The All Ordinaries Index (ASX: XAO) has dumped 13.4% since the start of 2022, and this mining technology share has been among its weights. But could the RPMGlobal Holdings Ltd (ASX: RUL) share price be about to turn its suffering around?
The team behind the Forager Australian Shares Fund (ASX: FOR) think so.
The company's stock makes up the listed investment trust (LIT's) biggest holding, and its earnings are tipped to soar in financial year 2023 (FY23). Beyond that, the experts believe an enticing takeover offer could soon hit the table.
The RPMGlobal share price is currently trading at $1.635. That's 23% lower than it was at the start of 2022.
So, why do the fundies believe the mining tech stock's tumble will soon turn around? Keep reading to find out.
Could this ASX All Ords share be a FY23 winner?
The team behind the Forager Australian shares LIT first locked eyes on RPMGlobal shares three years ago. Now, they're expecting their investment to really pay off.
Forager senior analyst Alex Shevelev today noted the company shifted its revenue model from an upfront payment to a subscription-style model a number of years ago.
That appeared to impact its shorter-term profitability and made its growth look less likely.
A few years later, in FY22, the company's subscription revenue had grown to $26.2 million. Sadly, its expenses also surged, leaving RPMGlobal with just $4.5 million of earnings before interest, tax, depreciation, and amortisation (EBITDA).
But that's all expected to change this financial year. The company forecasts its EBITDA to reach $14.2 million in FY23. Looking to the horizon, Shevelev said:
Next year we're going to see a tripling in EBITDA, which is starting to show that really strong operating leverage that the business has.
By and large, as upside to a case of continuing to hold this business, if we hold it through to next year business will be trading at 14 times earnings and at 8% free cash for yield.
For a business of its quality growth potential, that is a very good valuation starting point.
RPMGlobal tipped to be potential takeover target
Beyond that, the fundie believes the ASX All Ords share could soon be the subject of an appealing takeover offer.
That's if the company's CEO and managing director Richard Mathews' past pursuits are anything to go by. Shevelev commented:
The other very interesting thing here is, we've got a managing director, Richard Mathews, who's done this before. He's built up quite a business here and he's … historically … built them up and then subsequently sold them off.
Now, it helps that two of [RPMGlobal's] larger competitors have recently been bought out at valuations that imply for RPMGlobal 2 [times] to 2.5 times the current share price, and we think with Richard Mathews' background, we're more likely than not to see an offer like that materialise.
