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http://www.icicidirect.com/mailimages/ICICIdirect_eClerx_EventUpdate.pdf
A p t s t e p s t o a d d r e s s c l i e n t c o n c e n t r a t i o n r i s k …
Last week, eClerx announced the acquisition of Agilyst Inc, an operational
and analytic support service provider to the US media & telecom industry,
in an all cash deal. The investment was routed through eClerx’ wholly
owned subsidiary, eClerx Investments Ltd. Though the company held an
analyst conference call on Friday, April 13, 2012, financial details of the
transaction would be shared on deal closure and financial consolidation.
Below, we highlight the key takeaways from the call:
ƒ Agilyst- A niche operational and analytics company
Agilyst is a five year old $10 million revenue run-rate (FY12) US
based knowledge process outsourcing service provider with a
delivery centre in Chandigarh. With ~1,000 employees (99%
offshore), the company provides error identification, customer
experience analysis and end-user support services. The typical
engagement size is similar to eClerx (small – four or five employees,
large 40-50) while the revenue/employee is likely lower than eClerx
(30,000-33,000/employees).
ƒ We estimate likely payoffs of $14-17 million in cash
The management suggested than Agilyst grew faster than eClerx,
which itself grew ~40% CAGR during FY08-11. Agilyst EBITDA
margins could likely be lower (25-30% range) than eClerx (~39% in
FY11) given higher proportion of first level managers, longer training
time than eClerx and unavailability of requisite skill manpower.
Given its healthy cash balance of ~| 200 crore, eClerx would fund
the deal through internal accruals. Payment structure includes earnouts based on future performance. Assuming Mcap/revenue metric
of 1.4-1.7x yields a deal value of ~$14-17 million for Agilyst and
translates to an EV/EBITDA multiple range of 5.6-6.8x assuming
25% EBITDA margins.
V a l u a t i o n
eClerx is trading at 12.9x and 11.5x our FY12E and FY13E diluted EPS
estimate of | 56.8 and | 63.6, respectively. We model revenue/earnings to
grow at 29%/25% CAGR during FY11-13E and continue to value ESL at
| 820 i.e. at 12.9x our FY13E EPS estimate and maintain our BUY rating
with a target price of | 820.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://www.icicidirect.com/mailimages/ICICIdirect_eClerx_EventUpdate.pdf
A p t s t e p s t o a d d r e s s c l i e n t c o n c e n t r a t i o n r i s k …
Last week, eClerx announced the acquisition of Agilyst Inc, an operational
and analytic support service provider to the US media & telecom industry,
in an all cash deal. The investment was routed through eClerx’ wholly
owned subsidiary, eClerx Investments Ltd. Though the company held an
analyst conference call on Friday, April 13, 2012, financial details of the
transaction would be shared on deal closure and financial consolidation.
Below, we highlight the key takeaways from the call:
ƒ Agilyst- A niche operational and analytics company
Agilyst is a five year old $10 million revenue run-rate (FY12) US
based knowledge process outsourcing service provider with a
delivery centre in Chandigarh. With ~1,000 employees (99%
offshore), the company provides error identification, customer
experience analysis and end-user support services. The typical
engagement size is similar to eClerx (small – four or five employees,
large 40-50) while the revenue/employee is likely lower than eClerx
(30,000-33,000/employees).
ƒ We estimate likely payoffs of $14-17 million in cash
The management suggested than Agilyst grew faster than eClerx,
which itself grew ~40% CAGR during FY08-11. Agilyst EBITDA
margins could likely be lower (25-30% range) than eClerx (~39% in
FY11) given higher proportion of first level managers, longer training
time than eClerx and unavailability of requisite skill manpower.
Given its healthy cash balance of ~| 200 crore, eClerx would fund
the deal through internal accruals. Payment structure includes earnouts based on future performance. Assuming Mcap/revenue metric
of 1.4-1.7x yields a deal value of ~$14-17 million for Agilyst and
translates to an EV/EBITDA multiple range of 5.6-6.8x assuming
25% EBITDA margins.
V a l u a t i o n
eClerx is trading at 12.9x and 11.5x our FY12E and FY13E diluted EPS
estimate of | 56.8 and | 63.6, respectively. We model revenue/earnings to
grow at 29%/25% CAGR during FY11-13E and continue to value ESL at
| 820 i.e. at 12.9x our FY13E EPS estimate and maintain our BUY rating
with a target price of | 820.
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