RCG Holdings

Biometrics and RFID solutions specialist RCG grew sales and adjusted profits during a challenging first half to June.

Malaysia-based RCG, listed in Hong Kong as well as on AIM and focused on Southeast Asia and Southern China, reported 11.5% top line growth to HK$1.44bn (£121.6m), driven by new contract wins in its solutions, projects and services division. Pre-tax profit, albeit adjusted for amortisation, was upped 6% to £40.7m, despite the competitive pricing of biometric products and growing sales of lower-margin consumer IT products paring gross margins to 46.3% (2009: 51.2%).

In geographic terms, 31% growth was seen in Southeast Asia, driven by expansion into markets including Indonesia and spearheaded by the consumer and solution projects operations. Buoyancy there offset weakness in Greater China, where sales declined 12%, with management noting delays in the implementation of projects in the PRC.

RCG continued to secure wins across sectors including entertainment, ‘anti-counterfeit’ and healthcare, validating the earlier acquisitions of Vast Base, Chance Best and A-1 Development. And during the half, a 70% stake in Strong Aim, which provides RFID phones and tags for anti-counterfeit applications in China, was purchased for $128m in a cash and shares deal expected to yield cross-selling opportunities aplenty.

Well-placed for profitable growth across the education, government and healthcare sectors, RCG's management team has additionally spotted potential within the renewable and green technology space too.

Yet the shares, originally recommended by Growth Company Investor at 33.5p back in 2005, are swapping hands for only 2.1 times forecast earnings of HK$2.45 (20.4p). That ludicrous rating simply fails to reflect RCG's growth fundamentals, so keep buying.