The RC365 (LSE: RCGH) share price has fallen by around 90% in four months. In July, it peaked at 180p after surging over 600% in just five weeks.
Today, one RC365 share costs just 14p, which makes it a penny stock again. Indeed, the share price is now actually lower than it was prior to the almighty rise.
AI association
As a quick reminder, RC365 Holding specialises in software development. Through its subsidiary, Regal Crown Technology, it offers IT and payment gateway solutions in China and Hong Kong.
It’s widely believed the share price started rising in response to numerous online posts (by different authors) highlighting RC365 stock.
One was entitled ‘Missed Nvidia? This London AI stock could jump over 1,000%’.
These posts said that buying RC365 shares today could be like investing in Nvidia or Apple decades ago.
Nvidia is a US technology giant whose computer chips are the brains behind artificial intelligence (AI) systems. ChatGPT, for example, is trained on tens of thousands of the company’s graphics processing units (GPUs).
A lower valuation
RC365’s market value has fallen from £175m in July to just £18m today.
Another consequence of the share price decline is that the stock’s price-to-sales (P/S) ratio is also lower. It has dropped to 10.95.
For context, a P/S ratio over 5 is generally considered expensive by many investors. That said, some companies expecting to generate high future sales growth regularly trade at more than that.
A price-to-earnings (P/E) ratio cannot be used to value the shares as the company has so far been loss-making.
Recent developments
There have been two recent updates given by the company. Neither have benefitted the share price.
First, the firm announced in late September it had set up a new subsidiary in Malaysia. The Southeast Asian country’s economy grew at the quickest pace in more than two decades last year.
Second, the company said in October that its RCPay subsidiary in Hong Kong plans to establish a fintech collaborative platform. This is with Koperasi Usaha Maju Kuala Lumpur (KOMAJU), a Malaysian government-founded organisation.
Under this memorandum of understanding, the company will provide both online and offline Mastercard payments solutions. Meanwhile, KOMAJU will provide and manage the services for domestic and international clients.
Both parties intend to cater to the needs of corporate and small- and medium-sized enterprises (SMEs). Their goal is to reach 5,000 card users within the Southeast Asia region by the first half of 2024.
However, a formal signed agreement has yet to be announced.
Looking forward
In its annual report for the year ended in March, the company’s revenue was HK$16.8m (£1.7m). That was more than double the year before, but the net loss also increased to HK$5.4m (about £550k).
It should be noted that the release of this annual report in July coincided with the start of RC365’s share price collapse.
Going on the release date of the last interim report, the company’s H1 results for its current financial year should be published in December.
However, no City analysts are currently covering the stock. So there’s nothing to guide investors on what to expect, other than management saying in July that it “continues to be optimistic about the outlook for FY24”.
