This article first appeared in The Edge Malaysia Weekly on October 7, 2024 - October 13, 2024

PENANG-based integrated gaming solutions specialist RGB International Bhd (KL:RGB) is poised for a record profit this year, driven by its strategic expansions in the Philippines and Cambodia.

Despite absorbing significant impairments totalling RM37.1 million, RGB saw its net profit increase by 5.5 times to RM21.21 million in the financial year ended Dec 31, 2023 (FY2023), up from RM3.82 million a year ago. If not for the impairments, its earnings would have been more than double that, at about RM58.3 million.

Chuah Eng Meng, senior vice-president of the sales, support and marketing division, is confident the group will be able to reverse these impairments, adding that it has already begun doing so, as reflected in its 2QFY2024 results.

“We are on track for another good year in FY2024. Our previous record profit was RM40.17 million in 2019. We are confident that FY2024’s net profit will surpass that milestone. In fact, we have already reported earnings of RM40.7 million in the first half of FY2024,” he tells The Edge in an interview at RGB’s headquarters in George Town, Penang.

In May, RGB announced that it had successfully clinched a RM383 million contract to supply 1,968 slot machines to the Philippine Amusement and Gaming Corp (PAGCOR) by the end of the year.

Three months later, RGB signed an agreement with Firm 614 to be its exclusive agent to assist in importing, selling and distributing all kinds of gaming equipment and gaming software to gaming operators licensed by Cambodian regulator Commercial Gambling Management Commission (CGMC).

Firm 614 is currently the only company in Cambodia accredited and licensed by CGMC for gaming activities.

RGB’s sales target for 2024 is set at over 4,000 machines. As of 2QFY2024, the group has sold more than 1,700 machines.

“A significant portion of our remaining target is anticipated to come from the second half of FY2024. The contract from PAGCOR is currently in shipment and we expect to complete installation and commissioning by the end of the year.

“We are also optimistic of achieving the target we set at the start of the year through the various sales and services teams in all the countries we operate in — the Philippines, Vietnam, Malaysia, Singapore, Laos, Timor-Leste and Cambodia. These markets continue to show strong potential and we are confident they will continue to contribute to our growth path,” says Chuah.

RGB has three core businesses. Under its SSM division, the group manufactures and distributes electronic gaming machines (EGMs), spare parts, various types of casino equipment and casino management systems.

Under its technical support and management (TSM) division, RGB offers machine concessions and leasing programmes. The group currently has 41 revenue-sharing concession venues across Asia, including the Philippines, Cambodia, Vietnam, Laos and Timor-Leste, with about 5,000 EGMs.

Under its engineering division, RGB provides on-site technical solutions, preventive maintenance and repair services.

The group has also recently set up a new team under the digital solutions division that will look into the rolling out of artificial intelligence (AI)-related products for the gaming industry.

“We are currently working with an integrated resort (IR) to test the products and they would be a new stream of revenue if successful,” says RGB chief operating officer Datuk Steven Lim Tow Boon.

Currently, there are over 15 privately run IRs and casinos operating across the Philippines, which use around 25,000 units of EGMs. The archipelagic state has continuously recorded high gross gaming revenue — totalling US$3.3 billion (RM13.89 billion) in the first half of this year — with the potential to surpass Singapore by next year.

“We managed to secure a sizeable order from 16 state-run casinos under PAGCOR in May this year via an open tender to supply close to 2,000 slot machines.

“The most recent IR opened in May, to which we supplied and installed the majority of its machines and equipment. Hence, we are in a good position to capitalise on the growing gaming market in the Philippines,” Lim says.

It is learnt that there is a plan for PAGCOR to privatise all of its 16 casinos and 24 VIP clubs in the coming years.

The Philippines, with around 25,000 EGMs in its privately-run IRs and casinos, remains one of the least penetrated slot machine markets in the region, based on the number of EGMs per million population.

Australia, with a population of 25 million, has about 200,000 EGMs. The Philippines, with its 110 million population, only has 12.5% of Australia’s EGMs.

Lim says the general outlook for the gaming industry, particularly the casino equipment market, remains positive over the next three to five years.

“In the Philippines currently, up to eight new IRs have been approved, with at least one IR opening each year,” he says.

