Xalles Holdings (OTC: XALL), a financial technology holdings company, led by CEO Thomas Nash, has been the poster child for future CEO’s to mirror their incubator/accelerator playbook and business model. Since the beginning of 2020, XALL management has utilized its share equity to add 6 acquisitions (4 complete and 2 to close shortly) and bolster its asset portfolio to the tune of anticipating a revenue run rate of $12.5 million for 2020 and $34.0 million for 2021 These run rates don’t factor in other assets that may be acquired in the near future. Keeping the acquisitions within the same “Fintech” sector, XALL’s subsidiaries are capable of creating synergies that would allow them to grow exponentially both nationally and globally. Their latest acquisition of Adaptive announced just days ago, is by far the biggest and best puzzle piece XALL has added to date. An article yesterday on this topic compared investors to deer standing in front of car headlights as investor reaction didn’t reflect the true magnitude of the Adaptive press release.
Investors still haven’t digested the fact that the latest acquisition “Adaptive Metadata Solutions” provides Fortune 500 clients with essential software solutions that deliver a business discipline of data governance, control and innovation to the enterprise. Industries currently serviced include Insurance, Financial Services, Government Agencies, Healthcare, Energy, and many other regulated industries, where compliance and data governance are critical to operational and strategic success. Adaptive is projected to generate at least $5 million in 2020 revenue and more than $10 million in revenue in 2021.
Adaptive CEO, Eric Reehl has a great resume and has over 25 years of experience as an investor and advisor to companies, lenders, and investors across a range of industries for both debt and equity capital. He has led in excess of $5 billion of direct investments and restructurings as a principal or advisor. In 2019, Adaptive was named by Gartner as a Leader along with industry giants IBM, SAP and Oracle in the MetaData Management Solutions sector.
Adaptive’s product suite is used by clients that include Bank of America (NYSE: BAC), Federal Reserve Bank of New York (NYSE: BK), Western Union (NYSE: WU), the U.S. Government’s General Accounting Office (GAO), Dell (NYSE: DELL), United Natural Foods (NYSE: UNFI), and numerous central banks and financial services companies. The platform enables organizations to understand the entire data landscape of an enterprise providing end-to-end data lineage analytics.
“The Adaptive acquisition is the definition of synergy. Adaptive will add value to our existing operating companies and technologies, while Argus Technology Partners will expand Adaptive’s reach into new vertical markets,” stated Thomas Nash, Xalles Holdings CEO.
The key point is that Xalles was able to attract an industry leader capable of competing with companies like Oracle, SAP and IBM in the MetaData sector. The bonus was the addition of Eric Reehl, a seasoned finance guy who may play a vital part in future capital raises that sustain the proper working capital requirements of the subsidiary companies.
Xalles Has Completed 4 Acquisitions on the Year
YTD, Xalles has now completed 4 acquisitions including Gateway Innovations, MinervaWorks, Intel365 and Argus Technology Partners with the closing of 1Rivet Global and Adaptive Metadata Solutions expected very soon. The above chart is a great visual showing the gradual increase in outstanding shares (equity for acquisitions) was a justifiable trade-off for the projected revenue the new subsidiaries will bring to the table. Going into 2020, XALL had an outstanding share count of 508 million shares and its estimated that they will be at approximately 678 million in August after closing on all the past announced acquisitions. To utilize 170M for $34M in projected sales for 2021, in our opinion deserves accolades. For those NEW to Xalles, here is a list of this year’s other acquisitions.
- 1Rivet Global, through its proprietary 1Rivet PublicWorks Platform “1RPP”TM provides eGovernment and payment services to developing and emerging markets. 1Rivet Global will continue to focus its short-term sales and deployment efforts in Africa.
- Argus has a network of sales channels and representatives will be utilized to expand the sales reach of the recently acquired Xalles companies, MinervaWorks and Intel365. In the future it is expected that Argus will provide marketing and sales services for new technology-based acquisitions within the Xalles structure of companies.
- Intel365 is a background check technology and services company that is a provider of employment background checks that includes drug testing, criminal record checks, education, and employment verification, reference checks, driving records, credit reports, social security trace and address history, civil court records, global background checks, sanctions, and risk reports.
