Pinned straw:
There is still a ‘newness’ to this business, despite establishing a value adding service to the wagering industry, some powerful partnerships including the likes of Waterhouse, an established and growing footprint in the UK and a recent acquisition in ASIA, which aligns with their stated ambition of becoming a leading player in this very lucrative market. Just think of Hong Kong Racing.
I first invested in RTH based on a fascination. This Company is close to profitability with less than 50 m shares on issue. I have never had a share on my radar with so few shares on issue. I know EPS has lost appeal for many as an investor metric. I am still ‘old school’ and regard this as the ‘catch all’ measure and prefer wrangling with the likely PER off a ‘current’ constant EPS.
Looking forward to their FY25 results later this month.
RobW
Good intel @Mujo, I’ve recently bought into this one too @RobW.
Work shared here by @Wini and @mushroompanda here got me interested.
There’s a lot to like and only a few risks that I can see (ESG, some customer concentration, competing with a key UK customer, key person risk, some founder selling).
It’s a genuine Microcap with market cap of ~$50m with 36% insider ownership making it too illiquid for most.
On a Fast Track
RTH is fast growing, approaching profitability, has sticky customers, multiple revenue streams, 90% gross margins, and long tenured (25 years) founders in leadership roles.
They are also expanding in line with their Prospectus stated strategy with new products and into new markets. From what I can tell they are competitively advantaged with some genuinely unique IP and high switching costs.
Despite tying up the tier one players in their industry, new products, some key partnerships and a favourable regulatory environment (especially in the US) mean they likely still have a long growth runway ahead of them.
However, they are still FCF burning but seem to have adequate cash to get to positive. They have an M&A growth strategy (as well as organic / capex) so we could see a cap raise at some point but management have seemed disciplined so far.
Management Quality
Given this is so small and founder run, I expect management will have an outsized impact on managing risks and generating returns over time.
I asked Perplexity to make an assessment of mgmt. quality based on some parameters I prompted, using only ASX announcements since IPO.
AI output is to be taken with a grain of salt, or better yet treat it like a hypothesis to be falsified but the below aligns with what I have been seeing in my research and summarises it better than I could.
Disc: Held