IPO

Tuesday, November 14, 2023

FBMKLCI: 1,445.18
Sector: Technology
THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY*

Panda Eco System Berhad TP: RM0.185 (+15.6%)

ACE Market Listing
Retail Management Solutions Provider NOT RATED
Wilson Loo, CFA Tel: +603-2167 9606 wilsonloo@ta.com.my www.taonline.com.my

Background 1 Share Information

Founded in 2003, Panda Eco System Bhd (PESB) is principally involved in the 8 Listing ACE Market
development, customisation, implementation, and integration of retail Enlarged Share Capital (mn) 671.2
management solutions. Its customer segments include grocery retail stores, Market Cap @ RM0.16 (RM mn) 107.4
general merchandise retailers, specialty stores, and convenient stores. Issue price (RM) 0.16
Oversubscription rate N/A
IPO Statistic Estimated free float (%) 25.0
The IPO entails a public issue of 109.3mn new shares and offer for sale of
61.8mn existing shares. Collectively, they account for 25.5% of the group’s Tentative Listing Dates
enlarged issued share capital.
Opening of the IPO 08-Nov-23
Competitive Advantages Closing of the IPO 15-Nov-23
1. Comprehensive Range of Retail Management Solutions Balloting of Applications 17-Nov-23
2. In-House Developed Retail Management Software Allotment of Shares 24-Nov-23
3. Solutions With Flexibility & Convenience to Customers Listing 27-Nov-23
4. Experienced & Technically Strong Management Team
Valuation Ratio & Analysis

At the IPO price of RM0.16/share, PESB is priced at a trailing PE of 15.5x NTA per share (post IPO) (RM) 0.05

CY22 core EPS. As we assign a target PE multiple of 15.0x against its CY24F Price to NTA (x) 3.3

EPS, we derive a fair value of RM0.185/share. This takes into account PESB’s Proforma Net Gearing (x) Net cash
earnings growth prospects (FY23F/FY24F/FY25F: +3.8%/+16.2%/+15.8%) as it
is poised to benefit from: i) the growth of Malaysia’s retail industry both via Utilisation of Proceeds RM (mn) %
brick-and-mortar and online channels, and ii) government initiatives to spur R&D of new solutions 2.7 15.5
digitalisation, especially to SMEs and micro enterprises. Additionally, we have Regional expansion in ASEAN 1.9 10.8
also taken into consideration PESB’s track record, experienced and technically Hubs & Workforce Expansion 2.6 15.1
strong management team, and rich margin and ROE. Not Rated. Expansion of CTS department 1.7 9.6
HQ expansion 3.0 17.2
Earnings Summary Working capital 2.8 16.2
FYE Dec (RM mn) FY21 FY22 FY23F FY24F FY25F Estimated listing expenses 2.7 15.6
Revenue 20.0 21.0 23.1 26.0 29.9 TOTAL 17.5 100.0
EBITDA 8.8 8.4 9.4 10.9 12.8
EBITDA margin (%) 44.0 40.3 40.9 41.9 42.9
Dep. & amortisation (0.2) (0.2) (0.2) (0.3) (0.5)
EBIT 8.6 8.3 9.3 10.6 12.3
Net finance costs 0.1 0.1 0.2 0.3 0.4
EI 1.8 0.1 (2.7)* 0.0 0.0
PBT 10.4 8.5 6.7 11.0 12.7
Taxation (2.5) (1.4) (1.6) (2.6) (3.0)
PAT 7.9 7.0 5.1 8.3 9.6
Core PAT 6.1 6.9 7.2 8.3 9.6
Core EPS (sen) 0.9 1.0 1.1 1.2 1.4
Core EPS Growth (%) (11.2) 13.2 3.8 16.2 15.8
PE (x) 17.6 15.5 15.0 12.9 11.1
DPS (sen) 2.4 0.0 0.2 0.4 0.4
Dividend yield (%) 15.0 0.0 1.4 2.3 2.7
* IPO expenses.

