Is Ramssol Group Berhad (KLSE:RAMSSOL) a Buy Amid Earnings Growth and Share Dilution Concerns?

Ramssol Group Berhad (KLSE:RAMSSOL) has captured investor attention with a dramatic 124% annualized net income growth over three years, surging from RM13.5 million in 2024 to RM30.7 million (calculated from a 116% YoY increase in FY2024 net income) Ramssol Group Berhad Full Year 2024 Earnings^[3]. However, this robust top-line performance contrasts sharply with a more modest 24% EPS growth, from RM0.019 in 2022 to RM0.041 in 2024 Ramssol Group Berhad (KLSE:RAMSSOL) - Stock Analysis^[2]. This discrepancy raises a critical question: Is the company's earnings expansion translating into sustainable shareholder value, or is aggressive share dilution undermining long-term returns?

The Earnings Growth Story

Ramssol's financial trajectory reflects a company in transition. From 2022 to 2024, its EPS grew at a compound annual growth rate (CAGR) of 24%, outpacing many peers in the commercial services sector. This growth, while impressive, lags significantly behind its net income surge. For context, a 124% net income growth would typically drive a commensurate EPS increase—assuming no dilution. The gap suggests that while Ramssol's profitability is improving, its capital structure may be eroding the benefits for shareholders.

Data from SimplyWall Street indicates that the company's EPS rose from RM0.019 in 2022 to RM0.025 in 2023 and RM0.041 in 2024 Ramssol Group Berhad (KLSE:RAMSSOL) - Stock Analysis^[2]. Meanwhile, net income for FY2024 hit RM16.68 million, with a trailing 12-month net income of MYR 16.68 million Ramssol Group Berhad Statistics - KLSE^[1]. The lack of precise 2022–2023 net income figures complicates a full three-year analysis, but the available data underscores a clear trend: Ramssol's profitability is accelerating, yet EPS growth remains muted.

Share Dilution: A Hidden Drag on Shareholder Value?

The root of this divergence likely lies in share count dynamics. Ramssol's IPO in June 2021 issued 55.76 million shares, resulting in 61.264 million outstanding shares post-listing Ramssol Group Berhad Statistics - KLSE^[1]. By 2024, the share count had ballooned to 377.61 million, a 514% increase from the IPO level. While the most recent data shows a 15.02% year-over-year decline in share count Ramssol Group Berhad Statistics - KLSE^[1], this reduction appears insufficient to offset years of prior dilution.

For example, if Ramssol's share count grew by an average of 30% annually from 2021 to 2024 (a rough estimate based on the IPO and 2024 figures), the EPS impact would be significant. A 30% annual dilution rate would require net income to grow by at least 30% annually just to maintain flat EPS. Instead, Ramssol's EPS grew by 24% over three years, implying that dilution has indeed dampened per-share returns.

The company's recent 15% share count reduction—a positive sign—may signal a shift toward shareholder-friendly policies. However, without transparency on historical issuance activity (e.g., secondary offerings, stock-based compensation), it's impossible to quantify the full dilution effect. Bursa Malaysia's annual report archives for 2022 and 2023 lack detailed share count disclosures Annual Report^[4], leaving a critical data gap.

Balancing Growth and Dilution: A Buy Case?

Investors must weigh Ramssol's earnings momentum against the risks of past dilution. On one hand, the company's ability to generate a 124% net income growth in three years—even with dilution—suggests strong operational execution. This growth could justify a premium valuation if it stems from recurring revenue streams or scalable business models. On the other hand, sustained dilution can erode shareholder value over time, particularly if the capital is deployed inefficiently.

A key consideration is whether Ramssol's management has reinvested the proceeds from share issuance into high-return projects. If the company's revenue growth (which has increased for five consecutive years Ramssol Group Berhad (KLSE:RAMSSOL) - Stock Analysis^[2]) is driven by organic expansion rather than capital-intensive acquisitions, the dilution may be justified. Conversely, if the capital is underperforming, the drag on EPS will persist.

Conclusion: Proceed with Caution

Ramssol Group Berhad presents a compelling case for investors who prioritize earnings growth over immediate EPS metrics. Its 124% net income surge demonstrates a capacity to scale operations, and the recent share count reduction hints at a potential reversal of dilutive practices. However, the lack of historical share count data and the lingering effects of prior dilution create uncertainty.

For now, RAMSSOL is a speculative buy for growth-oriented investors willing to tolerate near-term EPS volatility. Conservative investors, however, should await more transparency on capital allocation and historical dilution trends before committing. As the company's 2024 results suggest, Ramssol's long-term success will hinge on whether its earnings growth outpaces the drag from share issuance—a question only future financial disclosures can answer.