R SYSTEMS INTERNATIONAL #Thread

#smallcap #stock

📌Presenting my study for educational purpose 👇

Will keep adding points to this #Thread so you may bookmark & re-visit as you like !

1
R Systems International incorporated in 1993 as a consulting firm in California, US.
Started its India operations in 1997 in Noida.

Per latest AR Dec19
Currently provide services in 40+ Countries for 200+ Active Clients.
7 - $3 Million Clients
26 - $1 Million Clients

2
📌Service & Solutions Offerings

3
Highly Diversified portfolio across various business domains & Geographies👍

Largest Client Revenue 7-8%👌
No high client Concentration, so even if they lose few (highly unlikely explained 👇) it won't be big dent on balance sheet.

📌Very imp point especially for small cap.

4
📌PARTNER List include quit prominent names ->
Oracle, Microsoft, Amazon, Google, SAP, Cloudera, Snowflake, DELL, Boomi, Automation Anywhere, UiPath, informatica, Information Builders, Alteryx.

5
Financial Highlights !

Digital Revenue is 47% up from 39% in 2018.

Digital Transformation is continued to be Focus
Services in Cloud, Analytics, AI, Machine Learning,
Data & Speech Analytics, RPA(Robotics Process Automation), Salesforce

6
📌As per Sep20 Con Call !

Major Traction in Cloud Space

Analytics continue to extend strength in MLAI (Machine Learning & Artificial Intelligence)

Continue to expand in Data & Speech Analytics currently serving many key clients in this space

7
Mobility - work on wide range of technology devices such as Android, iOS, hybrid to webex right from App to Enterprise application

8
📌7 deal wins (Sep20)

Leading Real estate appraisal management company collaborated with R systems to digitize existing applications to move from monolithic to cloud multi-currency multi-language flavor.

9
Canada Based leading software solutions for water data management existing solutions to AWS cloud using micro-services architecture help in ensuring scalability & high availability of their products

10
Cloud based automative retail marketing solution provider engaged R systems to provide engineering & taxing services to enable automative retailer to
manage their service operations.

(R systems already have several clients in this space)

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Largest Telecom Provider in Switzerland. They have engaged R Systems European subsidiary to develop a new voice services for their subscribers to enhance
their experiences.

In South-East Asia a Singapore based Vertical Farming company has awarded

12
Technical Headcount added 170+ technical associate

2335(Q2 FY20) to 2506(Q3 FY20) to take care of strong sales channel & growth in existing customer base.

They follow Dec Calendar not Mar Calendar.

📌90%+ Repeat Revenue Business

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Utilization - Marked Peak Utilization(Sep20)

78.8% in IT up 1% visa vis last year Qtr
58.7% to 80% in BPO (Big Jump)

On Qtrly basis contribution
NAmerica - 66.7%
Europe - 13.3
S.East Asia - 17.8%
Rest of World - 2.1%

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Regained momentum in Revenue & Margin growth in FY20. For YOY Sep20 grown about 8% in 9 months with Strong margin Improvement

📌Feels +ive for future growth

📌Business outlook has improved significantly on the back on renewed interest for Digital services in COVID pandemic

15
Sep 20
EBITDA ~16% highest in several qtrs.
Business Revenue grew by 1.3 million
Utilization improved by 2% from last qtr
Cost reduced due to Pandemic
Travel cost will increase but it will not increase as much as pre-pandemic expect saving atleast of 40-50%.

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Growth will be driving the margins
15-16% (+,-1%) Hopefully able to maintain EBITDA.

Have Strong Balance Sheet & Expanded (Associates & Infrastructure) as to meet strong demand.

17
Largest client - 7-8% Good customer diversification.
Diversified services in several Sectors.
Long term contracts with Companies.
MD Rekhi - Client focus get Repeat business (90%+) & build repo to get new clients.
I feel Good safety in terms of Revenue (imp for #SmallCaps )

18
📌R SYSTEMS Acquisitions!

