Tanla Solutions

Tanla Solutions

ABG Shipyard, Adhunik Metalliks, Bartronics, Cairn India, Dishman Pharma, Garware Offshore, Koutons Retail, Nitin Fire Protection, Shree Cement, SBI

ABG Shipyard, Adhunik Metalliks, Bartronics, Cairn India, Dishman Pharma, Garware Offshore, Koutons Retail, Nitin Fire Protection, Shree Cement, SBI, Tanla Solutions

Tanla Solutions

Investors with a medium-term standpoint can consider buying Tanla Solutions. The stock was on a structural down-trend from its lifetime high of Rs 410 recorded in January 2008. This move was arrested at Rs 21 in March. The prolonged positive divergence in the weekly indicators triggered its trend reversal. An emerging intermediate-term uptrend is visible since then.

Though the stock is undergoing sideway consolidation between Rs 74 and Rs 84, the medium-term prospect is bullish. Following this sideways movement, the stock has the potential to rally up to Rs 104 in the medium term. Medium-term investor can buy the stock while maintaining stop-loss at Rs 67. Short-term investor can buy with the target of Rs 89 and stop at Rs 71.

via BL

Tanla Solutions

Tanla Solutions

Sun TV, Tanla Solutions, Tech Mahindra, Usha Martin

Sun TV, Tanla Solutions, Tech Mahindra, Usha Martin

Tanla Solutions

Investors with a short-term trading perspective can consider buying Tanla Solutions stock. It is apparent from the charts of Tanla Solutions that it has been on a long-term downtrend from its life high of Rs 410 touched in January. The stock has been forming lower peaks and lower troughs since then. In September, the stock broke through a significant support level at Rs 200 and its downtrend accelerated. It, however, found support at Rs 54, recording an all-time low in late November and reversed direction. Positive divergence in the daily and weekly relative strength index (RSI) supports the stock’s recent reversal. On December 12, the stock surged 16 per cent, penetrating its 21-day moving average. We observe that there is an increase in volume over the past three sessions. The daily RSI has entered in the bullish zone from the neutral region. Our short-term forecast for the stock is bullish. We anticipate the stock to move up until it hits our price target of Rs 103 in the upcoming trading sessions, while maintaining a stop-loss at Rs 86.

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Tanla Solutions

The crisis in the global financial markets has taken a toll on several of the key banking, financial services and insurance clients of Indian IT majors. The top-tier companies may yet pull through, thanks to the breadth and depth of their service offerings and broad geographical diversity.

For most mid-tier companies, though, these are challenging times. Valuations for mid-tier IT players has plummeted, with most of them trading at single-digit price-earnings multiples on a forward basis. Even at these levels, the business risks associated with many of them are high.

In this scenario, players with niche offerings and catering to limited verticals or segments may chug along and deliver strong earnings over the medium to long term. Tanla Solutions, predominantly a network aggregator in the mobile value added services (MVAS) space, might be one such player. Investors with a two-year perspective may consider buying the shares of Tanla Solutions. At Rs 173, the stock trades at eight times its likely 2008-09 earnings. Tanla has no strict peers in the listed space.

An integrated play in the mobile billing and value added services catering largely to top mobile operators in the UK and Ireland, synergies from the acquisition of Openbit and an expanding domestic presence are key business drivers for Tanla. Content aggregators typically enable content from music companies, websites and entertainment companies to be made available in a downloadable format on mobile phones.

The company’s revenues have grown at a compounded annual rate of 173 per cent over the last three years to Rs 459.8 crore, while net profits have jumped 189 per cent to Rs 166.5 crore. The company has over the last several years been enjoying an EBITDA margin of over 50 per cent.
Integrated play

Tanla has end-to-end offerings in the mobile value added services segment, with network aggregation, product offerings and professional services. The company derives 78 per cent of its revenues from the network aggregation services. Its top clients are leading European mobile operators such as O2, Orange and Vodafone, all pan-European players, thus enabling Tanla to expand its footprint. These operators also have an average revenue per user (ARPU) of $35-45, of which non-voice revenues are $10-14.

In addition, the company also has its own products, such as content management systems, WAP Builder and Interactive TV. Although this segment contributes only 11 per cent of revenues, it enjoys 86.9 per cent of the EBITDA margins. Professional services are also delivered offshore by Tanla. Interestingly, most products are offered on a SaaS model, making the implementation cycle shorter and cheaper for clients and allowing for higher margins.
Openbit acquisition

Tanla Solutions’ acquisition of Openbit gives it a clear edge in terms of enhancing its offering in the on-device mobile payment segment. It could also help Tanla expand operations in new regions and create a sustainable revenue stream.

