The more I research into XRF, the more impressed I am with the company and management:
positive outlook on most fronts (market segments and etc)
margin expansion
diversification in revenue streams (markets and geographical locations)
emerging from a period of heavy investment and not stands ready to benefit from those investments
operating in some niche and high margin businesses
confidence expressed by management (outlook and reflected through increased dividend payout ratio)
transparent and modest remuneration for board and key executives
a good share register with couple of respectable institutional investors on board
In my view, XRF has now reached the inflection point. CEO presentation has identified a number of catalyst for a market re-rate (hopefully). No matter how I look at it, the current share price appears undervalued. Whether using a multiple or FCF valuation approach with very conservative inputs, it is evident that there is considerable upside to the share price.
Accordingly, I consider XRF to be currently offering investors a very compelling risk-reward investment proposition.
Multiple valuation approach Estimated FY20 NPAT = $2.52M (20% uplift from FY19 NPAT of $2.1M) EPS = 1.88 cents Earnings multiple = 17.5 (mid point of a conservative 15 and a positive 20) Implied valuation = $0.33
FCF valuation approach I have also derived an implied FCF valuation of $0.32 using very very... did I mentioned very conservative inputs....
Disclaimer: a lower tax rate of 27.5% could be used (but I am not exactly sure if XRF is eligible or when it would be phased in)
XRF Price at posting:
23.5¢ Sentiment: Buy Disclosure: Held
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