RMA Global Limited IPO: Prospectus Evaluation Report (BFF3351)

This report provides an in-depth analysis of the RMA Global Limited IPO prospectus, focusing on its financial performance, industry dynamics, and investment potential. The analysis includes an executive summary that highlights the company's performance in key markets like Australia, the US, and New Zealand, emphasizing revenue growth, competitive landscape, and relative valuation. The report evaluates sales growth strategies, particularly the use of online agent registration, and assesses the competitive environment within the real estate industry. A critical component involves the evaluation of financial performance, including revenue and cost analysis, and the consistency of qualitative information. Furthermore, the report conducts a relative valuation using the P/E ratio to assess the IPO's share price and determine whether shares are overpriced or underpriced. A qualitative assessment of the company's business model, operational strategies, revenue generation, and growth drivers is also provided. The report concludes with recommendations based on the financial analysis and qualitative assessments, suggesting that the shares are overpriced and investors should be cautious.

Running head: FINANCE 1
Initial Public Offering- Prospectus Evaluation RMA Global Limited
Name
Institutional Affiliation
Date

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Executive summary
The study explored the performance of RMA in its operation areas especially in
Australia, US and New Zealand markets.The study evaluated the Sales growth, competition level
and the evaluation of financial performance. RMA is a digital online marketing business that
provides elaborated data about listings of residential property and the status of sales about real
estate agents. Furthermore, RMA allows the vendors to look information online and also
comparing real estate agents through marketing their services.it is evident that RMA had a
revenue growth rate of about 35% in 2018 as obtained from the revenue values which showed a
positive increase out of its metrics outcome. From the relative valuation, the 2018 records
showed the company had profits of AUD224, 000 and if such an amount is computed against the
current common stock, it would generate an EPS of 0.00467. the study provided with the
summary recommendations that the investor would have better value and returns if such shares
were sold off in the future. It is therefore recommendable for an individual to participate in the
IPO of the company.

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Industry performance
Industry performance of any business entity is a measure that is subjected to several
factors and among such factors includes Michael porter’s five feces of market competition.
These include the level of threats to entry, customer bargaining power, number of competitors,
suppliers bargaining power and the level of substitutes in the industry. Asit is recognized in the
prospectus, one of the most threats or risks that the company is subjected to is increasing threats
to entry and competitive effectiveness of other firms. Therefore, according to Michael porter, a
firm thatoperates in a highly competitive industry or market needs to devise strategic
measures(Pern, 2019). For instance, RMA global limited needs to find possible alternative
measures that can set a difference form all between the services provided from all those provided
by other competitors. The advantage with setting a unique product or service is customer loyalty.
The company similarly has strategic plans to expand in other international markets will highly
subjective. Dependence on factors such a product quality alone as stated in the prospectus may
not be the only factors of consideration(Patel, 2019). Other underlying factors such social
behaviors and preferences, the political climate and legal considerations among others will have
to be analyzed.
Sales growth
According to the prospectus, sales growth is primarily to be achieved through agents
though an online mode of registration. The major markets of focus for the company currently
include The Australian, the US and New Zealand real estate markets. Therefore, according to the
available information, the company plans to reliably use the distribution of services through

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though agents in the various markets. Through such a strategy, company revenues are to be
generated through sub-scription based services together with the digitalized services(Jeremiah,
Moses, Kabeyi and Kabeyi, 2018). The advantage of using such a marketing approach however
that is a wide market area can be accessed. This provides an opportunity for generating more
revenues and incomes.
Competition
Within the real estate industry, the major competitors identified include the residential
real estate agents together with the residential vendors. Consequently, there is need to find all the
possible alternatives that can be used to overcome such competition in the market(Indiatsy,
Mwangi and Mandere, 2014). The use of product and service differentiation techniques should
be an important approach to market penetration. Alternatively, this calls for strategies such as
aggressive advertisements especially in the new and developing markets such as the United
States real estate market..