- MinervaWorks is a technology company that focuses on The Brick application, Managed Services and IT Consulting. The Brick is a piece of hardware installed on a customer’s network, analyzes technology infrastructure, including end-user computing, systems, networks and cybersecurity, cloud enabled and virtualized, utilizing proprietary edge computing platforms.
- Gateway Innovations is the designer and owner of the Ghana Cyber City project. The Ghana Cyber City, based in Accra, Ghana, comprises intelligent workspace, company incubation infrastructure and resources, a data center, retail and housing, a high-tech campus, featuring local and international business colleges, and a marketplace for smart city solutions, including fintech, smart energy, edutech and health tech.
Xalles and Subsidiaries Have Offices and Clients Around the Globe
Another important piece that investors may be unaware of is that Xalles, through its acquisitions, has offices and clients around the globe and on 4 continents. Having a global footprint, paves the way for expansion and we wouldn’t be surprised if we see them enter the Australian or Asian market in 2021. Their clients include banks, governments and Fortune 500 companies that offer credibility and prestige, making it easier for their sales team to close new deals in the future.
Synergy Within the Subsidiaries
Within Xalles there are two sub sectors of fintech. There is a financial services unit and a technology unit. This is the definition of fintech. Within the technology unit there is the Brick product manufactured by MinervaWorks that consists of a piece of proprietary hardware, software, and support services. The glue that binds all these units together is Argus Technology Partners which is poised to do sales on the technology offerings. This unit was strategically placed in with the other units it has the potential to cross sell products to. The financial services acquisition are grouped together in the services unit which seems focused on payment mechanisms. Under Xalles Capital division is the Fintech Growth Center which is acting as an incubator of other fintech businesses. The Gateway Innovations Ltd. is another operating entity and is the owner and manager of the Ghana Cyber City technology and office park. The synergies come through the cross selling of customer bases. For example, if IBM is a customer of Adaptive, there is no reason why MinervaWorks’ Brick couldn’t be sold to IBM too. Another example is that Intel365 could find a way to sell its background check services to one of the merchants customers in the Global Savings Network.
Xalles Fair Valuation Using P/S Ratio
In order to value companies in the fintech sector like Xalles, ratios like the price to sales ratio, or P/S ratio, or PSR, are commonly used. The P/S ratio can be calculated either by dividing the company’s market capitalization by its total sales over a designated period – usually twelve months, or on a per-share basis by dividing the stock price by sales per share. The P/S ratio is also known as a “sales multiple” or “revenue multiple.”
Analyzing a dozen or so publicly traded financial technology companies (seen in chart above) yielded an average P/S ratio of 11.32. If we cherry picked the “top 4” of this batch, they would avg. 16.18, and an avg. of the “bottom 4” (excluding Xalles) would still give us a ratio of 5.36. Being that Xalles is currently at a ratio of 1.4, based on this valuation formula, we could hypothetically say that versus its peers, XALL (low end using the 5.36 ratio) should at least be trading at $0.096, or $0.202 based on the average of its fintech peers or (high end using the 16.18 ratio) trading at $0.289 would be a ceiling trade price.
Conclusion: Investment Summary
Xalles Holdings Inc., is an emerging global fintech leader in the making. The stock is trading in the $0.028 range and based on its projected price to sales ratio it appears to be grossly undervalued. The industry average P/S ratio is 11, but Xalles has a P/S ratio of 1.4 which is well below the average. Our model supports XALL potentially being valued between ($.096 – $.289/share) with a healthy industry average of about $0.20/share (700% potential) based on 2020’s projections as 2021’s would be dramatically higher. The story gets even better factoring in the CEO’s plans for more acquisition announcements in the near future. A twitter post from the Xalles corporate account on July 9th mentioned there were 4 more acquisitions in negotiations (3 now that Adaptive was just announced) with potential July signing dates and August closing dates. Technically the chart is in a strong uptrend and the revenue growth keeps climbing. XALL has been trading above $.01 since late June. If it can maintain this price, a QB uplisting could also be in the near future. This company appears to be building something special, and should be a consideration for anyone’s portfolio.
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