Geodesic an outperformer: SSKI Research

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SSKI Research is bullish on Geodesic Information System and has recommended outperformer rating on the stock.

SSKI Research report on Geodesic Info:

Key highlights of Q4FY07 results:

• Revenues grew 8.3% qoq (+64.5% yoy) in Q4FY07 to Rs 490 million on sales of Mundu IM applications and its variants to various segments.
• EBITDA margins increased to 63.4% from 55.2% in the last quarter on account capitalization of software development related expenses as advised by new auditors Ernst and Young. EBITDA increased 24.5% qoq to Rs 311 million (increased 112% yoy). Both EBITDA and EBITDA margin were higher than our estimate of Rs 274 million and 54%, respectively.
• Other income of Rs 52.9 million (Rs 51.2 million in last quarter) was inclusive of Rs 28 million of forex gains. Depreciation was lower at Rs 41 million (Rs 57.9 million in last quarter). Effective tax rate was 5.1% for the quarter. PAT grew 25.6% qoq in line with EBITDA growth of 24.5% qoq. PAT was Rs 305 million against our estimate of Rs 212 million.

FY07 full year consolidated results:

Revenues grew 73.6% yoy during FY07 to Rs 1.68 billion against its guidance of Rs 1.60-1.70 billion and our expectation of Rs 1.74 billion. EBITDA at Rs 1.04 billion (+96.3%) was higher than our estimate of Rs 1.01 billion (+89.9%). EBITDA margins were 62.2% against our expectation of 58.2%. PAT was Rs 911 million (+123% yoy) against our estimate of Rs 818 million (+101% yoy) and guidance of Rs 650-700 million.

Client addition:

Geodesic added five new clients in the new sectors including Portals and Publishers, Handset Manufacturers, ISPs and Telecom carriers. BenQ, Gothenberg Posten and Adeprimo were some of the names announced during the quarter.

New product launch:

Geodesic launched the 4th generation of Mundu Interoperable IM. Free version of 1st generation Mundu Internet Radio was launched to cater to the rising smart phone market. Paid version is likely to be launched by August 07.

Developments on Simputer related products:

Amida Simputers are being used to pilot projects such as Traffic Rule Enforcement in India and as Mobile Data Readers and Writers for the National Indian Identity Card. The pilot for traffic rule enforcement is going on in Delhi, Bangalore, Kolkata and Pune. The product is being distributed by BEL. The company is in talks with universities in US for marketing and development of "Olai".

Developments pertaining to Chandamama acquisition:

The work of digitization of content available with Chandamama is in progress. The content delivery through internet and mobile is expected by end August.

Standalone results audited by Ernst and Young:

FY07 standalone results were audited by Ernst and Young, the new auditor appointed last year. Consolidated results announced are provisional and the audited numbers are expected soon.

Bonus announced:

Geodesic announced 1:2 bonus and total 20% dividend (including interim) for the year FY07.

Valuations and view

Geodesic has reported strong net profit growth - topline growth was, however, lower than our expectations. Client wins continue to be decent with another five new clients added in the quarter. We have reduced FY08 revenues and EBITDA by 11.7% and 7.7% respectively to account for rupee appreciation and the delay in launch of paid version of radio product. FY09 revenues are lower by 4.7% due to our lower Rupee assumption. Earning estimates for both FY08 and FY09 are left unchanged on account of higher margins, other income and lower depreciation expenses. We have assumed a tax rate of 11% in FY08 and FY09 and hence the net profit growth appears lower in FY08. We expect CAGR in EBITDA of 44% over FY07-09E. At Rs 275 the stock trades at 10.9x FY09E - Outperformer