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OnMobile Global Ltd.
Growth Looks Pushed Out a
Year, but We're Still Positive
What's Changed
Price Target Rs175.50 to Rs149.00
EPS F2012E, F2013E -24%, -34%
We reiterate our Overweight rating on OnMobile
because we think disappointing earnings are in the
price, and we remain convinced of the company’s
growth potential, led by its international business.
Earnings seem to be running one year behind our
prior estimate… Recent results disappointed due to a
slowdown in domestic demand and cyclicality in the
European business. We remain constructive on the
international business, but our industry checks also
suggest that the domestic Value Added Services (VAS)
segment is likely to grow more slowly: 10-12% p.a.
during F2011-13E (earlier we expected 15-20% p.a.).
…but we believe this is in the price: The stock has
underperformed the Sensex by 27% over the last 12
months, 11% of which has come after the disappointing
F4Q11 results. The stock now trades at 16x F2012E
EPS, 20% below its average over the last 12 months.
We remain convinced of OnMobile’s growth
potential thanks to its international business… The
company has launched services in most of the
Telefonica countries, including Spain, which was added
later. We expect OnMobile to achieve penetration levels
of 8% with ~18-20mn subs by F2014 in Telefonica
Latam and expect international EBITDA contribution to
grow from -9% in F2011 to 33% by F2014E.
…despite lowering our F12 and F13 earnings
estimates by 24% and 34%: This reflects lower than
expected growth in domestic business, longer gestation
time from its investments, and higher depreciation. Our
cash profit cut is half our overall profit cut at 10-13%.
Even now, though, we expect normalized profits to grow
at an impressive CAGR of 23% during F2011-F2014.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
OnMobile Global Ltd.
Growth Looks Pushed Out a
Year, but We're Still Positive
What's Changed
Price Target Rs175.50 to Rs149.00
EPS F2012E, F2013E -24%, -34%
We reiterate our Overweight rating on OnMobile
because we think disappointing earnings are in the
price, and we remain convinced of the company’s
growth potential, led by its international business.
Earnings seem to be running one year behind our
prior estimate… Recent results disappointed due to a
slowdown in domestic demand and cyclicality in the
European business. We remain constructive on the
international business, but our industry checks also
suggest that the domestic Value Added Services (VAS)
segment is likely to grow more slowly: 10-12% p.a.
during F2011-13E (earlier we expected 15-20% p.a.).
…but we believe this is in the price: The stock has
underperformed the Sensex by 27% over the last 12
months, 11% of which has come after the disappointing
F4Q11 results. The stock now trades at 16x F2012E
EPS, 20% below its average over the last 12 months.
We remain convinced of OnMobile’s growth
potential thanks to its international business… The
company has launched services in most of the
Telefonica countries, including Spain, which was added
later. We expect OnMobile to achieve penetration levels
of 8% with ~18-20mn subs by F2014 in Telefonica
Latam and expect international EBITDA contribution to
grow from -9% in F2011 to 33% by F2014E.
…despite lowering our F12 and F13 earnings
estimates by 24% and 34%: This reflects lower than
expected growth in domestic business, longer gestation
time from its investments, and higher depreciation. Our
cash profit cut is half our overall profit cut at 10-13%.
Even now, though, we expect normalized profits to grow
at an impressive CAGR of 23% during F2011-F2014.
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