Remitly Global (NAS:RELY) — mrkt cap $4.08B; Price $22.47; trailing P/E NA
HOLD. Remitly is quickly becoming the leader in digital remittance payments for migrants. We first covered RELY in stock sonar on 7/26, where we initiated a position and have since increased it. The stock surged by 30% following Q2 earnings reported on 8/2. Our conviction in holding this stock for the long term is growing. They currently hold a 2% penetration in a 1.6T remittance market. The drivers for increased penetration are clear to us: weak competition from non-digitally native players (Western Union & MoneyGram) and the ongoing shift in remittance trends from cash to digital. Additionally, the remittance market as a whole is expected to continue its multi-decade ~5% growth due to the aging demographics of developed economies. Finding names with the potential for 5+ year holding periods is rare for us, but RELY is likely one of them. We are in the final stages of our research, and IR/Management is assisting us in addressing the list of questions we have sent their way.
Great Lakes Dredge & Dock (NAS:GLDD) — mrkt cap $570mm; Price $8.52; trailing P/E NA
PASS. GLDD is one of the nation’s largest dredgers. To put it simply, a dredger primarily restores harbors, coastlines etc by moving sand and rock around. GLDD benefits from higher margins on large projects that are deeper water as that requires larger ships that they have limited competition on. Closer shoreline projects have stiffer competition as the equipment needed is less rigorous. Dredging should benefit from increased funding from the IIJA, of which GLDD should be a direct beneficiary. Offshore wind generation should also be another avenue of growth as after the first rock layer is poured it is now considered a domestic port and foreign sea vessels are not permitted to work there (Jones Act), leaving only GLDD and a couple other companies able to do so. The Jones act bans foreign carriers from domestic water routes. GLDD is still too expensive trading around 10x in an elevated environment. GLDD is also entering a large capex cycle to replace some of their ships.
Euronet Worldwide (NAS:EEFT) — mrkt cap $4.28B; Price $86.1; trailing P/E 16.7
MORE RESEARCH NEEDED. The stock experienced a 25% decline following the announcement of negative EBITDA guidance. Euronet’s operations are categorized into three reportable segments: the Electronic Funds Transfer segment (with an international ATM network of approximately 50,000), the ePay segment, and the Money Transfer segment (focused on remittances). The first segment boasts a widespread presence of over 600,000 points of sale and 47,000 ATMs operating on a global scale. This segment oversees all ATM-related services and contributed 28% of the company’s revenues by 2022. Although each individual segment exhibits promising growth dynamics we are grappling with identifying synergies among them. The valuation as a whole seems attractive, and we are taking a closer examination.