Multibagger Stock Trade – RS Software for Electronic Payment Machinery Solutions

    • RS Software is a chief in providing machinery solutions to the electronic payment industry. Founded in 1991 to provide customized service solutions to the electronic payment industry. At present RS Software has emerged as a strong enterprise with a client base comprising of world’s top payment brands like Visa, Visa EU, Visa CEMEA, Maclane, Pemco, Vignon. It has carved out a niche to bring to the market place, the combination of its expertise in global outsourcing and the domain knowledge in electronic payment transactions.
    • RS Software reported a revenue growth of 31.76% and profit after tax growth of 32.4% in FY12. Total net operating revenues increased with 31.78%, from INR 188.3 Crs to INR 248.15 Crs. For Q1FY13, the company reported a revenue growth of 40.5%yoy and profit after tax growth of 80%yoy. Total net operating revenues increased with 31.78%, from Rs.188.3 Crs to Rs.248.15 Crs. Also, it outperformed the Indian software export industry growth by a factor of 1.5x in fiscal 2011-12.  Cash flows are strong and likely to grow in the future.
    • Departure to the fore, the electronic payments industry is approaching USD 300 billion. Payments companies spend a huge amount on technology infrastructure and reducing these costs by even one percent liberates millions of dollars for onward reinvestment. Consequently, many global payments organizations possess a technology infrastructure appetite that outpaces the growth of their business. R.S. Software is attractively positioned to capitalize on this global phenomenon.
  • RS Software at present maintains a RoE of ~32% and RoA of ~31% during FY12. Currently, the market values the company at a much lower multiple compared to its counterparts. The current stock trading at P/E of 6.3xFY13E whereas the industry P/E is 19.3xFY13E. With the EPS of 27, there are no perceivable risks in the stock except being a mid cap it does suffer from some volatility. We Bet RS Software market share Grab at Rs. 160 for the Target Rs. 300 in Time Frame of 6-8 Months.