Page 1 of 9
 14-Nov-23

Business Overview
Founded in 2003, Panda Eco System Bhd (PESB) is principally involved in the
development, customisation, implementation, and integration of retail
management solutions. Its customer segments include grocery retail stores,
general merchandise retailers, specialty stores, and convenient stores. Retail
management solutions are used to support retail operational processes such
as point-of-sales management, customer relationship management, electronic
commerce platform management, supply chain management, management of
information on store operations, inventory and warehouse management, as
well as financial and accounting management.
The group’s key solution is its Retail Management Eco-system which
comprises:
i. HQ Centralised Management, Store Operations and
Financial Management solution: for management and monitoring of
business operations and daily activities of a network of retail stores,
management of point-of-sale, and management of financial information;
ii. Omni-channel engagement solution: enables customer relationship
management, management of e-commerce platforms, mobile applications
and digital content, as well as management of delivery assignments for
orders made through e-commercia platforms; and
iii. xBridge B2B solution: enables electronic document exchange between
retailers and their suppliers.
Additionally, PESB is also involved in the trading of third-party software,
trading of information technology (IT) hardware, as well as software
customisation, implementation and integration of process control, and
automation solutions.
From FY19 to 1HFY23, PESB had implemented its Retail Management Eco-
system for 1,377 retail stores operated by ~137 retailers throughout Malaysia.
Overseas, the group had also implemented its Retail Management Eco-system
for 2 retail stores in Batam, Indonesia in 2016, and 1 retail store in Brunei in
2021. And recently since July 2023, the group had commenced implementation
of its Retail Management Eco-system for 1 grocery retail chain in Indonesia.

Figure 1: Panda Eco System’s Customers

Source: Company, TA Securities

Page 2 of 9
 14-Nov-23

Figure 2: Panda Eco System’s Business Model

Source: Company, TA Securities

Figure 3: Revenue Breakdown (By Business Segment) Figure 4: Revenue Breakdown (One-Off vs Recurring)

RM mn' 100%
25 90% 22% 28% 35%
80% 40%
48% 47%
20 2 2 70%
60%
15 1 50%
1 40% 78% 72% 65%
10 19 1 30% 60%
18 1 52% 53%
15 20%
5 12
10 10%
8
0%
0 FY19 FY20 FY21 FY22 1HFY22 1HFY23
FY19 FY20 FY21 FY22 1HFY22 1HFY23
One-off Recurring
Retail Management Eco-system Others

Source: Company, TA Securities Source: Company, TA Securities

Page 3 of 9
 14-Nov-23

Table 1: Share Allocation

No. of Shares % of Enlarged

Public Issue to: Amount
('000) Share Capital
Malaysian public 33,559 5.0% RM5.4mn
Eligible directors, employees & persons 42,774 6.4% RM6.8mn
Placement to selected investors 32,953 4.9% RM5.3mn
Total 109,287 16.3% RM17.5mn

No. of Shares % of Enlarged

Offer for Sale to: Amount
('000) Share Capital
Placement to selected investors 61,810 9.2% RM9.9mn
Total 61,810 9.2% RM9.9mn

Source: Company, TA Securities

Table 2: Shareholding Changes Pre & Post-IPO

Pre-IPO Post-IPO
Name Designation
Direct Indirect Direct Indirect
Goldcoin Capital Sdn Bhd Investment Holding 94.2% 69.6%
Loo Chee Wee Executive Director / Chief Executive Officer 94.2%* 69.6%*
Tay Kheng Seng Executive Director / Chief Technology Officer 96.0%** 71.3%***
Total 100.0% 74.5%
* Deemed interested by virtue o f interest in Go lden Capital
** Deemed interested by virtue o f interest in Go lden Capital & spo uses's shareho ldings
*** Deemed interested by virtue o f interest in Go lden Capital, spo uses's shareho ldings & assuming spo use will fully subscribe to P ink Fo rm A llo catio ns