Prominent are ->

Pune Based Indus Software
Singapore based ECnet
UK based Computaris
Innovizant LLC, USA Feb 2019
(Engaged in Analytical, data science, data engineering,
decision science services & solutions & other IT services)
IBIZ ,Singapore

19
📌Apart from various Acquisitions they also sold some businesses -

Jul 2015 Sales of its holding in R Systems Products & Technologies Pvt Ltd to BD Capital Partners Ltd., a Mauritius Company.

Nov 2014
R Systems sold Europe BPO Business 4 Million Euro.

Profitable sales !

20
R SYSTEMS decided to pursue Digital & new Age Technology services hence sold its Product businesses.

The Sudden jump in profits in 2014 & 2015 (check sheet in #1 👆) is due to these profitable sales.

21
📌R SYSTEMS Highlights last 10 yrs!

Revenue grew 3 times
Operating Profit grew 4 times
OPM incr from 8% to 11%
PBT grew 5 times
PAT grew 4 times
Regular dividend
Great NFAT Improvement
NPM improved
Negligible Debt
Debtor days improved from 70 to 60
📌ROCE incr from 9% to 22%

22
📌R SYSTEMS SSGR Analysis

SSGR = 40% much higher than Current Historical Sales Growth !

Business is not Capital Intensive at all !

23
Last 10yr!
Generated 609 Cr CFO whereas it has used 169 Cr Capex and given 223 Cr dividend so Inflow of cash is 609 Cr while utilization is only 392 Cr(169+223).
No wonder company doesn't need much debt & has FCF of 259 Cr
CFO(609 Cr) >PAT(467 Cr)
NOT Capital Intensive!

24
R SYSTEMS Retained Earnings Vs Market Cap & EPS Growth !

Last 3-4 yrs feels like TURNAROUND to me !

Based on this SSGR + RE Analysis & All the Points mentioned above I can't find a reason what could hamper this Growth !

25
Promoter Holding is 51.58% & are gradually nibbling shares since last 2 yrs.

BHAVOOK TRIPATHI holds whopping 36.85% in Public Shares & has been nibbling along with Promoters.

2 other Public investors also incr stake.

Feels speculative but just stating facts as I see!

26
📌Who is BHAVOOK TRIPATHI?
Things get little interesting here !

Known for his concentrated bets especially Excel Crop Care & FAG Bearings

Invested 69 Cr in R systems now worth ~550 Cr

He holds 36.85% & is still hungry as he has increased his holdings by 1.5% in last 2yrs.

27
R SYSTEMS on my

"RISING STARS Sales&ProfitGrowth_GdValue_CashFlow" #screener.

https://twitter.com/Coolfundoo/status/1328917681559515136?s=20

28
R SYSTEMS on my
"Companies Undergoing Capacity Expansion"
#screener

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R SYSTEMS on my
"ROCE Grtr WACC LowDebt HighFCF ROE SalesProfit OPM" #screener

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R SYSTEMS on my
"InvestableSmallCapUniverse" #screener

https://twitter.com/Coolfundoo/status/1332954547812175872?s=20

31
Another Interesting Observation about R SYSTEMS.

📌In my view R SYSTEMS qualifies as low Free Float.
Why ?

Bhavook share though public aren't traded. It's like an Institution holding.
So after removing his shares there are only 1.38 Cr shares available to be traded...

32
...
There is no FII & DII holding which makes things interesting for RETAIL...

https://twitter.com/Coolfundoo/status/1309725613897527296?s=20

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...
Being Low Free float, Nil FII & DII (Institutional Holding) a small interest from few interested players could move the price !

Read about Low Free Float & corresponding #screener in this #thread ->

https://twitter.com/Coolfundoo/status/1309725614908243968?s=20

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R SYSTEMS is also part of my Diwali picks for Next year ->

https://twitter.com/Coolfundoo/status/1328556433269534720?s=20

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