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KUALA LUMPUR: Penang-based RGB International Bhd is planning to venture into the business of selling parts — for the electronic gaming machines it manufactures — to its existing clients in order to grow its revenue stream for the financial year ending Dec 31, 2015 (FY15).

“We are looking to be a technical service and parts provider for gaming machines in the region. We have recently tied up with a business partner — a company that provides turnkey technical support and parts,” RGB chief operating officer Steven Lim told a media briefing yesterday.

Lim said RGB will first start with a pilot project in the parts business in the Philippines, where its biggest customer for gaming machines is. It has tied up with an established gaming machine parts provider for the new venture.

This, he said, will allow RGB (fundamental:1.7; valuation: 1.5) to be a “complete solutions provider”. It will also help add value to RGB’s customers in a market where demand for both gaming machines and their replacement parts is high due to a mushrooming of new integrated resorts

“Parts are important because machines cannot stay down. What has always been challenging in the regulated gaming market is that regulations surrounding import of parts makes replacement very difficult. So, we are providing a service where customers can order parts and we can provide the part and servicing,” said Lim.

Meanwhile, RGB is aiming to grow both its profit and revenue by 5% in FY15, driven by the sale of 1,500 gaming machines, the placement of an additional 500 Bingo machines in the Philippines and its 7,000 machine concessions across Asia.

“As a rule of thumb, casinos upgrade their floors after one or two years of operation. This means that they undergo a replacement programme or undergo a floor expansion. So, they will need to replace or add to their gaming machines,” said Lim.

RGB is also planning to expand its footprint in new markets in Asia — both for supplying its gaming machines as well as acquiring minority stakes in “clubs” which host such machines.

“Currently, our income is coming from the technical support and management (TSM) division. Moving forward, we want to buy equity in clubs which operate these gaming machines. We are looking at a minority stake of 20% to 30% to have another stream of recurring income,” Lim said.

RGB is already in the process of completing the first such acquisition, with its subsidiary RGB (Macau) Ltd acquiring a 30% stake in Timor Holding, Lda. The deal is expected to be completed in the middle of this year but the success it is seeing from Timor Leste makes a good case for more acquisitions.

“As we can see now, the results in Timor Leste are very encouraging. We are not putting in top-end machines because the market does not need it. We are bringing in refurbished machines.

“Based on what we have seen since November 2014 when we started sending gaming machines to Timor Leste, we are looking at US$400 (RM1,460) to US$500 per machine per day. These are numbers that we will not get in the other markets we are in now. That gives you an idea of what the returns are like,” said Lim.

RGB currently has 90 gaming machines operating in Timor Leste from which it is reaping revenue through concession agreements based on a profit-sharing scheme with its customer.

RGB assured investors the company will not incur more debt for its expansion plans. Instead, internally generated funds and possibly a corporate exercise will be used for fundraising.

RGB shares closed down 3.13% at 15.5 sen yesterday, bringing a market capitalisation of RM182.96 million.


The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to theedgemarkets.com for more on a company’s financial dashboard.

This article first appeared in The Edge Financial Daily, on March 6, 2015.

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