Money

Is Worldwide Cash Categorical (IMXI) A Good Lengthy-Time period Purchase?

Voss capital, an investment company, has published its “Voss Value Offshore Fund” investor letter for the second quarter of 2021 – a copy of which can be downloaded here. The fund returned + 11.2% quarterly net return for the second quarter of 2021, ahead of the Russell 2000, Russell 2000 Value and S&P 500 benchmarks, which returned + 4.3%, + 4.2% and +8, respectively. 5% delivered for the same period. You can check out the fund’s top 5 holdings to see their top bets for 2021.

In Voss Capital’s letter to investors for the second quarter of 2021, the fund mentioned International Money Express, Inc. (NASDAQ: WALK) and discussed his stance on the company. International Money Express, Inc. is a Miami, Florida based money transfer company with a market capitalization of $ 715.7 million. IMXI posted a year-to-date return of 18.40% while 12 month returns are up 13.29%. The stock closed at $ 18.40 per share on September 1, 2021.

Here’s what Voss Capital had to say about International Money Express, Inc. in its Q2 2021 investor letter:

“We believe Intermex (International Money Express, IMXI) is a convincing long. IMXI is an international money transfer company primarily focused on transactions originating from the United States and going to Mexico and Guatemala. They make their money by charging a fixed fee for each transfer (85% of sales) and, to a lesser extent, through currency arbitrage on transactions (14%). Her client base consists primarily of low-income, low-bank immigrants from Mexico and Guatemala whose family / friends are staying in their home country and in need of financial assistance. We believe IMXI is an easy to understand story, with a clean capital structure, very low capital intensity (outside of some fluctuations in working capital), a strong brand, adept management, and excellent ongoing execution (z incremental margins). We believe the negative narrative surrounding the company has flaws that we can exploit, namely skepticism about the sustainability of its growth, the stickiness of the customer base, and a misunderstanding about the economics of a digital transfer versus a personal transfer.

The consensus on Wall Street is that IMXI is making a strategic mistake by not going “all-in” with digital transactions like MoneyGram (MGI), Western Union (WU) and well-supported private competitors like Remitly and Wise . You will hear the wave of VC money showing you what the future holds and transfers initiated through brick and mortar stores are dying out. In the digital transition, Intermex will lose its customer base and, given the operational leverage of the model, profitability will be hit hard. Bears also argue that digital is cheaper, easier, and should create a more solid customer base in the long run. In addition, Intermex’s focus on a few markets makes it difficult to scale the business and will quickly hit a wall of growth.

Voss has a different opinion. After in-depth survey of the customer base and research into cultural factors, we believe that the transition to IMXI’s digital customer base will be very slow as digitization requires a bank account and it can take longer for the money to be available to the recipient in cash. As WU and MGI focus on the digital, IMXI continues to gain market share locally and an increasing share of the associated superior profitability of the units. Digital has a much lower Lifetime Value (LTV) / Customer Acquisition Costs (CAC) ratio due to intense competition that requires high marketing costs and increases “churn”. Digital isn’t necessarily a cheaper way for customers to send money either, as digital gamers try to grow their revenue with higher currency arbitrage to offset the low advertised transaction fees, something our smart customer base is very much aware of. We’d also argue that IMXI’s personal customer base is probably stickier than the overly digitally minded Wall Street imagines. A worker dropping by the IMXI counter in the same store where they cash their check or buy groceries is routine, and that convenience and familiarity are sticky. Management noted that many of the customers who switched to IMXI’s digital product during the lockdown returned in person after the stores reopened.

Intermex’s disciplined focus on a few markets, instead of striving for growth in every country, enables the company to dominate these high-volume corridors and participate consistently and profitably. In direct contradiction to the bearish mood and narrative, IMXI is constantly growing around 20% faster than its competitors WU and MGI.

At its current valuation of ~ 8x NTM FCF and 7x EBITDA, the market’s expectations for this 20% organic grower are exceptionally low. We believe they can sustain 10-20% growth and pave the way for the stock to double in the next 2-3 years through a combination of continued organic growth and multiple expansion as the market realizes that their runway is a lot is longer than currently forecast. Our price target is $ 29 (90% up) based on 10x our EBITDA estimates for 2023. If the stock’s price doesn’t improve by then, we believe it’s both private equity and There are strategic buyers interested in buying the entire company. “

The story goes on

Photo by Karolina Grabowska from Pexels

According to our calculations, International Money Express, Inc. (NASDAQ: IMXI) couldn’t find a place on our list of The 30 most popular stocks among hedge funds. IMXI was there fifteen Hedge fund portfolios at the end of the first half of 2021 compared to 18th Average in the previous quarter. International Money Express, Inc. (NASDAQ: IMXI) returned 18.43% over the past 3 months.

The reputation of hedge funds as shrewd investors has been tarnished over the past decade as their hedged returns have not kept up with the unsecured returns of market indices. Our research has shown that hedge fund small-cap stock selection beat the market by double digits annually between 1999 and 2016, but the outperformance margin has been decreasing in recent years. Nevertheless, we were able to identify a selected group of hedge fund holdings in advance that exceeded the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). We were also able to pre-identify a select group of hedge fund holdings that lagged the market by 10 percentage points annually between 2006 and 2017. Interestingly, the underperformance margin of these stocks has increased in recent years. Investors who take long positions in the market and short these stocks would have earned more than 27% annual return between 2015 and 2017. We’ve been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

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Disclosure: None. This article was originally published at Insider monkey.