4. International Money Express, Inc. (NASDAQ:IMXI)
Steamboat Capital sold off nearly half of its stake in its former top holding International Money Express, Inc. (NASDAQ:IMXI) during Q3, though the stock nonetheless remained one of its top 10 holdings and its fourth-largest finance holding. Steamboat owned 949,014 IMXI shares on September 30 valued at $15.85 million.
International Money Express, Inc. (NASDAQ:IMXI) was owned by 19 of the hedge funds tracked by Insider Monkey’s database on September 30, which represents a high in hedge fund ownership of the international money remittance company’s shares.
One of those hedge funds is Travis Cocke’s Voss Capital, which called IMXI a “compelling long” in its Q2 2021 investor letter. The fund, which bought more shares of International Money Express, Inc. (NASDAQ:IMXI) during Q3, likes the company’s capital-light business, its strong brand in core countries like Guatemala and Mexico, and its strong execution. The fund believes that the market is being unfairly critical of the company not going all-in on digital transactions, as Voss Capital believes IMXI’s customer base will be slow to adopt digital payments.
Voss Capital, an investment management firm, published its “Voss Value Offshore Fund” second-quarter 2021 investor letter and mentioned International Money Express, Inc. (NASDAQ:IMXI). Here‘s what the fund said:
“We believe Intermex (International Money Express, IMXI) is a compelling long. IMXI is an international money remittance company that focuses primarily on transactions emanating from the United States and going to Mexico and Guatemala. They make their money by charging a fixed fee for each remittance transaction (85% of revenue), and to a lesser degree from foreign exchange arbitrage on transactions (14%). Their customer base is primarily low-income and under-banked immigrants from Mexico and Guatemala with family/friends remaining in their home country that need financial support. We believe IMXI is a simple story to understand, with a clean capital structure, very low capital intensity (outside of some working capital swings), a strong brand, savvy management, and excellent ongoing execution (e.g., 15-20% growth at high incremental margins). We believe there are flaws in the negative narrative surrounding the company that we can exploit, namely the skepticism around the sustainability of its growth, the stickiness of the customer base, and a misunderstanding about the economics of a digital remittance transaction versus in-person.
The consensus narrative on Wall Street is that IMXI is making a strategic error by not going “all in” on digital transactions, as MoneyGram (MGI), Western Union (WU), and well-backed private competitors like Remitly and Wise are. You will hear that the wave of the VC money shows you what the future beholds, and remittances initiated via physical brick & mortar stores are dying. As the digital transition occurs, Intermex will lose their customer base, and given the operating leverage in the model, profitability will be hit hard. Bears also argue that digital is cheaper, easier, and should create a stickier customer base in the long term. Furthermore, Intermex’s focus on only a few markets makes it hard to scale the business and they will quickly run into a wall on growth…” (Click here to see the full text)
