KUALA LUMPUR (Feb 12): Electronic gaming machine maker RGB International Bhd (KL:RGB) is projected to deliver its strongest quarterly result since inception, driven by its strategic expansions in the Philippines and Cambodia, said Phillip Capital.

RGB is expected to report on Feb 26, a core earnings of RM51 million in 4QFY2024, which boosted full-year 2024 earnings to RM108 million, a 91% increase year-on-year (y-o-y). 

The anticipated earnings growth was contributed by the completion of a sizeable order of 1,968 electronic gaming machines (EGMs) delivered to the Philippine Amusement and Gaming Corporation (PAGCOR), valued at US$81 million. Delivery was completed in 4Q2024 and boosted the quarter profits.

Phillip Capital initiated a “buy” call on RGB, with a target price of 71 sen, based on nine times its estimated 2025 earnings per share (EPS), making it a 59% discount to global EGM manufacturers.

Its recommendation is based on estimated profit compound annual growth rate (CAGR) of 32% over 2023–2026.  

The house cited that improvement of margin, balance sheet in clean slate, and 10% dividend yield expectations for 2024 make RGB an undervalued gem, with a valuation of an estimated 5.1 times of 2025 price-earnings (P/E) and 2.9 times of 2025 P/E if excluding cash.

Phillip Capital said RGB is well-positioned to capture 60% to 70% of new orders from the Philippines, which is the largest market. 

“With the recent legalisation of gambling in the UAE and Japan, we estimate that the total addressable market for EGMs is projected to expand by 17,000 over 2024–2027. 

“This growth builds on the existing 44k EGMs currently in operation, reflecting significant potential opportunities from newly opened market. These dynamics provide strong visibility for our RGB’s projected sales of 4,500 to 5,500 units across 2024–2026,” it said.

Further, it noted that the Thai cabinet has recently approved plans to establish a casino, while RGB is in the process of setting up a new subsidiary in Thailand.

RGB has secured an exclusive agreement with FIRM 614, the only licensed EGM importer in Cambodia. Cambodia’s new regulation requires all casinos to register their gaming equipment by the end of 2024, and remove outdated equipment older than 10 years. 

With over 6,000 EGMs installed, Cambodia, the third largest EGM market, presents significant growth opportunities for RGB. The market has yet to significantly contribute to RGB’s earnings, but with plans to expand integrated resorts and gaming facilities like the NagaWorld expansion (Naga 3), RGB stands to benefit from this growth.

The house expects the Philippines gross gaming revenue (GGR) to exceed US$6 billion, to surpass Singapore, thanks to holding exclusive distribution rights, and a robust pipeline of new integrated resorts set to open. At least 10,000 units of EGM will be tendered in the Philippines over the next three years, said the house.

The privatisation of PAGCOR’s casino operations is expected to begin in 2026, and have a higher sales valuation from US$1 billion to US$1.4 billion. 

At the time of writing on Wednesday, shares of RGB were up 1.5 sen or 3.8% at RM 0.415, valuing the company at RM642.5 million.