Company Overview: RMA Global Limited (ASX: RMY) is an online digital marketing business that provides extensive data on residential property sale results for residential real estate agents and agencies. It also provides reviews of agent performance from vendors and buyers of residential real estate. The data can be used by agents to market themselves or can be used by vendors or buyers to find themselves a suitable agent in regards to buying or selling their property. The company has a strong presence in Australia and has witnessed decent growth in the markets of the US and New Zealand.
RMY Details
Growth in Revenue Aided by Rising Agents & Reviews: RMA Global Limited (ASX: RMY) is engaged in the business of online digital marketing in the real estate space. The market capitalisation of the company as on 11 June 2021, stood at ~$115.04 million. It has a decent hold in the Australian market with 39,800 agents who have claimed profiles in the company platform as of 19 April 2021 and have collected 980,700 reviews.
In Q3FY21, the company has posted recurring revenue of $2.97 million, reflecting an increase of ~59% on the previous corresponding period. Net receipts from customers stood at $3.66 million during the quarter, up by ~19.5% on the previous quarter. The Australian business segment continued with its decent performance and collected ~51,300 reviews in Q3FY21, an increase of ~23% on the previous corresponding period. There has also been an improvement in the operating cash outflow of the company to $1.09 million, reflecting an improvement of ~28% on the previous quarter. It ended the period with a cash position of $12.72 million as of 31 March 2021.
Decent Rise in Cash Levels (Source: Analysis by Kalkine Group)
Decent Growth in Agents & Platform Reviews: The company’s focus to drive agents and reviews on its platform has resulted in 115,000 agents on the US platform, with a total review of 109,800. This reflects an increase of ~148% and 363% on the total agents and platform reviews respectively in Q3FY21 when compared to the previous corresponding period. There has been an uptick in subscription revenues in H1FY21 compared to H2FY20 in the US market.
RMY has also witnessed increased traction in agents and the number of claimed profiles in the ANZ region, with 3,800 agents having claimed their profiles and collected 25,800 reviews in New Zealand.
Business Performance in Australia (Source: Company Reports)
Rise in Revenue from Subscriptions: The company has witnessed decent growth in subscriptions from the ANZ region on the back of its growth initiatives and diverse product offering. The RMA Awards held in February also acted as a catalyst to drive the sales of the company. Australian subscription revenue increased by ~4% in Q3FY21, on Q-o-Q and ~18% on Y-o-Y basis. The annual subscriptions and prepaid in advance remained the popular subscription model among the subscribers. There has been significant improvement in the New Zealand subscription revenue, with an increase of ~111% in Q3FY21, when compared to the prior corresponding period, driven by a permanent in-country sales resource. During the same time period, active sales have started in the US business vertical.
Subscription Revenue Performance (Source: Company Reports)
Top 10 Shareholders: The top 10 shareholders together form around 72.94% of the total shareholding, while the top 4 constitute the maximum holding. Williams (David) and Armstrong (Mark) are holding a maximum stake in the company at 27.97% and 11.77%, respectively, as also highlighted in the chart below:
Top 10 Shareholders (Source: Analysis by Kalkine Group)
Key Metrics: The company reported a gross margin of 84.8% in H1FY21. The asset turnover stood at 0.47x during the period, compared to an industry median of 0.20x. It reported a comfortable liquidity position with a current ratio of 4.24x in H1FY21, compared to an industry median of 1.41x. There has been an improvement in the leverage levels, with a decrease in debt to equity to 0.04x in H1FY21, from a level of 0.11x in the pcp. The total debt stood at $0.41 million as of 31 December 2020.
Growth Profile and Leverage Profile (Source: Analysis by Kalkine Group)
Key Risks: The company’s line of business exposes it to the underlying risks inherent in the real estate sector. Its revenue is inclined to the volumes of property sales in a given period, and as such is prone to the impact of macro-economic events on the economy. It is also prone to credit risk and has to continuously monitor its clients based on the credit activity.
Outlook: The company has taken COVID-19 as an opportunity to enhance its business prospects and has invested for platform development. It has several new products in the development pipeline and has launched mortgage broking which has witnessed increased traction in review growth. It anticipates 200,000 agents on the platform and 300,000 agent reviews from the US business unit in CY21. RMY is of the view that revenue may increase in H2FY21 from the US platform, as it allocates increased resources and monetise the agent base. It plans to be cash-flow positive on a monthly basis in FY22.
Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: As per a recent update, the company’s Director, David Williams has undergone a change in interest in the company and has acquired 522,944 ordinary shares, on an indirect basis, for a total consideration of $136,736. As per ASX, the stock of RMY is trading below its average 52-weeks’ levels of $0.215-$0.385. The stock of RMY gave a positive return of ~6.38% in the past nine months and a negative return of ~10.71% in the past six months. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight premium to its peer average EV/Sales (NTM trading multiple), considering the decent performance in Q3FY21, strong cash levels and the expected economic recovery. For this purpose, we have taken peers such as Icar Asia Ltd (ASX: ICQ), Carsales.Com Ltd (ASX: CAR), REA Group Ltd (ASX: REA), to name a few, which comes under Internet Publishing and Broadcasting and Web Search Portals. Considering the expected upside in valuation and current trading levels, decent rise in agents on the platform and an increase in their reviews, comfortable balance sheet, optimistic outlook and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.250, up by 4.166% as on June 11, 2021.
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RMY Daily Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV
Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.
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