RMA Global Limited

Company Overview: RMA Global Limited (ASX: RMY) operates an online platform that provides extensive data on residential properties. It provides sale results for individual real estate agents & agencies and in the process gives reviews of agent performance from vendors and buyers. The data in the platform can be used by the agents to market themselves or can be inferred by the vendors to find a suitable agent for their property needs.

RMY Details

Increase in Platform Agents & Reviews Fuelled by Growth in US Market: The company’s objective is to become one of the leading real estate review platform providers through its platform “RateMyAgent”, which provides exhaustive data on sale results for real estate agents. The Group has a strong presence in Australia, with 75% of active agents on the platform, and it is also making its presence felt in the markets of the US and New Zealand.

Unique Business Model:

• The company compiles a database on property transactions and agent data, and it has reported data of ~1 million agents as per CEO’s address on its recently held AGM. It engages with big brokerages in the US and has partnerships with four of the top large brokerage firms.
• It invites agents to claim their profile on the platform and further encourages them to collect reviews, which can be used by them to market themselves. Finally, RMY looks to monetise its transaction and agent database, and as such reviews are critical to drive its subscription model.
• The Group has witnessed increased traction in growth in the US market over the last year and has reported 160,000 agents on the platform with over 230,000 reviews.

Q1FY22 Performance Update:

The Group has reported decent performance during the quarter with a significant uptick in agents and reviews.

• Recurring revenue grew by ~54% to $3.4 million during Q1FY22, compared to the pcp.
• There has been a considerable increase in net receipts from customers at $3.8 million, reflecting a growth of 43% from Q1FY21.
• COVID-19 restrictions during the quarter had an impact on the company’s Promoter product sales.
• Agents on the US platform increased by a whopping ~93% to 155,600 in Q1FY22. The total reviews garnered during the period stood at 208,000, witnessing a growth of ~265% on Q1FY21.
• Strong growth in subscription revenues was witnessed in the ANZ region, on the back of the company's growth initiatives and wider product offering.
• There has been an uptick in operating cash outflow during the period to $2.1 million, owing to an increase in investments due to a rise in headcounts.
• It ended the period with a cash position of $8.6 million as of 30 September 2021.

Revenue Trend (Source: Analysis by Kalkine Group)

Top 10 Shareholders: The top 10 shareholders together form around 75.31% 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 28.17% 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 82.3% in FY21. There has been an improvement in the liquidity with the current ratio reported at 2.24x in FY21, compared to 1.85x in FY20. The cash cycle also stood at an impressive negative 143.6 days in FY21.

Liquidity Profile (Source: Analysis by Kalkine Group)

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

• Macro Risk: The Group is prone to broader macro risks which might impact the real estate sector. This, in turn, might impact the transaction volumes, thus impacting the profitability of the company.
• Technology Risk: It is also faced with the risk of a technology malfunction, which can also hamper the business of the group.
• Profitability Risk: Though the Group has been witnessing a surge in top-line, it has not been able to achieve profitability yet, which is essential for sustenance in the long term.

Outlook: The company has been making rapid progress in the execution of its US strategy and has seen a gradual uptick in reviews. The RMA Awards Leader Board, which provides agents their relative position in a suburb/county, has generated strong competition amongst the agents in order to prove their worth. Further, the Group plans to market its Promoter product from December 2021, ahead of the Awards in January 2022.

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 an announcement on 21 October 2021, the company’s director, David Williams, has undergone a change of indirect interest in the company and has acquired 930,569 ordinary shares for a total consideration of $172,826. The stock of RMY is currently trading close to its 52-week low level of $0.175, offering a decent opportunity for accumulation. The stock has corrected by ~27.99% in the past six months. The stock has been valued using the EV/Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount to its peers’ average EV/Sales multiple, considering the negative profitability of the Group, and uncertainties over COVID-19 impact on the sector. For this purpose of valuation, few peers like Rent.com.au Ltd (ASX: RNT), Hipages Group Holdings Ltd (ASX: HPG), Icar Asia Ltd (ASX: ICQ), and others have been considered. Considering the current trading levels, indicative upside in valuation, decent top-line performance, increase in agents & reviews, optimistic outlook, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating at the closing price of $0.18, as on 19 November 2021.

RMY Daily Technical Chart, Data Source: REFINITIV 

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.

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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