Tim Borehame: Criterion From: The Australian August 31, 2013 12:00AM
IT consulting minnow RXP Services (RXP, 74.5c) is operating in a separate universe to its bigger peers who complain about a pre-election lull, especially for government work.
"In all the areas we are playing in we have not seen the slowdown everyone is talking about," chimes chief Ross Fielding.
Criterion admits he doesn't have the foggiest what IT consultants do, but ex-Telstra exec Fielding explains that RXP's staple is "integration-type work, which is not at all sexy" - except to RXP, of course.
"Clients are still changing their front ends and back ends (in areas such as cloud and data mining) and we work in the middle to glue the two together."
OK ... we'll just accept that IT consultancies are only as good as their people (sorry, human capital). With guidance of a 40 per cent revenue uptick for the current year, Fielding and co are proving themselves as rainmakers.
Investors had reserved their judgment on RXP after the outfit raised $10 million at 67.5c in May, partly to fund acquisitions. But their reticence was abandoned on Thursday after RXP reported full-year EBITDA of $4.9m, compared with $530,000 previously.
What really got their motors running was second-half margins improving to 19.5 per cent, from 11 per cent in the first half.
RXP, which listed in late 2011 after raising $8.5m at 50c apiece, in July acquired the Sydney-based strategic adviser Transpire and has targeted more acquisitions in Hong Kong, Singapore and locally.
Criterion had RXP as a long-term buy at 71c in mid-March and 66c in early May.
The 12c (19 per cent) share surge over the last two days suggests investors have caught up with the story, but as a columnist of convictions (not all of them criminal), we'll stick with a long-term buy.
theaustralian.com.au
RXP Price at posting:
76.0¢ Sentiment: Buy Disclosure: Held
