Ramssol Group Bhd (RAMSSOL MK) acquires a Thai-based software developer and maintains a BUY rating with a higher target price (TP). Maybank Investment Bank (Maybank IB) expressed positivity about RAMSSOL’s acquisition of GeekStart, highlighting the potential for regional expansion and cost-saving synergies. Earnings estimates for FY24–26 have been raised by 61–80%, resulting in a new TP of RM 1.00, an increase of 50 sen. The TP is now pegged to 17x FY25E PER, reflecting stronger earnings delivery from its PeopleTech and AutoTech segments.
RAMSSOL announced the acquisition of a 51.0% equity interest in GeekStart Company Ltd. for RM 6.93 million. The acquisition will be funded by issuing 13.069 million new RAMSSOL shares at RM 0.53 each. Completion is expected by 3Q24, with a profit guarantee of over RM 4.7m for FY24 and RM 7.1m for FY25. The purchase price is approximately 10.0x GeekStart’s FY23 audited PAT, at the lower end of comparable companies’ historical 12-month trailing PER range.
GeekStart specialises in software development for web, mobile, and IoT applications, with a significant market share in the Thai financial, property development, and manufacturing sectors. The acquisition is expected to allow RAMSSOL to achieve cost and project timeline efficiencies by internalising software development activities that are currently outsourced. Additionally, RAMSSOL aims to grow its regional presence by cross-selling its digital solutions to the Thai market.
RAMSSOL’s strong 1Q24 earnings momentum will continue throughout FY24, driven by robust PeopleTech earnings delivery from realised joint ventures and partnerships. The full-scale rollout of AutoTech in 2H24 and the maiden earnings contribution from GeekStart are also expected to contribute to this momentum. Consequently, Maybank IB raised its FY24-26 earnings estimates by RM 7.1m, RM 7.7m, and RM 8.3m, respectively, reflecting 80%, 69%, and 61%.
The revised earnings estimates and a larger share base following the issuance of new shares for the GeekStart acquisition are expected to bolster RAMSSOL’s financial position. Given the expected synergies and earnings growth, Maybank IB maintained its BUY rating on RAMSSOL, highlighting the potential for further upside as the company integrates GeekStart and expands its market reach. The new TP of RM 1.00 underscores confidence in RAMSSOL’s strategic acquisition and its ability to deliver strong earnings growth in the coming years.
