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Is It Prudent to Book Profit on this Media and Entertainment Stock – RMY

Nov 01, 2021 | Team Kalkine
Is It Prudent to Book Profit on this Media and Entertainment Stock – RMY

 

RMA Global Limited

RMY Details

Q1FY21 Operational Updates: RMA Global Limited (ASX: RMY) operates an online marketing platform for real estate agents. It provides sales results to real estate agents and agencies and engages in reviews of the agents and delivers them to buyers and vendors with interests in residential real estate.

Financial Snapshot; Analysis by Kalkine Group

Key Risks and Challenges

  • Dependency on Highly Cyclical Real Estate Industry: The company’s business model is directly associated to the performance of real estate industry: any systematic risk can diverge revenue growth.
  • COVID-19 Headwinds: RMY’s operational performance may be affected due to uncertainties from the pandemic, which may lead to a fall in agents’ count.

Outlook

  • RMY is seeking to monetise the user base in AU and NZ and targeting to become cash flow positive on a monthly basis in FY22.
  • The company would continue to build out its platform and products in order to offer greater value to agents with a key focus on top-line growth.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Data Source: Refinitiv, Thomson Reuters, 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

The stock of RMY gave a negative return of ~23.636% in the past one year. The stock is currently trading lower than the 52-weeks’ average price level band of $0.185 - $0.385 since a long haul. The stock is trading at a resistance level of ~0.230 and support level of ~0.187. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price low single-digit downside (in percentage terms). The company might trade at some discount to its peers’ median of EV/Sales, considering business losses, negative ROE, and negative margins. For valuation, few peers like Rent.com.au Ltd (ASX: RNT), Hipages Group Holdings Ltd (ASX: HPG), Airtasker Ltd (ASX: ART) have been considered. Considering pandemic risks, high sensitivity to real estate industry, high exposure to subscription revenue, highly competitive industry, valuation surpassing intrinsic value, current trading levels, we suggest investors to book profits and give a “Sell” recommendation on the stock at the market price of $0.230, as of 29 October 2021, at 11:30 AM (GMT+10), Sydney, Eastern Australia.

RMY Daily Technical Chart, Data Source: REFINITIV

Note: The purple line reflects the RSI (14-day period)

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision 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 Valuation has been achieved and subject to the factors discussed above.


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