Source: Company, TA Securities

Table 3: Utilisation of Proceeds

% of Gross
Purpose Amount Timeframe
Proceeds
R&D of new solutions RM2.7mn 15.5% Within 36 months
Regional expansion in ASEAN countries RM1.9mn 10.8% Within 36 months
Service hubs & workforce expansion in Malaysia RM2.6mn 15.1% Within 24 months
Expansion of CTS department RM1.7mn 9.6% Within 24 months
HQ Expansion RM3.0mn 17.2% Within 36 months
Working capital RM2.8mn 16.2% Within 24 months
Estimated listing expenses RM2.7mn 15.6% Within 1 month
Total RM17.5mn 100.0%

Source: Company, TA Securities

Competitive Advantages
1) Comprehensive Range of Retail Management Solutions
PESB offers a comprehensive range of retail management solutions under its
Retail Management Eco-system which includes HQ Centralised Management,
Store Operations, and Financial Management, Omni-channel Engagement, and
xBridge B2B. These retail management solutions are designed to address
various retail needs and requirements, as well as support various retail
operational processes. Among others, this includes point-of-sale management,
customer relationship management, e-commerce platform management, supply
Page 4 of 9
 14-Nov-23

chain management, management of information on store operations,

inventory, and warehouse management, as well as financial and accounting
management. By offering a comprehensive range of retail management
solutions, PESB is able to provide customers with the convenience of sourcing
the entire suite of retail management solutions from a single solution provider.
Furthermore, PESB is also able to leverage on its existing customer base to
cross-sell its solutions.

2) In-House Developed Retail Management Software

PESB has developed in-house all of the retail management software utilised in
its Retail Management Eco-system. Upon request, its in-house developed retail
management software can also be integrated with third party software. As the
software used are developed in-house, the group is not dependent on third-
party suppliers for software enhancements, updates, and the launch of new
solutions that are aligned with market trends. This strategy allows PESB to
promptly address issues and meet market trends in a timely manner.

3) Solutions With Flexibility & Convenience to Customers

PESB’s Retail Management Eco-system offers a variety of benefits to customers
including:

i. Ease of access: PESB’s xBridge B2B and Omni-channel Engagement

solutions are implemented based on cloud-based infrastructure. This
allows remote accessibility and cross-platform and multi-device
responsiveness.
ii. Modularity: All PESB’s retail management solutions can be
integrated seamlessly. This allows customers to progressively add-on
new modules alongside their business growth.
iii. Integrate-ability: PESB’s Retail Management Eco-system can be
integrated with third-party software and IT hardware.
iv. Dedicated and responsive after-sales support services: PESB
has a Customer Technical Support department with a target response
time of 2 to 24 hours depending on the urgency of the issue.

4) Experienced & Technically Strong Management Team

PESB is led by an experienced and technically strong management team. The
group’s Executive Director and Chief Executive Officer, Loo Chee Wee,
contributes 30 years of relevant experience and has played an instrumental
role in spearheading the group’s growth and success since incorporation. He
has a wealth of banking experience and profound understanding of retail
operations given involvement with his family business in the grocery retail
industry. Meanwhile, the group’s Executive Director and Chief Technology
Officer, Tay Kheng Seng, possesses 30 years of experience in IT system
implementation and sale of IT related products, as well as software
development and customisation. Both Executive Directors receive support
from a team of experienced key senior management, equipped with the
necessary skills, knowledge, and expertise across various business activities
including operations (i.e., Business Development & Project Delivery and
Customer Technical Support), finance, and procurement.

