Case Study of Revenue Group Berhad (0200)

By Stella Goh – Market Data Analyst | 21 October 2019

Overview

Revenue Group Berhad is a company established in the Year of 2003, which primarily involved as an electronic integrated payment platforms provider in Malaysia. REVENUE provides best practice services and a wide range of robust options to help their client’s business adapt the latest technological framework with a low operational work, and the integrated technical experts provide supporting infrastructure for their needs especially in the field of IT and businesses.

REVENUE  listed in ACE Market of Bursa Malaysia since 18th July 2018. With over 15 years of experience in the electronic payment industry, REVENUE has been servicing different customers such as banks, non-bank institutions, physical store, merchants, online store merchants, and e-money payment scheme. For examples, Ambank, Affin Bank Real Rewards, Comex GeneSys, Visa, MasterCards, Malaysian Electronic Payment System (MEPS), VeriFone, Petronas, Touch n’ Go etc.

Business Model

REVENUE engaged in the business by providing complete and customizable payment solutions which cover all aspects of terminals, network infrastructure, management and applications to satisfy their customers. For examples, they have come out with the solutions such as EMW Smart Card Technology, Terminal Management System, Loyalty System, Consumer Behavioural Management System, Web-Based Payment System and Payment Transaction Management System.

REVENUE also offer a wide range of technology-led multi-channel payment solutions through the flagship platform called revPAY. The flagship revPAY will be used to connect the front-end and back-end solutions and used to facilitate the acceptance of payment transactions across various payment channels from physical Electronic Data Capture (EDC) terminals, E-commerce transactions and Quick Response (QR) Payment.

Financial Review



Based on the past 4 financial years of revenue chart above, the group’s revenue grew years-on-years (y-o-y) from FY2016 (+78.83%), FY2017 (+3.11%), FY2018 (+33.32%) and FY2019 (+67.86%). On a CAGR basis, REVENUE has grown 42.52% based on 4 years. The growth of revenue mainly attributed to 58.49% for Electronic Data Capture (EDC), 33.68% for electronic transaction processing segments and the rest attributed from the solutions and services business segment.

The Malaysia market remains the largest market contributing to the Group’s revenue accounting for approximately of 99.69% of total revenue in financial period to data.

Revenue Group Berhad has achieved a tremendous high record by approximately 41.05% from RM22.9 million in FY2018 to RM32.3 million in FY2019. On a CAGR basis, the gross profit has grown 38.31% based on 4 years. The gross profit of REVENUE increased was mainly due to the higher sales of Electronic Data Capture (EDC) terminals, increase in the rental of EDC terminals and processing income, as well as the contribution of 2 months revenue from the newly acquired subsidiary companies namely Anypay Sdn Bhd and Buymall Services Sdn Bhd.

The REVENUE’s overall Profit After Tax (PAT) increased marginally by RM2.2 million or 31.4% from RM7.0 million in FY2018 to RM9.2 million in FY2019. Based on a CAGR basis, the Profit After Tax (PAT) grew by 44.59% was in line with the growth of revenue and gross profit achieved by Revenue Group Berhad.

Cash Flow Statement

Based on the 4th Quarter Financial Result of cash flow statement, REVENUE has a decreased of net cash from operating activities from RM13.2 million in FY2018 to RM1.4 million in FY2019. The decreased of cash flow from operating activities indicate that the company unable to receive the due date’s receivables from customers on time, and they had paid back their creditors and amount due owed to the directors as well as to pay for the derivative’s financial liabilities.

The net cash from investing activities has a negative figure in FY2018 (-RM9 million) was mainly due to the purchase of Property, Plant and Equipment (PPE) for business expansion, and acquisition of other investment such as Anypay Sdn Bhd and Buymall Services Sdn Bhd which can help the firm grow for their business.

The net cash from financing activities have increased from RM2.6 million in FY2018 to RM18.1 million in FY2019 was mainly attributed to the proceeds from the issuance of shares amounted to 20.6 million. REVENUE had also paid for the share issuance expenses, finance lease payables, and term loans with a total amounting to RM3.5 million.

