I am a relatively new shareholder to XRF.The more I research...

I am a relatively new shareholder to XRF.

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)