported revenue. Since this discrepancy was not addressed in the report, we believe it may involve a one-off non-operating income item that which potentially reduced the overall CNP even further.

 

YoY. In 4QFY24, CNP dropped by 23.4% yoy, despite revenue rising 33.1% yoy, as higher operating expenses compressed margins.

 

QoQ. CNP plummeted 85.8% qoq to RM0.6m, primarily due to sluggish HCM project deliveries in the quarter. Revenue fell 46.3% qoq to RM10.5m.

 

Dividend. The Group declared its first-ever dividend since listing, at 0.28 sen/share, payable on 16 April 2025.

 

Outlook. We adopt a more cautious view on Ramssol’s ability to sustain HCM solutions project wins and deliveries after the weaker-than-expected results. Although the newly acquired Thailand business contributed higher revenue this quarter (RM3.3m vs. RM0.9m previously), we await clarity on its profitability—particularly in light of the unusual segment profit figure. Moreover, the rollout of new product offerings is likely to elevate operating costs and amortization of intangible assets.

 

Earnings Revision. We are reducing our CNP forecasts by 10% for FY25F and 16% for FY26F, by lowering sales and margin assumptions across all business segments following the coverage transfer from previous analyst and the disappointing results.

 

Valuation. We downgrade Ramssol to a HOLD with a lower target price of RM0.78 (from RM0.86), reflecting our earnings revision. Our valuation is based on a 21.0x P/E multiple applied to the revised fully diluted FY25F EPS of 4.0 sen and incorporates a three-star ESG rating.

 

Risk. Potential vulnerabilities include security breaches or data compromises, as well as slower-than-expected kick-off of new projects.

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