Lim recalls that during the Covid-19 pandemic lockdowns, the entire gaming industry in the Philippines came to a standstill. The situation spurred a wave of creativity among operators, leading to the birth of remote gaming.

The concept allows players to connect to physical slot machines from their mobile devices, offering a seamless experience akin to remote desktop work.

According to Lim, RGB was the company that introduced and promoted this concept to casino operators. “This is not some kind of virtual game — these are real machines being played remotely. Players are connected to the machines via the internet. When these remote players are connected, no one at the site can play that same machine.”

These machines are typically placed in exclusive areas within the casino that are dedicated to remote play. Players feel more secure knowing these machines are connected to reputable slot clubs and IRs, ensuring that the experience remains legal and regulated.

“It is very secure and gives players a way to continue gambling even when they are not physically present in the casino,” he says.

For players, convenience is key. Lim shares an example: “Someone is chasing a big jackpot that is about to drop. If they need to leave the casino, remote gaming allows them to continue playing from their phone, so they don’t miss out. It’s that kind of convenience and flexibility that makes this system so attractive, especially when big jackpots are involved.”

As AI and technology continue to evolve, RGB is focusing on expanding into these two fields.

“By leveraging these advancements, we aim to stay at the forefront of the industry and capitalise on emerging opportunities in the current and new markets within the region,” Lim says.

Cambodia has had a long history in the gaming industry. However, it has always been a lightly regulated market. The country is now in the process of transitioning to a fully regulated market through its newly-established gaming regulatory body CGMC.

Chuah says the Cambodian market has an estimated 6,500 slot machines in 118 casinos. “We are told the number is expected to grow to 10,000 machines over the next few years. This is another exciting opportunity for RGB to put a strong footprint in the country.”

Next door, the Thai government has announced its plan to legalise gaming activities and boost tourism through IRs, which presents a wave of new opportunities for companies like RGB.

Chuah believes that Thailand is looking to emulate Singapore’s tourism model and plans to enhance its natural attractions — such as beaches and mountains — with artificial tourist destinations like IRs and entertainment complexes, including casinos. Thailand’s much larger size and population offer significant potential for the development of multiple IRs.

“We are very optimistic about Thailand because it is a big country, so they may have a big number of IRs in the future,” he says.

Malaysia makes up about 30% of tourists visiting Thailand each year. This, coupled with the proximity of northern Malaysia to Thailand, could further drive gaming-related business across borders. Many Malaysians already frequent Thailand for shopping and tourism, which could further increase with legalised gaming.

“We foresee that the law [legalising gaming] could be passed by next year and it will take three to five years to roll out the new IR law. But if the government is aggressive, they might allow temporary casino sites while full developments are underway. The signs are very strong for legalising casinos and the current government seems optimistic,” Chuah observes.

Year to date, shares of Main Market-listed RGB have gained 42% to close at 38.5 sen last Wednesday, giving it a market capitalisation of RM588.23 million.

As it continues to generate strong earnings, Chuah believes the company’s share price should respond accordingly. “We are focusing on delivering sustainable growth as we achieve our financial targets. We believe the market will recognise this in our stock valuation.”

Chuah is the son of RGB’s major shareholder and managing director Datuk Seri Chuah Kim Seah, who holds a direct 30.02% stake in the company.

Last year, the Malaysian Anti-Corruption Commission arrested Kim Seah as they investigated one of his private businesses related to slot clubs. The 71-year-old gaming industry veteran was later released on bail. At the time, RGB said it was only involved in the sale of gaming machines and had no involvement or ownership in slot clubs in Malaysia. The company also refuted any involvement in political funding.

Last Tuesday (Oct 1), RGB announced in a stock exchange filing that MACC’s investigation had been “completed and resolved, with no further action on the part of the authorities”.

Among RGB’s top 30 largest shareholders, based on its 2023 annual report, are its senior vice-president Mazlan Ismail, deputy chief operating officer Datuk Chuah Kim Chiew (who is Kim Seah’s brother), Batu Kawan Bhd (KL:BKAWAN) managing director Datuk Lee Hau Hian, as well as AHAM Select Dividend Fund, KAF Core Income Fund and Great Eastern Life Assurance (M) Bhd. 

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