International Money Express Inc.

IMXI Details

International Money Express Inc (NYSE: IMXI) is engaged in money remittance services between North America (the US and Canada) and Mexico, Guatemala, and other countries in Latin America, Africa, and Asia. The company provides wire transfer, money order, foreign exchange, and cash checking services. It operates offline through a network of agents located in various retail establishments and self-operated stores in the US and Canada, and online through its app and website. As of April 21, 2021, the company’s market capitalization stood at USD 555.46 million.

Capturing the Digital Opportunity: On September 17, 2020, IMXI announced partnering with ArcTouch, a leading mobile application development company, for a redesign of its rapidly growing mobile money transferring app. This investment in the mobile application is likely to help drive the future growth of the business. As the pandemic has affected the IMXI business to a large extent, the company plans to augment its digital framework which will help in mitigating risks from such events and can be a significant revenue driver in the future.

Strong FY20 Results: The company reported an 11.76% growth in the total revenues to USD 357.20 million in FY20 as compared to that of USD 319.60 million in FY19. 86% of the total revenue in the FY20 came from Wire transfer and Money Order fees and 13% of it came from the foreign exchange gain. The company reported the revenue from the Wire transfer and Money order fees is USD 307.90 million in the FY20 as compared to that of USD 273.08 million in the FY19. This was primarily due to an 18% increase in the transaction volume from its agent network outlets. The company reported 72.28% growth in the net income to USD 33.78 million in FY21 as compared to that of USD 19.60 million in FY19.

IMXI Market Share Growth (Source: Earnings Presentation, 4QFY20)

Key Risks: IMXI earns most of its revenue from its key sending agents – business entities who use the company’s services and provide them to end customers. This results in significant distribution channel concentration risk, as any loss of major sending agents could impact the topline as well as earnings. Further, the company assists the US federal and state in the prevention of money laundering and terrorist financing activities. As there is a significant rise in digital transactions, the probability of money laundering and terrorist financing activities is also increasing. Any litigation, court rulings related to such activities or events could have a material and adverse effect on the company.

Outlook: For FY21, the company anticipates the total revenue to be in the range of USD 414 million to USD 421 million, depicting a rise of 16%-18% YoY. The company expects its adjusted EBITDA to be on the scale of USD 76 million to USD 79 million. IMXI expects its net income for FY21 to be in the range of USD 40 million to USD 42 million.

Valuation Methodology: Price/Earnings Multiple Based Relative Valuation

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

* % Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: IMXI has declined 7.55% in the past 3 months and is currently leaning toward the middle of the 52-week range of USD 18.69 to USD 7.44. We have valued the stock using the Price/Earnings based relative valuation methodology and arrived at a target price of USD 17.02. Considering the company’s focus on the rapidly growing LAC corridor, strong brand name, endeavor to capture the digital opportunity, associated risks, and current trading levels, we give a "Speculative Buy" rating on the stock at the closing price of USD 14.56, up by 0.28% as of April 21, 2021.