Future Plans and Business Strategies

1) Development of Cloud-Based Modules
Currently, PESB’s xBridge B2B and Omni-channel Engagement solutions are
implemented using cloud-based infrastructure, while its HQ Centralised
Page 5 of 9
 14-Nov-23

Management, Store Operations, and Financial Management solutions are

implemented using customers on-premises infrastructure. With plans to
develop cloud-based modules for the group’s HQ Centralised Management,
Store Operations, and Financial Management solutions, PESB will be able to: i)
reduce the time taken to implement retail management solutions, ii) allow
customers remote accessibility, cross-platform, and multi-device compatibility,
and iii) enable fast roll out of enhancements and updates without downtimes.

2) Expansion of Workforce and Operational Facilities in Malaysia

PESB intends to expand its workforce and operational facilities to facilitate its
business expansion in Malaysia. Plans include: i) expansion of Customer
Technical Support department in Melaka via hiring of 20 additional engineers
by end-2025, ii) establishing a new headquarters to cater for workforce
expansion and provide software training services to customers, iii) establishing
new service hubs in Kuala Lumpur and Penang to respond to customer issues
in the Central and Northern regions more efficiently, and iv) expansion of
workforce in existing service hubs in Johor Bahru, Sabah, and Sarawak to scale
up business operations.

3) Expansion Within ASEAN Region

PESB has plans to expand its geographical footprint within the ASEAN region,
particularly in Indonesia and the Philippines. This will involve the establishment
of 1 new service hub in each country by 2025. Alongside this, the group will
also be forming a local business development team in each country with
recruitment to begin from 2024.

Outlook
According to an independent market research report by Providence Strategic
Partners, Malaysia’s retail management solutions industry has displayed strong
growth as it grew at a CAGR of +18.8%, from RM176.1mn in 2018 to
RM351.1mn in 2022. Going forward, the industry is forecasted to sustain its
growth momentum with a CAGR of +18.4%, from RM415.7mn in 2023 to
RM582.8mn in 2025. The key growth drivers include:
i. growth of Malaysia’s retail industry with constant need for retail
management solutions to manage both existing and new physical and
online stores;
ii. introduction of new retail management solutions aligned to
latest retail industry trends (e.g., to support omni-channel retailing,
self-checkout retailing);
iii. proliferation of cloud-based retail management solutions
which offers benefits of lower capital and operation expenditure,
shorter implementation time, among others; and
iv. government initiatives to promote digitalisation (e.g., as per
Budget 2024: via digitalisation grants of RM5k to SMEs and micro
enterprises, RM900mn in loan funds under Bank Negara Malaysia
provided to SMEs to increase business productivity via automation and
digitalisation).
Elsewhere in Indonesia and the Philippines (where PESB has plans expand its
presence), the retail management solutions industry in these markets have also
exhibited decent growth as they respectively grew at a CAGR of +16.2% and
+16.8% from 2018 to 2022. Like Malaysia, these markets are also expected to
sustain their double-digit growth trajectory, respectively at a CAGR of +12.8%
and +12.7% from 2023 to 2025.
Page 6 of 9
 14-Nov-23

Key Risks Relating to Business and Industry

i. Failure to secure new orders from existing and new customers.
ii. External data and cyber-security breaches.
iii. Failure to adapt to rapidly changing technologies.

Highlights & Forecast

Figure 5: Financial Performance

RM mn' %
50.0 50.7 55.0
45.0
40.0 41.9 45.0
35.0 35.0
30.0 32.9
30.5
25.0 20.0 21.0 25.0
20.0 16.4
13.3 15.0
15.0
6.8 6.8 8.1 6.9 8.6 8.3 6.9
10.0 6.1 5.0
5.0
0.0 -5.0
FY19 FY20 FY21 FY22

Revenue Core PBT* Core PAT* Core PAT margin (RHS)

*Excludes gain on disposal of other investments & investment properties, impairment loss on
investment properties & trade receivables, & professional fees.

