Company Overview: RMA Global Limited (ASX: RMY) operates an online digital marketing platform and provides data on residential properties. It gives sales results to real estate agents and agencies and also engages in reviews of the agents and provides them to vendors and buyers of residential real estate.

RMY Details

Growth in Revenue on the Back of Rise in Agents & Reviews: The company provides reviews for the real estate agents, which in turn are used by them to build on their profile in order to market themselves on ratemyagent.com or social any social media page. RMY enjoys a dominant presence in Australia and is looking to make inroads into the US and New Zealand markets.

Decent Traction in Growth of Agents:

• US Platform: The company reported 128,000 agents on the US platform as of 19 July 2021, with a total of 137,800 reviews. There was an increase of ~122% and ~344% to the total agents on the platform and reviews, respectively, as of Q4FY21 when compared to the pcp.

Subscription revenues grew by ~399% to ~$167k in Q4FY21, compared to the pcp.

• ANZ Platform: ~41,000 agents have claimed their profiles in Australia, with reported reviews of 1,041,000 as of 19 July 2021. Reviews collected increased by ~49% to ~58,800 in Q4FY21, when compared to the prior corresponding period. Business in New Zealand witnessed 4,300 agents to have claimed their profile with a collection of 32,600 reviews.

Financial Highlights of Q4FY21:

• RMY reported recurring revenues of $3.3 million in the Q4FY21 period, reflecting an increase of ~73% to the pcp. The annual recurring revenues increased by ~52% to ~$11 million.
• There has been increased traction in the subscription revenues in all the key geographies driven by growth initiatives and diverse product offerings.
• The company reported an increase in the cash receipts by ~66% to $3.94 million in Q4FY21, on the pcp.
• Operating cash outflow improved by ~80% to $1.98 million on Q-o-Q basis.
• It ended the period with a cash balance of $10.7 million as of 30 June 2021.

Cash Balance on Rise (Source: Analysis by Kalkine Group)

Growth in Promoter Product: The Promoter product, which allows agents and agencies to display their reviews and profile across social media platforms, witnessed growth and delivered over $1.1 million in Q4FY21. The performance was driven by a higher subscriber base and the focus of real estate agents to build their profile. Australia and New Zealand witnessed their promoter revenue increase by ~16% and ~69% respectively in Q4FY21, on the prior quarter.

Top 10 Shareholders: The top 10 shareholders together form around 74.74% 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: Gross margin of the company stood at 84.8% in H1FY21, an improvement from 80.4% in H2FY20. The asset turnover ratio stood at 0.47x during H1FY21. It reported total debt of ~$0.41 million as of 31 December 2020.

Growth Profile and Profitability Metrics (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to the following risk factors:

• Financial Risks: The Group’s activities expose it to interest rate risk, credit and liquidity risk.
• Sector Risk: The company is directly dependent on the performance of the broad real estate industry for its profitability and sales volume. Any adverse impact on the sector might impact its performance.
• Impact of COVID-19: The prevalence of the COVID-19 pandemic can impact the real estate space, thereby agents reducing their exposure to subscriptions.

Outlook: RMY expects an increase in agent engagement on its platform and anticipates growth in paid subscriptions in H1FY22. The company has witnessed growth in the US market despite the travel restrictions due to the global pandemic. The performance of the Promoter product surpassed the management expectations in the ANZ region and is expected to carry a decent growth going forward. It is likely to release its FY21 results on 25 August 2021.

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, EFM Global Growth Funds has undergone a change of substantial holding interest in the company and has increased its voting power to 7.66%. As per ASX, the stock of RMY is trading below its average 52-weeks’ levels of $0.205-$0.385. The stock of RMY gave a negative return of ~22.64% in the past one year and a negative return of ~24.07% in the past three months.

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.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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