India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Tulip Telecom |
Heads for an acquisition |
BUY
CMP: Rs 168 Target Price: Rs 240
n Acquires Data Centre facility in Bengaluru from SADA IT Parks Private Limited (SADA) for Rs 2.3bn
n Facility is spread across an area of 9 lac sq. ft this would take Tulip’s total data centre space to 10 lac sq. ft.
n This facility will be owned and operated through a newly formed wholly owned subsidiary of Tulip Telecom named ‘Tulip Data Center Private Ltd’
n Rs 2.3bn paid in cash so net debt/EBITDA remains unchanged at 1.25x as per Q2FY11
Acquires data centre at Bengaluru
Tulip announced the acquisition of a Data Center facility in Bengaluru by acquiring
100% shares of SADA IT Parks Private Limited (SADA) at a value of Rs 2.3bn. The
Bengaluru facility is spread across an area of 9 lac sq. ft. and is a level 4 Data Center.
This facility will be owned and operated through a wholly owned subsidiary of Tulip
Telecom named ‘Tulip Data Center Private Ltd’. Going forward, other existing four data
centers would also be transferred to this newly formed subsidiary. Post this acquisition
the company would have five data centers.
Facility still not operational – three phase transaction
The facility is not yet operational and would require additional Rs 0.6bn of capex and 6-
9 months to get partly operational. Investment of Rs 9.0bn would be spread over a
period of 3 years. Out of the total investment Tulip would be paying Rs 2.3bn upfront
and it is expected to rope in strategic partner for additional Rs 3.6bn in the second
phase and at subsidiary level it would put additional Rs 2.7bn from internal accruals. As
per management comments 60% of total investment would be done in first year and
remaining 40% to happen in next two years.
Management optimistic on the business model
Tulip Telecom has already four data centers with 1 lac sq feet of space and generates
~Rs 50 crore with 38% EBITDA margin on the annual basis. The management expects
the revenues to kick in next 6-9 months and it already has demand for 1 lac sq feet from
some telcos and banks. The management expects revenue of Rs 10.0bn with 50%
EBITDA margin by the end of third year of operation. However, we would get a clear
picture once the revenues from the project would start kicking in. Hence, we would
incorporate financial estimates post the revenues start contributing to P&L.
Outlook and Valuations
Considering the continued strong growth momentum from its existing business
segments, we retain our EPS estimates and target. At CMP of Rs168, Tulip trades at
extremely attractive valuations of 6.6x P/E and 3.3x EV/EBIDTA for FY12E. We retain
BUY rating with target price Rs240.
No comments:
Post a Comment