Geodesic Software

Geodesic Software

Thursday, March 24, 2011

10:55 PM

Introduction

1. In a competitive telephony market, and with subscriber base reaching near penetrable levels, where does the moolah for Communication companies lie?

2. What is it that will be attractive with the introduction of 2G and 3 G services?

3. If someone were to ask me, while communication at low rates is here to stay, what is the secret ingredient for growth in the telecom sector. Will rural telephony really add up to the bottom line/ Will mobile number portability bring sufficient gains.

4. Like a typical middle class with his apprehensions , I am  a late entrant in the mobile technology arena . But it appears to me that there is tremendous potential in value added services .. Of course .. Until someone starts offering even this as free.

5. So I started searching for companies with expertisein this area and came across geodesic

Present Valuation

1. At CMP of 80, the market values the company at 720 crores. Debt is about 600 crores. So Enterprise Value  of the company stands at around 1300 crores.

2. The company makes around 150 crores after tax. If I ignore the reserves, it is giving me a return of excess of 10%  (150/1300).

3. There is no raw material, no power. Costs are its HR, advertisements and software.  The raw material is in its human capital.

4. At 80 Rs CMP  It earns around  Rs 20 per share and distributes Rs 2 as dividend.  (Consistently paying dividend)

5. MFs have a low holding. Makes more sense to buy.

Strengths.

1. First mover advantage with startegic tie ups in place

2. For most of the products, the company derives a continuous revenue stream in the form of licence fee, revenues linked to usage and product/feature upgrades.

Weakness

1  If ever value added services become free, company will have to start searching for something else

Opportunities

1. The company has signed deals with America Movil, a large mobile player in Latin America, for deploying products in latin america -  where average revenues per user are more than three times the levels prevalent in India and, thus, presents lucrative opportunities .

2.  It has also recently made available its Mundu Radio on the Android platform, which would enhance its user base. Some of its entertainment applications are made available in Apple’s App stores and Nokia’s OVI stores, where the number of users have steadily increased.

3. The company has also signed up a contract with Vodafone in India to allow users to update their Facebook accounts.
4. Tie up with banks to deliver services in place (  Axis Bank, HDFC Securities,  Angel Broking)

Financials

Year	2006	2007	2008	2009	2010	2011 (9)	Remarks
Net Sales	91	165	255	493	487
Net Profit	42	94	115	191	175
Op Margin	18	60	45	40	28
EPS	7	16	12	21	19
Dividend	0.4	0.4	0.6	1.6	1.7		Div yield-2%
RESERVES

More on the company to follow in the next post