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Evaluation of Financial Performance
Financial performance analysis is an assessment of the degree to whichfinancial
objectives sand goals are achieved. Therefore, the financial performance evaluation for this paper
will be based on the company costs and revenue performances for the past periods. In carrying
out the analysis both the presents and current performances will be used. The growth rates will
therefore be provided in percentage form. To determine growth rate, the formula used will be
stated as follows:
Growth rate = currentyearrevenues− previousyearsrevenues
previosyearsrevenues *100
For instance, RMA had a revenue growth rate of about 35% in 2018 as obtained from the
revenue values. This is as a result of $(4,054-3,003)/3,003 million dollars of total revenue
generated in 2018 and 2017.
The annual total costs of the company have however been more than doubled in the year
2017 as the company had a percentage increase in costs but however this was reduced to about
34.6% in the year 2018.
Assessment of consistency in the qualitative information
From the financial perspective and performance analysis, RMA global limited does not
show an indication of consistency. The qualitative forecasts and growth projections in terms of
online subscriptions do not reflect a highly positive correlation. For instance the percentage

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growth and profitability is still below average which is not the case as provided in the prospectus
review.
Relative valuation
Relative valuation is a financial technique that is used to create a comparison between a
firm’s value against its other competitors in an industry. Therefore, for this paper, relative
valuation calculations will be carried out on the firm to assess the IPO share price in relation to
its actual value on the market. This will be carried to ascertain whether the shares are being
overpriced or underpriced. In making this analysis however, the leading P/E ratio will be used as
the technique of measure. This will therefore require making an analysis of the company’s
current share price and the estimated earnings per share. Therefore, the formula for the leading
P/E is provided as current share price/ estimated earnings per share. The EPS on the on the
other had would obtained by dividing the company profit by the common stock(Wu, 2014). This
would give rise an estimated EPS of 0.058. Obtained as EPS = profit/ outstanding common
stock $(2.8/48) million. This is equal to 0.058 EPS. According to the leading relative valuation
technique, P/E =0.25/ 0.058 = $4.3103. Therefore, if an investor bought shares from the
company at a share price of $ 0.25, such an investor would be in position to generate returns
worth $ 4.3103 per share in the future.
However, from the 2018 records, the company had profits of AUD224, 000 and if such
an amount is computed against the current common stock, it would generate an EPS of 0.00467.
This is obtained by dividing profits by the total common stock = (224,000/48,000,000)=
0.0467.This means that the company shares are issued at an overpriced value.
Qualitative Assessment of the company

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Qualitative analysis of the company is set under different variables or items of the
company. Below is the qualitative assessment of the company;
Business of the Company
RMA is a digital online marketing business that provides elaborated data about listings of
residential property and the status of sales about real estate agents. Also, the company provides
reviews emanating from buyers and vendors of residential real estate (Loth, 2019). The data
collected is used by agents to aid them in marketing themselves or used by vendors in comparing
agents who deal in selling their property.
In addition, RMA has a fundamental and growing database of property sales. More so,
the business operates currently in Australia which has also started its operations in New Zealand
and US(Loth, 2019). However, the company operates in other countries, but it only generates
material revenue only in Australia.
How the business operates
In this case, the platform of RMA allows the vendors to look information online and also
comparing real estate agents through marketing their services. Such services are provided to the
vendors about RMA charges always on monthly subscriptions or one-off fees. The offer of the
business is conducted in order to yield funding which enables RMA in employing more staff to
strengthen the products base in the market(Loth, 2019). Furthermore, the offer is always
conducted to implement the company’s strategies of growth through increasing its penetration in
existing nations of Australia, New Zealand and US as well as expanding to new jurisdictions.
Besides, RMA business portrays liquid market about its opportunities and shares to invest in
other ventures (Boitnott,2018).

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Revenue Generation of the company
It is evident that RMA generates its revenue through selling off the subscription and
many digital marketing services especially to the agents of real estate. This situation therefore
helps them to market their services to the prospective property vendors. In the current situation,
It is evident that Australia is the only market that generates material revenue (Boitnott, 2018).
However, RMA aims at generating revenue through provision of third party services in order to
attain referral fee.
Major drivers to the growth of the company
There are three major drivers of growth of the company. These include the following
 The volume of real estate transactions and prices for houses
 The total expenditure of marketing sector
 Number agencies and real estate agents
Business opportunities
The company is hoping to expand its services from US and New Zealand to new markets
oversea especially on short or medium term of operation.
Furthermore, the success of RMA especially in new markets is hoped to depend on the
various factors more so operations and offering of products that are existing and the competitors
in the markets. Another vital factor is the willingness of the customers of RMA to pay for
services and the local economy state as well as property markets (Strischek, 2017). In addition,
the business practices, regulations that may affect the ability of RMA to process, publish and
source real estate data which is taken as crucial under the company’s operations.