Source: Company, TA Securities

From FY19 to FY22, PESB’s achieved 3-year revenue CAGR of +16.4% to

RM21.0mn, driven by: i) one-off income from the provision of solutions under
its Retail Management Eco-system to new retail chain stores, and ii) the
accompanying growth in recurring fees later on as customers are charged a
yearly recurring fee for the continuous use of the Retail Management Eco-
system. In tandem with the revenue growth, PESB charted 3-year core PBT
CAGR of +6.8% to RM8.3mn.
During FY19 to FY22, PESB commanded rich double-digit core PBT margin,
although it narrowed by -11.7pp from 51.5% in FY19 to 39.7% in FY22 due to
higher staff and administrative expenses. Meanwhile, core PAT growth was
flattish with only a marginal 3-year CAGR of +0.7% to RM6.9mn due to the
normalisation of tax rates towards statutory tax rate following the expiry of
Pioneer Status tax exemption for the group’s subsidiaries. As a result of the
higher tax rates, core PAT margin narrowed much more by 17.8pp from
50.7% in FY19 to 32.9% in FY22.
More recently in 1HFY23, revenue and core PAT expanded 21.6% YoY and
22.3% YoY to RM10.8mn and RM3.7mn, driven by: i) one-off income from the
provision of solutions under its Retail Management Eco-system to new retail
chain stores, and ii) the accompanying growth in recurring fees. In terms of
profitability, core PAT margin was relatively stable at 34.0% (+0.2pp YoY).

Page 7 of 9
 14-Nov-23

Figure 6: Financial Forecast

RM mn' %
60.0 50.7
55.0

50.0 41.9 45.0

40.0 30.5 32.9 32.1 32.3 35.0

31.1
29.9
30.0 26.0 25.0
21.0 23.1
20.0
20.0 16.4 15.0
13.3
8.3 9.6
10.0 6.8 6.9 6.1 6.9 7.2 5.0

0.0 -5.0
FY19 FY20 FY21 FY22 FY23F FY24F FY25F

Revenue Core PAT* Core PAT margin (RHS)

Source: Company, TA Securities

Going forward, we forecast PESB’s revenue and core PAT to expand at a 3-

year CAGR of +12.5% and +11.8% to RM29.9mn and RM9.6mn in FY25F. We
anticipate that PESB is poised to benefit from: i) the growth and digitalisation
of Malaysia’s retail industry both via brick-and-mortar and online channels, and
ii) government initiatives to spur digitalisation, especially to SMEs and micro
enterprises (e.g., as per Budget 2024: via digitalisation grants of RM5k to SMEs
and micro enterprises, RM900mn in loan funds under Bank Negara Malaysia
provided to SMEs to increase business productivity via automation and
digitalisation). On top of that, we also expect growth to be supported by
PESB’s plans to: i) strengthen the value proposition of its Retail Management
Eco-system by developing cloud-based modules for key its HQ Centralised
Management, Store Operations and Financial Management solutions, and ii)
expand its workforce across Malaysia.

Balance Sheet
As at end-1HFY23, PESB possessed a cash position of RM10.2mn and zero
borrowings. On a pro-forma basis, fresh proceeds of RM17.5mn from the IPO
is expected to boost the group’s cash position to RM35.0mn.

Dividend Policy
Currently, PESB does not have any formal dividend policy. As we assume a
dividend payout of 30% across FY23F to FY25F, we project forward yields at
1.4% to 2.7%.

Valuation
At the IPO price of RM0.16/share, PESB is priced at a trailing PE of 15.5x
CY22 core EPS. As we assign a target PE multiple of 15.0x against its CY24F
EPS, we derive a fair value of RM0.185/share. This takes into account PESB’s
earnings growth prospects (FY23F/FY24F/FY25F: +3.8%/+16.2%/+15.8%) as it
is poised to benefit from: i) the growth of Malaysia’s retail industry both via
brick-and-mortar and online channels, and ii) government initiatives to spur
digitalisation, especially to SMEs and micro enterprises. Additionally, we have
also taken into consideration PESB’s track record, experienced and technically
strong management team, and rich margin and ROE. Not Rated.

