RPMGlobal Holdings Ltd Buy

Strong FY23 guidance implies significant operating leverage

Information Technology Application Software 30 August 2022
.
COMPANY UPDATE EVENT: FY22 RESULT
FY22 EBITDA of $4.5m (vs. MAFe $6.9m) with variance largely attributable to higher
Ticker RUL
Stock Price $1.50 than anticipated bonuses in 2H.
Target Price $2.03 Ending ARR of $33m (+50%/$11m on pcp) with $56m TCV of software licences sold
Forecast Capital Return 35.3% during the year (including 54 customers signing new product contracts).
Forecast Dividend Yield 0.0%
Estimated Total Return - 12Mth 35.3% FY23e guidance of $14.2m EBITDA at a 14% EBITDA margin. Mgmt. noted "other than
to meet advisory & consulting demand, employee numbers will remain steady".
COMPANY MARKET DATA
Advisory EBITDA $3.7m (FY21: $0.6m) including contribution from ESG acquisitions.
Market Cap $357.4m
Backlog of $16m as at 30 June (vs. $11m June'21) supports FY23e growth outlook.
Free Float (%) 50.0%
Enterprise Value $326.2m "The company has employed additional AMT, XECUTE and ShiftManager software
Shares on issue 238.3m consultants in anticipation of a record year for all three products in FY23"
52-wk Range $1.42 - $2.27
IMPACT
ESTIMATE CHANGES 2022a 2023e 2024e 2025e
We increase FY23e EBITDA to $12.7m. While our top-line estimate aligns with
All figures are in AUD unless otherwise specified.
guidance, we allow for slightly higher cost growth.
SHARE PRICE PERFORMANCE
INVESTMENT VIEW
RUL
FY22 was a strong sales year for both software (ARR +50%) & advisory (+46% sales),
$2.40
however this translated into higher bonuses across which weighted on 2H EBITDA.
$2.20
FY23e guidance was strong, implying significant operating leverage should
$2.00 materialise as high-margin subscription growth drives Group earnings. This growth
$1.80 should be supported by sales from 4 new software products, as well as significant
upgrades to the RUL's highest-value products (AMT and Xecute) undertaken during
$1.60
FY22. Services contribution is also expected to increase during the year, noting that
$1.40
the advisory division finished FY22 with ~6 months of pre-contracted work.

Oct-21 Dec-21 Feb-22 Apr-22 Jun-22 Aug-22 Maintain BUY rating, $2.03 target price (prev: $1.94). Our thesis comprises:
RUL
Profitable with strong organic growth outlook (~18% software CAGR) supported by
deep up/cross-sell opportunities & new product pipeline.

ANALYST Well-established enterprise mining software servicing Tier 1 customer-base.

Ronan Barratt Flagship 'asset maintenance' product an industry-leading solution within its niche.
+61 2 8288 5426 Recurring subscriptions growing to >50% of Group sales by FY25e. $34m net
ronan.barratt@moelisaustralia.com cash balance sheet with buy-back ongoing.
Lachlan Scott Two peers acquired for ~16x software sales during CY22 (Deswik/Micromine) from
+61 2 8288 5403 different suitor types (OEM; software co) vs. RUL implied ~5.5x software sales.
lachlan.scott@moelisaustralia.com
Y/E JUN 30 2022a 2023e 2024e 2025e
Sales 82.6 100.3 110.4 122.1
Sales Growth 30.7% 21.5% 10.0% 10.6%
EV/Sales 3.9x 3.3x 3.0x 2.7x
EBITDA 3.0 12.7 16.7 23.0
EV/EBITDA 108.7x 25.7x 19.6x 14.2x
FCF (7.9) 11.6 13.8 18.7
P/E (88.2)x 67.1x 43.0x 27.4x
All figures are in AUD.

