IMXI - International Money Express Inc.
Purpose
We will look at IMXI. What they do, how they do it, future prospects, and attempt at a fair valuation.
The Business
If you’re in the U.S and you want to send money abroad to Latin America & the Caribbean (LAC corridor), they will help you out. They are recently expanding their markets, now you can send money from the U.S to Asia & Africa too. And opening up to Canada and EMEA on the sender’s side.
They are omnichannel meaning that you can transfer money by going to an office and speaking with an agent or just send money online. 20% of the money sent to Mexico and 30% of the money sent to Guatemala goes through them. Something beautiful I read in their 10K:
We believe many consumers who use our services may have access to traditional banking services, but prefer to use our services based on reliability, convenience and value.
Because they are brick & mortar with transactions being processed by agents, customers seem to have higher trust. Because they have digital solutions too, they are well poised for change if clients prefer using online services instead. Customer service is top class and calls are generally answered within 1 minute.
Furthermore, trends in cross border money spending seem to follow immigration trends. Which are always on the high. And once an immigrant enters the U.S.A, they will send money for years to come. Growth in the share price is also coming from a $100 million stock buyback — representing 1/5th of the company’s market-cap.
Growth
Growth is coming from an expansion into the U.K, Europe, as well as penetrating existing markets deeper (such as Canada). The retail market from the U.S to LAC is 4x the digital market — making their position safe.
They are debt free so nothing is bogging them down in their expansion plans. Let’s look at the revenue since 2018:
Giving us a CAGR of 106.3%. Profit margins are consistently around 8 to 10% in the last five years.
Valuation
For the valuation above we assumed a revenue growth rate of 5 to 10% YoY for the next 5 years. Profit margins of 7 to 10%. And a PE of 10 to 20. Not taking into account the massive share repurchase program and keeping the number of shares the same, even with the most conservative estimates I see this being 2x.
Closing thoughts
What makes this business interesting is that on the receiver’s side they have a moat in LAC markets. So whenever they expand to a new developed country, the immigrant population there knows about the business. Since their family back home is familiar with it too, they would be more likely to use it.
Many clients feel more comfortable going to a retail store to transfer money instead of going online. This makes the business resistant to competition. The icing on the cake is that it’s debt free & undervalued even with the bear case estimates. Short term catalysts also include share buybacks and higher immigration trends in developed countries.