Page 8 of 9
 14-Nov-23

Table 4: Earnings Summary (RM mn)

FYE Dec (RM mn) FY21 FY22 FY23F FY24F FY25F
Revenue 20.0 21.0 23.1 26.0 29.9
EBITDA 8.8 8.4 9.4 10.9 12.8
EBITDA margin (%) 44.0 40.3 40.9 41.9 42.9
Dep. & amortisation (0.2) (0.2) (0.2) (0.3) (0.5)
EBIT 8.6 8.3 9.3 10.6 12.3
Net finance costs 0.1 0.1 0.2 0.3 0.4
EI 1.8 0.1 (2.7)* 0.0 0.0
PBT 10.4 8.5 6.7 11.0 12.7
Taxation (2.5) (1.4) (1.6) (2.6) (3.0)
PAT 7.9 7.0 5.1 8.3 9.6
Core PAT 6.1 6.9 7.2 8.3 9.6
Core EPS (sen) 0.9 1.0 1.1 1.2 1.4
Core EPS Growth (%) (11.2) 13.2 3.8 16.2 15.8
PE (x) 17.6 15.5 15.0 12.9 11.1
DPS (sen) 2.4 0.0 0.2 0.4 0.4
Dividend yield (%) 15.0 0.0 1.4 2.3 2.7
* IPO expenses.

Table 5: Peers Comparison

Market Cap. PE (x) EPS Growth (%) Dividend yield (%) ROE (%)
Company Country Recom.
(RM mn') CY22 CY23F CY24F CY22 CY23F CY24F CY23F CY24F CY23F CY24F
Autocount Dotcom* Malaysia NR 355.1 na 24.8 20.2 na na 23.1 na na 25.0 21.1
Radiant Globaltech* Malaysia NR 168.1 22.9 na na 0.0 na na na na na na
Panda Eco System Malaysia NR 107.4 15.5 15.0 12.9 13.2 3.8 16.2 1.4 2.3 21.3 21.1
* Based on data from Bloomberg

Stock Recommendation Guideline

BUY : Total return within the next 12 months exceeds required rate of return by 5%-point.
HOLD : Total return within the next 12 months exceeds required rate of return by between 0-5%-point.
SELL : Total return is lower than the required rate of return.
Not Rated: The company is not under coverage. The report is for information only.
Total Return is defined as expected share price appreciation plus gross dividend over the next 12 months. Gross dividend is excluded from total return
if dividend discount model valuation is used to avoid double counting.
Required Rate of Return of 7% is defined as the yield for one-year Malaysian government treasury plus assumed equity risk premium.

ESG Scoring & Guideline

Environmental Social Governance Average
Scoring NR NR NR NR
Remark NR NR NR

★★★★★ (≥80%) : Displayed market leading capabilities in integrating ESG factors in all aspects of operations, management and future directions.
★★★★ (60-79%) : Above adequate integration of ESG factors into most aspects of operations, management and future directions.
★★★ (40-59%) : Adequate integration of ESG factors into operations, management and future directions.
★★ (20-39%) : Have some integration of ESG factors in operations and management but are insufficient.
★ (<20%) : Minimal or no integration of ESG factors in operations and management.
Disclaimer
The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without
notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this
document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein.

As of Tuesday, November 14, 2023, the analyst, Wilson Loo, who prepared this report, has interest in the following securities covered in this report:
(a) nil

Kaladher Govindan – Head of Research

TA SECURITIES HOLDINGS BERHAD 197301001467 (14948-M)

A Participating Organisation of Bursa Malaysia Securities Berhad

Menara TA One 22 Jalan P. Ramlee 50250 Kuala Lumpur Malaysia Tel: 603 – 2072 1277 Fax: 603 – 2032 5048
www.ta.com.my

Page 9 of 9