Does the company able to pay back its liabilities? Based on my computation of liquidity ratio, REVENUE has a current ratio of 1.930 times in FY2019 compared to 1.189 times in FY2018 indicate that the company do not have face any liquidity problem as they are capable of paying back its liabilities on due by using the current assets such as trade receivables, other receivables, tax recoverable, fixed deposit, cash and bank balances.

Future Challenges

REVENUE has collaborated with TNG Digital Sdn Bhd to launch the additional online shopping options for TNG e-Wallet users to shop in Alibaba-owned Taobao and Tmall marketplace by using the e-Wallet application via REVENUE’s revPAY platform. Taobao and Tmall are the world’s largest E-commerce marketplaces, with monthly active mobile users of 755 million in June 2019. The collaboration would further enhance the REVENUE’s bottom line going forward and drive up the electronic transaction processing segment as the e-Wallet has been using widely by Malaysian due to the attractiveness of cash rebates and the needs for day-to-day transactions. (Source: TheEdge, 2 Oct 2019).

REVENUE have acquired 51% of stake in Buymall Services Sdn Bhd and 70% of stake in Anypay Sdn Bhd. Buymall operates as an online marketplace which provides procurement services for consumer goods from oversea e-commerce websites as well as cross-border logistics and last-mile delivery for Malaysian. (TheEdge, 31 July 2019) For examples, Buymall will open a new segment for Revenue Group, with the target tourists from China who visit Malaysia. The Chinese tourists who come to Malaysia can buy duty-free and duty-paid items online and have them delivered to their hotels by using the Buymall’s services. (TheEdge, 15 Apr 2019)

While with the Anypay bill payment gateway, REVENUE wants to add other solutions to the EDC terminals. For examples, the terminal in 7-Eleven can accept the card and bill. Customers can find few top-ups in the Anypay application such as Maxis account, or even those overseas telcos and IDD cards via the EDC terminals. (TheEdge, 15 Apr 2019)

REVENUE also have announced that they will collaborate with Hong Leong Bank Bhd to offer payment acceptance and services to Singapore’s NETS cardholders to shop at retail outlets under GCH (Malaysia) Sdn Bhd and Guardian Health and Beauty Sdn Bhd in Malaysia. The exchange rate of NETS is cheaper than the rate offered by Visa and Mastercard; therefore REVENUE expects the transaction value processed can increase significantly, and they aim for the NETS payment acceptance to be available nationwide via its Digital Electronic Data Capture (EDC) or android terminals by the end of next year. (TheEdge, 18 July 2019)

My Insight

Based on my calculation on Discounted Earnings Model, Revenue Group Berhad has a fair value of RM2.847. The current market value of REVENUE is RM1.52 which is undervalued. (Based on 9Oct2019). REVENUE has a beta of 2.284 (500days) indicates that the company is more volatile than the current market. Based on my computation of Compound Annual Growth Rate (CAGR), REVENUE has an expected market return of 5.85%. Even though the Return on Equity (ROE) has decreased from 28.821% in FY2018 to 15.599% in FY2019, it still considered as healthy as the company can achieve a double-digit of ROE.

In conclusion, Revenue Group Berhad has achieved outstanding performance in FY2019 as the revenue, gross profit and net profit after tax has been increased years by years from FY2016 to Fy2019. REVENUE’s prospect remains bright by looking at the growth on the back of e-Wallet shop in Alibaba-owned Taobao and Tmall, e-payment adoption, acquisition of Buymall Services Sdn Bhd and Anypay Sdn bhd, as well as NETS payment acceptances and android terminals. I believe the company can grow very well in the future.

Disclaimers

The research information and financial opinions expressed by ShareInvestor.com website are for information and education purpose only. We do not make any recommendation for the intention of trading purpose or advice. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur. You should not rely upon the material and information on this website. We will not be liable for any false, inaccurate, incomplete information and losses suffered from your action. You need to do your research to make your own investment decision wisely.

Leave a Reply

Your email address will not be published. Required fields are marked *

Site last updated July 6, 2020 @ 3:54 am; This content last updated March 6, 2020 @ 3:25 am