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Assumptions in forecasts
There are several assumptions of forecasts of sales, customers, expenses and many other
phenomena. These assumptions include the following:
Usage of multiple scenarios; in this case, it is important to use various data sets or items
in order to estimate reliable results or forecasts. When the company is in need of predicting
estimates, at least two variables should be considered or 2-4 years on time series data. This
situation is true in case there is uncertainty factors that are likely to affect the business especially
the government operations, new competition or any economic growth(Strischek, 2017).
Expenses should be estimated first; it is assumed that it is very easy to forecast expense
than the revenues of the firm. Therefore, the model should state the fixed expense of the
company more especially the utilities, rent and insurance.
The steps in the company sales process should be outlined. The projection of the
company about revenue should pass through several steps sales channel instead of just taming
using the number on top-line. Also, comparisons between the results in different periods are
considered to be a significant assumption in estimating the forecasts of the company either on
sales, expenses or revenue.
Constant reassessments; it is assumed that the forecasts should not be static at all. This
can be done frequently by testing about different variables affecting the sales and revenue of the
company. It is evident that regular evaluations about operating results relate with the forecasts
should always be done and thus making adjustments to relate new information

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estimated(Strischek, 2017). This therefore aids proper decision making in the company and thus
resolving risks and uncertainties.
Figure 1: Projected Sales of the company
2016 2017 2017/2018 2018
0
500
1000
1500
2000
2500
3000
Sales ($000's)
Financial Year
Sales ($000)
Source: Annual Reports for FY16 and FY17 and Report for half-year ended 2017
Figure 1 shows the projection of the company’s sales from FY 2016 up to 2018. The
graph shows that there is a positive trend in sales of the company’s products and services. This

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therefore estimates the increment of sales in next financial year. The increase of sales could have
been caused by the extension of new market jurisdictions especially the US and New Zealand as
well as increased marketing strategies around the globe.
Recommendation
According to the leading valuation measure, investing in buying these company shares is
an ideal investment opportunity that should be undertaken. This is supported by the future
growth that the shares are likely to attain on the stock market. Since it is estimated that the
company shares are likely to increase in value up to an estimated $ 4.3103 per share in the future,
the investor would have better value and returns if such shares were sold off in the future. It is
therefore recommendable for an individual to participate in the IPO of the company.

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References
Boitnott, J. (2018). 6 Ways to Make Financial Forecasts More Realistic. Retrieved from:
https://www.entrepreneur.com/article/246592
Indiatsy, C., M., Mwangi, M.,S., Mandere, E., N. (2014). The Application Of Porter’s Five
Forces Model On Organization Performance: A Case Of Cooperative Bank Of Kenya
Ltd: European Journal Of Business And Management. RETRIEVED FROM
https://pdfs.semanticscholar.org/3001/a0b08b03fa3fcd4369af2740f2521c95f2eb.pdf
Jeremiah, M., Moses, C., Kabeyi, B., Kabeyi, J., B. (2018). Micheal Porter’s Five Competitive
Forces and Generic Strategies, Market Segmentation Strategy A Case Study Of
Competition In Global Smartphone Manufacturing Industry: International Journal Of
Applied research. Retrieved from
https://www.researchgate.net/publication/328462314_Michael_porter's_five_competitive
_forces_and_generic_strategies_market_segmentation_strategy_and_case_study_of_com
petition_in_global_smartphone_manufacturing_industry
Loth, R. (2019). Analyze Cash Flow the Easy Way. Retrieved from:
https://www.investopedia.com/articles/stocks/07/easycashflow.asp
Patel, S. (2019). 4 Growth Strategies Used By the Most Successful Companies. Retrieved from
https://blog.hubspot.com/sales/growth-strategy
Pern, S. (2019). How to Market For the Top Four B2B Business Growth Strategies. Retrieved
from https://www.g2msolutions.com.au/blog/bid/128765/how-to-market-for-the-top-
four-b2b-business-growth-strategies

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Strischek, D. (2017). The Ups and Downs of Cash Flow Projections for Contractors. Retrieved
from: https://www.rmahq.org/the-ups-and-downs-of-cash-flow-projections-for-
contractors/
Wu, W. T. (2014). The P/E and Profitability: Journal of Business and Economics Research.
Retrieved from https://clutejournals.com/index.php/JBER/article/download/8380/8404