September 10, 2008

OnMobile Global

cmp: Rs 495
target price: Rs 630

Citigroup Global Markets has initiated coverage on OnMobile Global with a ‘buy’ rating saying OnMobile Global is India’s largest VAS (value-added services) operator (35% share) in a rapidly growing market [FY08-11 (estimated) CAGR at 51%.

The estimated 36% EPS (earnings per share) CAGR over FY08-11 (estimated), was due to the company’s increasing international presence, said Citi.

“Though it appears high in the current environment, we believe our target PE (price to earning)of 25x Mar10E is justified by OnMobile’s strong growth prospects and is in line with the multiple for comparable peers,” the note added.

According to the Citi release the domestic VAS has graduated from being a glorified sub-set of p-to-p SMS to a well-demarcated segment. “The current contribution of the company at 3.4% of wire-less revenues is likely to increase to 6% by FY12E,” the note said.

“OnMobile’s industry-leading position in voice platform and CRBTs, organisation structure geared to innovate/scale up quickly, and strong operator relationships make the company well-positioned to capitalise on this opportunity,” it added.