OnMobile, Share BuyBack Positive for Company: IndiaNivesh

Please Share::

�� India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details ��

��

-->
OnMobile Global Ltd (OGL) board is likely to meet on Dec. 11. 2014, to consider
and approve a proposal for share buy-back.
Our Take
On back of net worth of Rs.7,670 mn, OGL can maximum announce Rs.760 mn
(10% of total net-worth) of share buy-back. As on 31 Mar-2014, the company’s cash
and cash equivalent stood at Rs.1,239 mn. Hence, the company has sufficient
liquidity to execute the buy-back at full limit. At CMP of Rs.70 we expect company
to buy-back ~11 mn shares (9.5% of total outstanding shares). This action would
lead to reduction in outstanding shares and expansion in FY15E/FY16E EPS each by
10.5% to Rs.1.0/Rs.10.2 (v/s Rs. 0.9 and Rs.9.3 current).
Valuations
At CMP of Rs.70, the stock is trading at P/E multiple of 77.2x FY15E and 7.6x FY16E
earnings estimate. In our view, OGL’s financial results depend on corporate actions
rather than only on supply and demand factors. As discussed, this is the story of the
operational turnaround with major organizational restructuring along with top
management reorganization. Going ahead revenue growth is likely to grow at 5.1%
CAGR over FY14-16E, while EBITDA growth is likely to be higher at 335.1% CAGR on
back of various restructuring initiatives. Based on the various available triggers and
proven management at the helm of the affairs, we maintain ‘BUY’ with target price
of Rs.82 (valuing at 9x FY16 EPS of Rs.9.3) on OGL.