02/09/2008
Unaffected by the credit crisis, thriving in the fast growing global biometrics and RFID market and highly profitable, RCG remains curiously overlooked by investors.
Interim results to June from the Asia Pacific-focused products and services provider showed impressive 65% sales growth to £63.9m, delivered largely organically, from which pre-tax profits powered ahead from £12.1m to £20.9m. A further highlight was cash conversion, which improved substantially from 39% to 70%.
‘Security concerns are still around and will continue to help us,’ says chairman and chief executive Raymond Chu, upbeat about the recent acquisitions of Chance Best and Vast Base, the Singapore-based RFID technology provider with good links into the Chinese event ticketing and healthcare sectors.
In May, RCG spent £27m acquiring a further 40.1% interest in Vast Base, increasing its stake to 60%. The ambitious Chu also sees recent OEM agreements with Acer and NEC fuelling growth.
Already established in Southeast Asia, Greater China and the Middle East, he says RCG continues to expand, albeit at cautious pace, into new markets such as the US and Japan.
For December 2008, house broker Investec Securities forecasts a jump in pre-tax profits from £29.3m to £42.7m from a top line £132m. For December 2009, profits of £50.1m from £155m sales look achievable, sending earnings up from 17.3p to 18.8p per share.
On those estimates, RCG, shortly to dual list on the Hong Kong Stock Exchange to widen its investor base and increase liquidity, trades on budget 2008 and 2009 earnings multiples of 3.7 and 3.47, which look particularly and rather inexplicably ungenerous.
| Market cap: | £151.13m |
| PE Forecast: | 3.7 |
| Share price: | 65.25p |
| AIM | £77.01m |
33.25p
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-1.75p
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