Revenue Group 37% Upside from Listing

We did not cover Revenue Group on our IPO Research but decided to subscribe the very last-minute realizing how fundamentally strong the company is. It was announced that the IPO offering was oversubscribed 11 times which make us feel that our chances of getting it had been lowered by a lot.

The opening price would likely be positive on opening day being an oversubscribed IPO but the story continues on asking which price to target for continuous accumulation.

A Brief History

Revenue Group is an back end electronics payment provider where they had been a part of this industry even before the rise of the word ‘Fintech’. According to their IPO Prospectus, AmBank had been their longest financial institution customer since 2004 and the list goes on opting for their services till date.

One thing for sure is that this isn’t a so called modern Internet based fly by night company. The integrity of their systems and credibility of their services plays a huge role in getting more and more customers to adopt their services.

The biggest name so far is China’s UnionPay services which opens up the market for them. China is the biggest market and with the number of Chinese people overseas, UnionPay had been the doorway to RMB based transactions and clearing overseas.

Taobao listed RevPay as one of their partners in their site.


Upcoming Development

With UnionPay services intact, this round’s IPO proceeds will lead the company to frontier markets of Cambodia and Myanmar for growth. Both very close to China and both very under-developed markets especially for online payments will provide a good prospect for Revenue Group’s growth.

Providing these services, it is best to be the market leader rather than 2nd in place because it is pretty clear that these types of companies naturally grow bigger and bigger due to economies of scale. The same infrastructure for services could be replicated easily with small modifications for each unique customer thus, economies of scale could be achieved easily.

This is why front-line services providers in the online transaction and payment industry grows bigger every year. In fact, at the end of the day, bigger actually means higher credibility similar to banks.


Consistency over the years were shown in terms of profit and loss. The company registered strong margins for gross and even after tax. The revenue growth had been smooth as well and all that proves that the business structure had been successful in Malaysia.


With a strong base locally, the company could undertake new investments into frontier markets Cambodia and Myanmar. Any kinks and bumps along the path of expansion could be buffered with their strong performance locally and possibly seize a few more customer’s in Malaysia along the way.

We think that at times, an IPO could be a marketing campaign for a company where in this case, awareness towards Revenue Group had been created through this IPO. We now know who’s behind those transaction systems. Brand image improves and being a highly known brand automatically improves their credibility. Which points back to the most important thing for provider of these services.

Indeed, the money raised could have been done through private placements where Revenue Group could still be a Sdn Bhd but the effect of listing improves the awareness of the public somewhat similar to Alibaba’s re-listing/US listing not long ago. Alibaba renewed their presence in the world and gain the awareness from the US side ditching Hong Kong listing where they delisted from there earlier.


We think that based what’s written on the prospectus, the Post-IPO market capitalization would put the company’s value at RM 82 million.


Although not the best to compare with Revenue Group, we chose Manage Pay (MPAY) as reference and the company is currently valued at RM 113 million. But sadly, MPAY isn’t a performer in terms of profitability. The firm started to make losses and eventually stressed the balance sheet acquiring retained losses as reported in the latest quarter.

Our conservative estimate puts the company’s valuation is only RM 100 million. Meaning we suggest that IPO pricing of RM 0.37 would see a RM 0.45 listing price or a gain of 20% from listing.

We wouldn’t be surprised if Revenue Group trades at a market capitalization of RM 113 million similar to MPAY’s. That would see the share price trading at RM 0.50 per piece or a 37% gain!

Listing Date

Our target buy is to collect on weakness at market capitalization lower than RM 100 million (maybe closer to RM 90 million side). On listing date, if the opening price is way up above 20%, we would take profit first and collect more when the market calms.

That strategy depends on how many shares would be allocated as well. With 11 times oversubscribe, we felt that only 30% of total subscription would be fulfilled.

Would follow up when it’s closer to listing date. Congratulations to those who subscribe, this company is rare to come by for the Malaysian market.


NovaMSC – Singapore’s very own MYEG?

NovaMSC could be seen trading among the top 5 in terms of volume day after day on the Malaysian market. The stock almost doubled in 1 month propelled by order book replenishment and a sudden explosion in contracts received over these periods.

The stock wasn’t covered under CIMB’s Research team but getting as hot as it is now, they too decided to publish a short introduction to the company.

Do you think you should have a piece of this? Have a look at their latest report!


Maybank – Outlooks for 2H 2018

The ups and downs of KLCI had brought us down 5.86% for the 1st half of 2018 or down 6.62% year to do. The report below is somewhat similar to what we posted before the start of this year.

Maybank once again cover the outlook for the 2nd half of 2018 in these 100 pages worth of good reads. The coverage extends from world economy to Malaysia after Pakatan Harapan’s win over the general election.

Have a look! It’s a great read…


CIMB’s Strategy June 2018

June is definitely a bear market but July just started which also marks the start of the 2nd half for 2018. Being down sharply for the last 2 months, we see possibilities for July to close higher than the 1st half.

CIMB posted its Malaysian strategy and it is clear that the weakest component on the KLCI I still the construction sector. Meanwhile, miners get a lift through higher oil prices.


Furthermore, the report includes a very important chart where we see the correlation of foreign buying versus the value of Ringgit against the US Dollars.


In short, weakening RM gets foreign funds selling. We missed the divergence for foreign money to come back after the election, but we believe that it takes time for confidence to rise and money to flow back in. The cabinet is in full force and business continues as usual.

CIMB only placed overweights on the oil and gas industry this time around.


Take a look at their strategy report. A lot of information and data provided for your reference.




CIMB Cuts KLCI Target

Cut KLCI earnings growth to 5% for 2018 and target to 1,767 pts

The weak corporate results have led us to cut our market earnings for the stocks in our universe by 6-7% for FY18-19, as we cut earnings forecasts for Axiata, Telekom and the banks.

This resulted in slower KLCI earnings growth of 5% for 2018 (from 8%) and 8% for 2019. In line with our earnings revision, we lower our end-2018 KLCI target to 1,767 from 1,820 points, still based on P/E of 15.4x (1 s.d. below three-year average mean P/E)

CIMB Research

Have a look at the summary after Q2 Results


CIMB on Inari Amertron

Our top pick post election due to expectation of weakening ringgit reported its results yesterday. As expected, revenue should see a decline Q-o-Q but the profit remained solid.

As the report from CIMB tells us,

We learnt that the second phase expansion at P13 had recently been completed. The second phase could add another 250 RF testers, raising Inari’s capacity to 1,200 units. Following completion, P13B plant will be the largest plant in the group with a total manufacturing floor area of 340 sq ft. The group is in the midst of getting production equipment and it expects to start ramping up production from Jul onwards.

We think that indeed it is still a growing company. Expect the price to trade close or breach to its previous high of RM 2.50 (adjusted after bonus issue)

Have a look at the report!



What if Etiqa is Listed?

Well the rumors might seem to be true eventually with the likelihood of Etiqa going listed. A couple of other insurance companies are queuing to get listed due to Bank Negara latest regulation. But it seems odd for Etiqa to get listed since its 69% Maybank owned.

Anyway the report below by CIMB elaborates more on this round’s spin off.


As long term investors to Maybank, we are firm that this spin off will make the operations clearer on the P&L and balance sheet.

Indifferent towards the growth prospect.