CHARLESTON, S.C. - Investment firm Breach Inlet Capital, LP has publicly addressed the Board of Directors of International Money Express (NASDAQ: NASDAQ:IMXI), proposing that the company consider strategic alternatives, including a potential sale, to enhance shareholder value. The firm, which holds approximately 2% of IMXI's shares, voiced its concerns following what it considers a lack of appropriate response from the company's board to its private discussions.
Breach Inlet Capital's analysis suggests that International Money Express is significantly undervalued by public markets, trading at approximately 5x last twelve months (LTM) Adjusted EBITDA, compared to a recent private equity acquisition of its peer MoneyGram at around 8x Adjusted EBITDA. The investment firm believes that IMXI's growth trajectory and financial performance warrant a higher valuation, especially given its expansion into digital remittances and the European market.
The firm pointed out that despite IMXI's Adjusted EBITDA growth, the company's current valuation does not reflect its potential, particularly when compared to the valuation multiples of competitors. Breach Inlet Capital argues that IMXI would benefit from a private equity takeout, allowing it to invest more aggressively in its growth opportunities without the scrutiny of public markets.
Additionally, the investment firm highlighted that private equity firms have previously shown interest in IMXI and its industry, citing historical acquisitions, including those involving IMXI itself in 2007 and 2017. It suggested that a conservative application of the valuation multiple from the MoneyGram deal would imply a takeout price for IMXI of approximately $30 per share, representing a significant premium over its current trading price.
Breach Inlet Capital concluded its letter by urging the board to act promptly and retain advisors to commence a review of strategic alternatives. The firm expressed its willingness to discuss its recommendations with the board and stressed the urgency of the situation, indicating that it would continue to advocate for its position to protect shareholder interests.
The information in this article is based on a press release statement from Breach Inlet Capital.
In other recent news, International Money Express, a leading remittance services company, has secured a $425 million revolving credit facility. This new multi-currency credit line, which includes an uncommitted incremental facility for additional term and revolving loans up to $100 million, is set to mature on August 29, 2029. The company used initial borrowings under this facility to repay the outstanding balance of its term loan and cover costs associated with establishing the new credit line.
In financial news, BMO (TSX:BMO) Capital has adjusted its outlook on International Money Express, lowering the price target to $26.00 from the previous $30.00, while maintaining an Outperform rating on the stock. This adjustment follows the company's second-quarter results, which prompted a revision of forward EPS estimates downwards by 6-18%. Despite facing a decline in retail transaction growth, International Money Express is still outperforming in a difficult market.
The company reported record-breaking financial performance in the second quarter of 2024 with total revenue hitting a record $171.5 million, largely driven by significant growth in its digital business. Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) reached $31.1 million, marking an 18.1% margin, while earnings per share (EPS) stood at $0.42 and adjusted EPS at $0.55, reflecting a 10% year-over-year increase. These recent developments underline the company's robust financial performance and strategic growth in its digital business.
InvestingPro Insights
Breach Inlet Capital's case for a strategic review of International Money Express (NASDAQ: IMXI) is bolstered by some compelling financial metrics and market performance indicators. According to InvestingPro data, IMXI has a market capitalization of $591.83 million, which could be a key factor in considering the company's value in any potential sale discussions. The company's P/E ratio stands at 10.48, and when adjusted for the last twelve months as of Q2 2024, it reflects a slightly more attractive valuation at 9.63. This suggests that the company is trading at a discount relative to its earnings, which may lend weight to Breach Inlet Capital's argument that the company is undervalued.
InvestingPro Tips reveal that IMXI's management has been actively buying back shares, a sign that those with intimate knowledge of the company's prospects see value in the stock. Additionally, the company is predicted to be profitable this year, with profitability already demonstrated over the last twelve months. These factors could be seen as indicators of a robust financial foundation and a positive outlook for the company's future earnings potential.
While the company does not pay dividends, which might be a detractor for income-focused investors, its liquid assets exceed short-term obligations, which underscores a strong balance sheet. However, it's noteworthy that analysts have revised their earnings expectations downwards for the upcoming period, which could impact the short-term stock performance and may need to be factored into the valuation considerations.
For investors and stakeholders evaluating IMXI's situation, there are 9 additional InvestingPro Tips available, offering deeper insights into the company's financial health and market position. These tips, accessible through InvestingPro's platform, could provide a more nuanced understanding of IMXI's value proposition and the merit of Breach Inlet Capital's proposal.
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