by:Criterion From:The Australian March 19, 201312:00AM Source: The Australian
RXP Services (RXP) 71c: Listed consulting firms are tricky to appraise because performance depends on X factors such as the quality of consultants and the willingness of clients to re-sign them.
We'll give the benefit of the doubt to this information and communication and technology consultancy, which listed in 2011 at 50c a share.
The brainchild of former Telstra exec Ross Fielding and SMS Consulting founder Lloyd Roberts, RXP is a case of backing the principals and their solid but short track record to date. In a 27-year career with Telstra -- most recently as head of mobiles -- Fielding had accrued a handy contact book. After "kicking around" the idea with Roberts, the duo formed RXP as a customer-friendly alternative to the global giants. "I've been on the buy side and the sell side of the consulting game, which really helps," Fielding says.
From a starting base of 60 consultants, RXP's complement has grown to 215 with a presence in Melbourne, Sydney, Canberra and Hong Kong.
Revenue is biased to big clients such as the big four banks. A typical assignment would be creating customer-friendly electronic forms.
RXP chalked up a net profit of $853,000 and earnings before interest, tax, depreciation and amortisation of $1.24 million in the first half, on revenue of $11.36m.
Management has tipped a "very strong"' second half, with guided full-year EBITDA of $4.5m-$6m on revenue of $26m-$30m.
At the midpoint, this implies the stock is trading on a current year earnings multiple of 14 times, falling to 8.5 times in 2013-14.
RXP is a long-term buy.
It could be picked off by an offshore acquirer, given increased interest in the sector (see below).
Fielding is one of 16 children including former Family First senator Steve and Paul, who helps run RXP's operations. Another brother, Glenn, runs the rival ICT division of UXC -- and we're assured the only thing shared around the Christmas table is the turkey.
RXP Price at posting:
71.0¢ Sentiment: Buy Disclosure: Held
