Miami, FL – December 6, 2019 (EmergingGrowth.com NewsWire) — EmergingGrowth.com, a leading independent small cap media portal with an extensive history of providing unparalleled content for the Emerging Growth markets and companies, reports on EXXE Group, Inc. (OTC Pink: AXXA).
Exxe Corp (AXXA) is a holding company with a real estate centric focus. Based on current prices, the asset value of the company’s holdings vastly exceeds the existing market capitalization by a factor of more than 10:1, thus offering huge upside to savvy investors! These discrepancies happen from time to time in the market, but they usually do not last for very long as sophisticated investors discover the unique and potentially very profitable opportunity.
What makes the valuation story even more powerful is that these assets are exciting in-demand properties that have a bit of celebrity attached to them and are generating huge revenue growth for the company. Every once in a while, there is a delay in the market where situations like this get overlooked. Then big news or a new quarterly report is released, and the market realizes it has completely mispriced and forgotten about a stock that is way undervalued AND enjoying unmatched growth in its core businesses. These windows typically do not last very long and it appears we are right on the cusp of a major turn in investors awareness regarding Exxe. For these reasons, it appears that Exxe’s market cap is well positioned to at least approach, if not reach the lofty value of its assets.
Make no mistake, Exxe Group is a diversified company in terms of its assets, businesses, and geography. The more than $48.5 million in real estate holdings alone (as of recent 10-Q) are high profile, liquid properties such as luxury, high-end condominiums in Trump Tower. The Company also has valuable media assets that provides Exxe with direct media access to China via their Chinese Film Festival franchise. They even have sustainable environmental operations along with the money to back up any bold venture they choose with their close access to private equity. Highly regarded investment research firm Goldman Small Cap Research projected “revenue will reach $9.2M this year with $670,000 in EBITDA and $33.4M in revenue and $8.4M in EBITDA in 2020. Note these figures do not include contribution from new businesses that may yet be acquired and would have a positive impact on our projections.” Based on these facts it’s not hard to like this story. The numbers alone could double the price of the stock.
Low Risk of Debt Conversion
One major concern OTC investors often have is regarding “toxic”convertible debt on a given company’s books. The Goldman Report doesn’t dissect the debt, but in order to make an informed investment decision it’s important to address the elephant in the room. Yes, there is a tiny amount of convertible debt that totals about $500K but it’s broken into 2 different buckets: old and new. Given its small amount, there isn’t a need to get into deep details of this debt, but it is being easily managed through repayment with a new instrument or extinguishing the debt. Company management has even gone on record saying that their goal was to have this convertible debt paid by the end of the current fiscal year. It seems that there are big investors on the sidelines ready and to eliminate the which bodes well for new shareholders concerned about dilution.
The company has on its books about $47 million in long term low interest debt, which is typical of firms with large real estate interests and is a bit lower than the real estate assets carried on the books. The debt is NOT convertible and in general has very favorable terms to the company with respect to interest averaging between 5-8%. The Company utilizes an innovative and sophisticated acquisition financing strategy which includes the combination of multiple sources of debt and equity. The debt holders are a potpourri of property owners, business owners, investors, and banks. Each of the debt holders had ceded majority control of the asset to the management of AXXA. This means that AXXA management has the flexibility it needs, to sprinkle the funds it receives off the properties to its respective noteholders.
Let that sink in, because the picture being painted here is that there is about $47 million in equity that was just raised inside of this company. These are long term investors interested in the success of the company, happy with their interest rate, and having full confidence in the company managing the assets. It’s a win-win scenario for AXXA management and the property owner and could be a win-win-win scenario as investors pay close attention to the enormous leverage generated by AXXA’s strategy.
A Chasm in Valuation–Set to Narrow
The current market cap of AXXA is $7.0 million yet it has $99.7 million in stockholders’ equity (assets minus liabilities) as of 2Q19, which was announced in mid-November 2019. The question is why the chasm in valuation? They have private equity financing and management’s successful buying binge has been demonstrated by 4 completed acquisitions and 3 more currently under MOU’s. It’s a complete mystery why investors aren’t following the money. Aside from the tiny convertible debt and being overlooked by investors, we arrive at only one plausible explanation. Some investors tend to stay on the sidelines when a company’s financials are in a current unaudited status. Management is working feverishly to audit current and previous financials for public dissemination. Once completed, this step should remove this aforementioned possible roadblock to future stock price gains and market cap gains.
Current Audit Status
The company in the process of becoming fully reporting and just filed a Regulation A+ document for fundraising which provides additional financial validation as its filed on EDGAR with the SEC. This filing provides Exxe Group with access to crowdfunding. AXXA is essentially a consolidation play as they take private equity money, find value propositions in exciting market sectors and roll them into the holding company. The step to becoming fully reporting should set the stage for a NASDAQ uplisting.
The evidence suggests that the stock price’s upside has been held in check only in the near term by the convertible notes, the audit status and the fact that it has been overlooked. But it seems like this chapter in the company’s history is drawing to a close by year end. The current stock price represents extreme value and nominal risk for the long-term investors with, assuming no growth at all, over 100% upside potential. Moreover, once released, those sideline investors will miss the boat on the big, early run, and then likely help take the stock to new highs.
Exxe Group Represents Best Valuation in REIT Sector
One way to value Exxe Group is to compare it with its peer group. The top REITs trade based on a valuation metric called Adjusted Funds From Operations (AFFO). The adjusted number is needed to normalize the earnings for depreciation. For most businesses that purchase assets it is standard practice to depreciate them because they are using them in the course of their business operations but for a REIT factoring depreciation isn’t a good gauge of performance. The Price/AFFO is the REIT’s equivalent of a Price to Earnings Ratio (P/E) and the average multiple expands and contracts based on the health of the real estate market. Last year the average Price/AFFO was 23.0.
As evidenced by this table, Exxe Group offers the lowest Price/AFFO valuation, signaling lower inherent risk and potentially the greatest upside. Investors want to avoid buying into a multiple that is too high but a situation that offers major upside potential. Clearly, Exxe offers the best of both worlds. As you can see by the chart, Exxe group (OTC Pink: AXXA) has the lowest Price / AFFO by far.
Asset Growth Could Fuel Takeover Speculation
REIT’s have metrics that measure their asset growth because that’s ultimately how they make their money. Right now, AXXA is not on the radar of the top REIT’s but if they get to the billion-dollar mark heads will start to turn. According to Goldman Research the company should eclipse $250 million in assets in the coming year, which would make them a contender for a buyout in 1 – 2 years as the REIT’s continue their consolidation.
Goldman Small Cap Research Forecast
Goldman estimates are actually conservative in terms of valuation because if AXXA has any multiple expansion to the average of 23X then that increases the market cap to $190 million or $.45/share. The qualifier is the thing that investors need to pay attention to because these estimates assume no new business. There appears to be a very low risk that the stock will continue to trade at these depressed valuations.
The point of this article is this: As the audit is completed and additional transactions occur in conjunction with continued strong operating results, and reaching the Goldman Research forecasts, it is clear that the share price will likely be substantially higher than current levels.
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