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MA FINANCIAL ESTIMATES

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RPMGlobal Holdings Ltd (RUL) Market Cap: $357.4m Stock Price: $1.50 Target Price: $2.03 Buy
Y/E JUN 30
PROFIT & LOSS ($) 2021A 2022A 2023E 2024E 2025E VALUATION SUMMARY
Revenue 63.2 82.6 100.3 110.4 122.1 Market Cap $357.4m
Growth (12.2)% 30.7% 21.5% 10.0% 10.6% Shares on issue 238.3m
Gross Profit 29.5 41.3 51.9 58.9 68.2 Stock Price $1.50
Margin 46.6% 50.0% 51.7% 53.3% 55.9% Target Price $2.03
EBITDA (1.4) 3.0 12.7 16.7 23.0 Estimated Total Return - 12 Mth 35.3%
Margin (2.2)% 3.6% 12.7% 15.1% 18.9% 12 Mth Fwd Dividend Yield 0.0%
Dep’n & Amort. (6.9) (5.9) (5.6) (4.8) (4.4)
PERFORMANCE RATIOS 2021A 2022A 2023E 2024E 2025E
EBIT (8.3) (2.9) 7.2 11.9 18.6
ROIC (14.5)% (6.4)% 8.2% 11.6% 15.2%
Net interest Expense (0.1) (0.3) (0.2) (0.2) (0.2)
Net Debt (Cash) ($m) (44.6) (34.5) (45.8) (59.6) (82.2)
Profit Before Tax (8.4) (3.2) 6.9 11.7 18.4
Working Capital 0.0 (14.5) (19.0) (23.7) (29.0)
Tax (0.6) (0.9) (1.6) (3.4) (5.3)
Working Capital/Sales (%) 0.0% (17.6)% (18.9)% (21.4)% (23.7)%
Tax Rate (%) 6.7% 28.5% (23.0)% (29.0)% (29.0)%
Minorities / Abnormal items 0.0 0.0 0.0 0.0 0.0 VALUATION RATIOS 2021A 2022A 2023E 2024E 2025E
NPAT (Underlying) (9.0) (4.1) 5.3 8.3 13.1 Sales 63.2 82.6 100.3 110.4 122.1
Growth 953.9% (54.8)% (231.4)% 55.9% 57.4% Growth (12.2)% 30.7% 21.5% 10.0% 10.6%
NPAT (Reported) (2.1) (4.1) 5.3 8.3 13.1 EV/Sales (x) 5.2x 3.9x 3.3x 3.0x 2.7x
EPS Underlying (Diluted) (¢) (3.8) (1.7) 2.2 3.5 5.5 EBITDA (1.4) 3.0 12.7 16.7 23.0
Growth 926.6% (55.3)% (231.4)% 55.9% 57.4% EV/EBITDA (235.5)x 108.7x 25.7x 19.6x 14.2x
Free Cash Flow 4.1 (7.9) 11.6 13.8 18.7 EPS (0.0) (0.0) 0.0 0.0 0.1
P/E (x) (39.4)x (88.2)x 67.1x 43.0x 27.4x
BALANCE SHEET ($) 2021A 2022A 2023E 2024E 2025E
Cash 44.6 34.5 45.8 59.6 82.2 CASH FLOW METRICS 2021A 2022A 2023E 2024E 2025E
Current Receivable 13.8 20.9 22.9 23.3 24.7 FCF/Share ($) 0.02 (0.03) 0.05 0.06 0.08
PPE 7.2 6.6 5.7 5.2 5.1 Free Cash Flow Yield (%) 5.6% (6.4)% 13.1% 15.3% 20.2%
Intangibles 4.1 2.6 1.7 1.3 1.1 Capex/Sales (%) (1.4)% (1.4)% (1.4)% (1.4)% (1.4)%
Goodwill 21.6 26.6 26.6 26.6 26.6
MARGINS 2021A 2022A 2023E 2024E 2025E
Other 15.4 15.0 15.0 15.0 15.0
GPM 46.6% 50.0% 51.7% 53.3% 55.9%
Total Assets 106.6 106.2 117.8 131.1 154.8
EBITDA (2.2)% 3.6% 12.7% 15.1% 18.9%
Current Payables 12.9 12.2 15.9 16.9 18.8
EBIT (13.1)% (3.5)% 7.1% 10.8% 15.2%
Debt 0.0 0.0 0.0 0.0 0.0
NPAT (14.2)% (4.9)% 5.3% 7.5% 10.7%
Unearned Revenue 18.2 23.2 26.0 30.0 34.9
Other 14.1 10.7 10.7 10.7 14.5 VALUATION METHODOLOGY
Total Liabilities 45.2 46.1 52.6 57.6 68.2 WACC 10.55%
Net Assets 61.4 60.1 65.2 73.5 86.6 Discounted Cash Flow Valuation/Share $2.07
Equity & Reserves 92.9 95.7 95.7 95.7 95.7 Sum-of-the-Parts Valuation/Share $1.99
Retained Profits (31.4) (35.6) (30.3) (22.0) (8.9) Average Valuation/Share $2.03
Shareholders' Equity 61.4 60.1 65.4 73.7 86.8 Target Price $2.03
Minorities 0.0 0.0 0.0 0.0 0.0
Total Equity 61.4 60.1 65.4 73.7 86.8

CASHFLOW ($) 2021A 2022A 2023E 2024E 2025E

EBITDA (1.4) 3.0 12.7 16.7 23.0
Net Interest (0.1) (0.3) (0.2) (0.2) (0.2)
Tax (1.2) (0.7) (1.6) (3.4) (5.3)

