In my view, the ASX small-cap stock RPMGlobal Holdings Ltd (ASX: RUL) could be an excellent investment at $2.70.
This business describes itself as a global leader in providing and developing mining software solutions. It has been helping the mining sector for more than 50 years. Its aim is to help mining clients extract more value at every stage of the mining lifecycle. The software has helped deliver safer, cleaner, and more efficient operations in over 125 countries.
I think it's a compelling time to look at the business because the RPMGlobal share price has dropped close to 20% since 5 December 2024, as the chart below shows.
There are a few reasons why I think it has an appealing future at this valuation level (or even if it was a bit higher).
Image source: Getty Images
Solid underlying growth
In the first half of FY25, the business reported a pleasing level of growth. It said that its software division achieved 7% year over year growth, and the company's underlying operating profit (EBITDA) rose by 21.2% to $8.2 million.
Were it not for a one-off royalty sale in the first half of FY24, the business would have reported pleasing growth in profit before tax and net profit.
The business said the transition from once-off perpetual licenses to multi-year subscription licensing continues to provide significant operating leverage.
In a sign of how appealing that company's software is, a number of clients, including Mineral Resources Ltd (ASX: MIN), Rio Tinto Ltd (ASX: RIO), and Newmont Corporation CDI (ASX: NEM), have adopted new products in FY25.
The ASX small-cap stock said it's actively working with some of the world's largest mining companies on productivity software development projects, which it believes will solidify and expand its reputation as a respected and reliable 'go to' software vendor for the global mining industry.
Focus on software
The company recently announced the sale of its advisory business to SLR Consulting Australia for an enterprise value of A$63 million. The ASX small-cap stock thought a global consulting company would see more value in its advisory business than a software company would.
RPMGlobal said there is little day-to-day operational overlap between its software and advisory operations, so it should have little impact on the continuing operations and prospects of the software business, while making it easier for (software) investors to understand and appreciate RPMGlobal shares.
SLR will pay RPMGlobal for corporate services to facilitate the smooth transition of employees, clients, and operational systems.
I think the sale of the advisory business will allow the company to give the software side of the business complete focus and help it succeed.
Share buyback
The final positive I'll note is that the business is planning to restart its share buyback for shareholders.
A share buyback is useful because it returns some of the profit to shareholders while reducing the overall share count. The value of the business is being shared across fewer shares, so in theory, the value of each share is increased.
Doing a share buyback increases some of the equity/share-based metrics such as earnings per share (EPS) and return on equity (ROE).
This alone should help increase how much investors are willing to pay for the ASX small-cap stock.
The future looks bright for this company, in my opinion.
