RDM Corp’s (TSX:RC) service offering represents “the future of banking” says M Partners analyst Manish Grigo.
This morning, RDM reported its Q4 and fiscal 2014 results. In the fourth quarter, The company generated Adjusted EBITDA $1.2-million on revenue of $6.2-million, up 10.7% from last year’s $5.6-million fourth quarter topline.
“Our results continue to demonstrate the underlying stability of our business and our success in shifting the company toward higher-margin, recurring revenue streams,” said CEO Randy Fowlie. “We generated a record $4.3-million in cash from operations, grew operating income 46 per cent to $2.9-million and instituted a dividend program this year. The strength of our product offering is being recognized in the market as we continue to win new customers. Through commercializing our new products and engaging with the opportunities in our pipeline, we will continue to grow our customer base while building our recurring revenue stream.”
Grigo says RDM’s Q4 results were slightly ahead of his expectations on the topline and fell slightly below his EBITDA target. The analyst explains that RDM’s headlines may be deceiving as lower margin hardware revenue is being replaced by higher margin payment processing revenue. He notes that this change in revenue mix resulted in an EBITDA growth of 20% for fiscal 2014.
The analyst points out that the banking market is set increase the adoption of electronic deposits, which today represents just 20% of a total of 21-billion cheques. He thinks RDM will experience steady and secure growth as adoption amongst Tier 1 financial institutions and Fortune 500 companies rises.
In a research update to clients today, Grigo We maintained his “Buy” rating and one-year target price of $3.75 on RDM Corp., implying a return of 60.9% at the time of publication.