Δ in Working Capital 2.6 (2.8) 4.5 4.7 5.3

Other 5.1 (6.0) (2.3) (2.4) (2.4)
Operating Cash Flow 5.0 (6.8) 13.0 15.4 20.4
Growth (61.6)% (236.4)% (293.2)% 17.7% 33.1%
Capex (0.9) (1.2) (1.4) (1.6) (1.7)
Acquisitions (1.5) (4.4) 0.0 0.0 0.0
Divestments 0.0 0.0 0.0 0.0 0.0
Other (0.7) 0.6 0.0 0.0 0.0
Investing Cash Flow (3.1) (4.9) (1.4) (1.6) (1.7)
Equity Raised 3.2 1.6 0.0 0.0 0.0
Dividends Paid 0.0 0.0 0.0 0.0 0.0
Net Borrowings 0.0 0.0 0.0 0.0 3.9
Other (0.0) (1.4) 0.0 0.0 0.0
Financing Cash Flow 3.2 0.2 0.0 0.0 3.9
FX / Non Cash items (0.2) 1.2 0.0 0.0 0.0
Change in Cash 4.8 (10.3) 11.6 13.8 22.6
Free Cash Flow 4.1 (7.9) 11.6 13.8 18.7

Source: Company data, IRESS, Moelis Australia research estimates 30 August 2022

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RESEARCH & SALES RESPONSIBILTIES
Equities Equities Research
Bryan Johnson Head of Sales +612 8288 5412 Real Estate
Edward Day Head of Research +612 8288 5424 Edward Day +612 8288 5424
Elliot Leahey Business Director +612 8288 5402 Murray Connellan +612 8288 5421
Brooke Davis Finance Executive +612 8288 5417
Jacqui Irons Corporate Broking +612 8288 5427

Industrials
Equities Sales & Trading Ronan Barratt +612 8288 5426
Bryan Johnson Head of Sales +612 8288 5412 Sean Kiriwan +618 6555 8602
Aaron Payne +612 8288 5405 Sarah Mann +612 8288 5407
Jack Dyson +612 8288 5401 David Meehan +612 8288 5413
Jake Rischbieth +612 8288 5654 Lachlan Scott +612 8288 5403

DISCLOSURE APPENDIX
Analyst Certification

The Analyst, Ronan Barratt, responsible for the content of this research report, in whole or in part, certifies that with respect to the companies
or securities that the individual analyses, that (1) the views expressed in this report accurately reflect his or her personal views on the
subject companies and securities, and (2) no part of his or her compensation was, is, or will be directly or indirectly linked to the specific
recommendations or views expressed in this research report.

I declare that:

a) to the best of my knowledge I am not in receipt of inside information and the research does not contain inside information; and

b) no other part of MA Moelis Australia Securities Pty Limited has made any attempt to influence the research.

The Analyst, Lachlan Scott, responsible for the content of this research report, in whole or in part, certifies that with respect to the companies
or securities that the individual analyses, that (1) the views expressed in this report accurately reflect his or her personal views on the
subject companies and securities, and (2) no part of his or her compensation was, is, or will be directly or indirectly linked to the specific
recommendations or views expressed in this research report.

I declare that:

a) to the best of my knowledge I am not in receipt of inside information and the research does not contain inside information; and

b) no other part of MA Moelis Australia Securities Pty Limited has made any attempt to influence the research.

COMPANY SPECIFIC DISCLAIMERS

The preparation of this report was funded by ASX in accordance with the ASX Equity Research Scheme. This report was prepared by Moelis
Securities and not by ASX. ASX does not provide financial product advice. The views expressed in this report do not necessarily reflect the views
of ASX. No responsibility or liability is accepted by ASX in relation to this report.

RATING DEFINITIONS

All companies under coverage are assigned a rating of Buy, Hold or Sell based on the expected 12 month total return estimated by the analyst(s).
The total return is a combination of the estimated capital gain or loss, in addition to the estimated 12 month forward dividends or distributions.
In relation to all companies that MA Moelis Australia Securities Pty Limited conducts research coverage on the relevant total return bands that
derive the ratings are:

Buy: >15% Hold: 5% to 15% Sell: <5%.

RATINGS DISTRIBUTION TABLE

Distribution of Ratings as at 30 August 2022
SELL HOLD BUY

2.78% 27.78% 69.44%

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 RPMGlobal Holdings Ltd Rating History as of 08-18-2022
BUY:$1.94
02/08/22
$2.40

$2.20

$2.00

$1.80

$1.60

$1.40
Oct 19 Jan 20 Apr 20 Jul 20 Oct 20 Jan 21 Apr 21 Jul 21 Oct 21 Jan 22 Apr 22 Jul 22

Closing Price Price Target

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