Here’s Why Voss Capital Remains Optimistic in Rimini Street (RMNI)

Voss Capital, an investment management firm, published its fourth quarter 2020 investor letter – a copy of which can be downloaded here. A return of 20.81% was recorded by its Voss Value Fund LP, and 20.67% by its Voss Value Offshore Fund in the fourth quarter of 2020, both below its Russell 2000 Value Benchmark that delivered a 32.72% return and its Russel 2000 TR Index that was up by 31.37% in the same period, but above the S&P 500 TR Index that gained 12.15% in the fourth quarter. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

Voss Capital, in their Q4 2020 investor letter, mentioned Rimini Street, Inc. (NASDAQ: RMNI) and emphasized their views on the company. Rimini Street, Inc. is a Las Vegas, Nevada-based software company that currently has a $709.4 million market capitalization. Since the beginning of the year, RMNI delivered an impressive 88.49% return, massively extending its 12-month gains to 122.07%. As of March 22, 2021, the stock closed at $8.35 per share.

Here is what Voss Capital has to say about Rimini Street, Inc. in their Q4 2020 investor letter:

“Due to ~92% price appreciation YTD, Rimini Street (RMNI) has become our largest position. At its current market price and valuation, it remains the cheapest profitable North American SaaS related stock that has scale (~$330 million in ARR) on an EV/ARR or EV/Gross Profit multiple basis. The stock still has hundreds of percent of upside to go to catch up to slower growing and much lower margin IT services trading comps, much less the low gross margin SaaS stock cohort that it most resembles. The company seems to be hitting an operational groove and has only just begun cross selling their recently introduced Application Management Services (AMS) in earnest into their existing 2,365 clients. Each new AMS contract cross-sold will drive a ~3x ARPU uplift over their existing core support business. At their recent analyst day, the company detailed its five-year strategic plan for the first time to investors, targeting $1 billion in revenues and 20-25% operating margins. Given estimates by Gartner for the third-party software support industry to skyrocket by nearly 3x within next three years and RMNI’s near monopoly like market share of the space (85%+), we believe their target is highly credible. They do not need to come close, however, to achieving the stated 20%+ five-year sales CAGR for the stock to double or triple from here. If their targets are achieved and we still assume an undeserved substantial trading comp discount, we believe the stock would be valued in the $40-50 range by 2026. This compares to its current market price of ~$8.50 and would translate to a >40% IRR from here even after it has nearly doubled YTD.”

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Oleksiy Mark/

Our calculations show that Rimini Street, Inc. (NASDAQ: RMNI) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Rimini Street, Inc. was in 11 hedge fund portfolios, compared to 9 funds in the third quarter. RMNI delivered a decent 76.53% return in the past 3 months.