Theme: Passive Aggressive Mid to Long term Strategy
We came to notice rexit company last week based on their recent quarter result. At a glance the company have not move much since the last drop during March 18. Rexit with the unique business.
Rexit offers integrated financial solution which covers general insurance, unit trust management system and legal practice management. in short, practically they offer company with a web based solutions to cater for front-liners (sales and marketing) agents.
1) e- cover - it's a web based solutions which provides an online system for insurance companies and their intermediaries. the business model is run by SaaS model which is pay per use.
2) e-ppa - enabling online unit trust investment through EPF. traditionally, alot of allocation are done manually or through agents meeting face to face and submitting their application in a hardcopy format. now this has been shifted to online application.
3) infoguardian - it is a work flow management system. this solutions provide an integrated workflow, case management and docent management system for financial and legal services.
- Business Prospect: Their online business will continue to grow with more businesses and agents are required to adapt to selling their products (insurance, unit trust) online instead. No longer hardcopy, excel file, etc. All these will be legacies.
1) net cash of of 14 million and zero debt company. defensive play.
2) sales revenue compounded annual growth of around 30% for the past 6 years.
3) Asset light model - asset (ppe) comprise of only 10% of the total asset.
4) Clean accounts. - only 300k in Goodwill as compare to most company such as green packet (7billion in Goodwill) and krono (100million in Goodwill). prudent management which will not give surprises (huge impairement losses).
5) profit margin of 30%.
6) Roe of 24%
7) dividend of 5%.
8) Constantly generating positive cash from operating expenses.
- without further looking into details, the company has a very clean balance sheet. if there is a scoring for it, it will have gotten 90/100 marks.
Why its passive aggressive? we would expect that when mco being lifted and post covid situation, more businesses, agents, companies, mnc, individual, will adapt to online system and we have seen the growth in the adaptability of the online system.
The management of rexit is very prudent whereby they don't make aggressive acquisition or even manipulate the share price. which is why it makes the company look boring as retailers loves to gamble. in this case, they can't.
Earnings projection. assuming they were to maintain eps of 1.10 cents next 2 quarters and improvement in business to 1.30 cents and pe of 14/15 it will give them a value of 72 cents which is 30% margin of safety. technology sector which demand only a 15 pe, will be quite safe. is it enough? at current economic situation, we would start placing some of our investment in more defensive yet there is room for growth counters. the further upside based on their current financials, they could have gone to main market anytime in the future. any proposal to go to main market will give a boost to the company.
Disclaimer: this is not a buy or sell call but more towards sharing purposes.