Why I am Buying XF1 (XREF), page-33

That's not my investment thesis but I agree that a long term hold has the potential for extreme upside.

Any COVID pain that was experienced across the past few months (even though XF1 did well during this time with their 2nd largest sales quarter ever) is akin to pulling back a string on a bow and arrow. For every lost job in the economy across the past few months, there will be a time in the future where those jobs return. XF1 can benefit tremendously from turnover.

My investment thesis is that XF1 is in the process of a re-rate to historical levels as the market recognises that management have delivered on what they said they would do -- bring the company to cashflow positive operations while maintaining growth. The next 2 quarters are key. They also have funding (if required) from Pure Asset Management in place. I think investors here will be rewarded massively on a short term horizon and a long time horizon. Current levels are less than 50% of what the company has been valued at historically, yet the company has never been stronger nor leaner from a cashflow perspective.

Ord Minnett estimated Xref's lifetime customer value to customer acquisition cost ratio (LTV/CAC) to be ~6x. That is outstanding -- more than double the SaaS industry benchmark of 3x. With costs guided to remain controlled and XRef improving its sales cycle significantly, I can see this ratio improving on the medium term. Post breakeven, XRef is set up for excellent operating leverage. Ord Minnett estimates long term reported EBITDA margins of ~49%.

This is a no brainer for me at these levels. Whether you hold for 6 weeks, 6 months or 6 years.

T.E.P.