The company acquired an 85 per cent stake in Openbit in June, to be hiked to 100 per cent in two years, for $15.8 million. For June alone, the company declared Rs 7.4 crore in revenues, with an EBITDA of Rs 1.66 crore.

The acquisition holds several positives for Tanla. Openbit has strong tie-ups with players such Nokia and has its software products installed in 20 million Nokia phones. This deal can help Openbit extend its relationship with Nokia in countries such as China and India, where mobile subscribers are being added at 8 million a month.

This apart, on-device payment is a concept fast catching up in India, with several operators such as Reliance Communications and Bharti Airtel betting big on mobile commerce. Tanla is set to serve Indian operators and agreements with several players are on the anvil.

Openbit’s products may augment Tanla’s mobile applications offering in this regard. Openbit derives 60 per cent of its revenues from clients in Europe and 35 per cent from those in Asia-Pacific, both of which are high-growth regions for mobile payments.

While a bulk of the revenues will continue to flow in on a usage basis for features such as gaming and other entertainment-related downloads, Tanla could create a more sustainable revenue stream over the next couple of years, comprising set-up, upgrade and support revenues.
India Foray

Tanla has also started its India foray, with tie-ups with BSNL for a voice portal in all the circles. It also has agreements with Bharti Airtel for launching a voice product-M-Raga in two circles. Reliance Communication is also in a deal with Tanla for premium SMS delivery.

There are also agreements with content developing companies to deliver integrated offerings to domestic operators. But all these are at a nascent stage and it may be over the next two to three years that India will contribute substantially to revenues. With established players such as OnMobile, IMI Mobile and Bharti Telesoft to contend with, breaking into this market may be difficult.
Risks

In India the company may have to contend with tighter margin on VAS products as offtake is much lower than in the US and Europe. The company does not offer ringtone downloads or caller ringback tones, which may be a negative. Tanla may find competition from players such as IMI Mobile, which has just entered the UK, and Onmobile Global which has made acquisitions in France.

Tanla Solutions

Tanla Solutions

Tanla Solutions

Tanla Solutions

Tanla Solutions

Tanla Solutions

Tanla Solutions, BILT, Elder Pharma

Tanla Solutions, BILT, Elder Pharma

Indiabulls Real Estate,Tanla Solutions,Banking

Indiabulls Real Estate,Tanla Solutions,Banking

Tanla Solutions

Tanla Solutions

Tanla Solutions

Tanla Solutions

Tanla, Nagarjuna Contructions, Bharat Forge, Emco, Bharati Shipyard

Tanla, Nagarjuna Contructions, Bharat Forge, Emco, Bharati Shipyard

Prabhudas Lilladher - Tanla Solutions

Prabhudas Lilladher has buy rating on Tanla Solutions and revised its price target to Rs 944.

"We expect Tanla to clock revenues of Rs 410 crore in 2007-08 (Apr-Mar) and Rs 620 crore in 2008-09. At the current market price of Rs 614, the stock trades at 19.8 times the 2007-08 estimate earnings per share of Rs 31.1 and at 13 times 2008-09 estimate earnings per share of Rs 47.2. We have increased the target price as we have factored in the contribution from Ireland and we believe that this stock is on a path of re-rating," the brokerage said in its Sep 21 report.

The company has forayed into Ireland. "Tanla has tied up with all the Irish operators which include 3, O2, Vodafone and Meteor. The total addressable market for Tanla is around Rs 1,000 crore. Revenues would start flowing in from second quarter of 2007-08. The margins in Ireland will be at par with the company level as there is no major capex involved here," the report adds.

Tanla’s US subsidiary has begun operations and revenues are likely to flow in three months. It is also looking for acquisitions there.

Hot Picks

Tanla Solutions CMP: Rs 482.65 Target price: Rs 706 HDFC Securities has initiated coverage on Tanla Solutions with a ‘buy’ recommendation on account of the company’s presence in the mobile transaction business. According to the brokerage, Tanla Solutions’ revenue is estimated to grow at a CAGR of 72% between FY07 and FY09. “Servicing content providers will help Tanla to catch up with the rapid technological changes in the content delivery business. This is a major business for Tanla and helps it to get more content providers on its network,” says the report. Moreover, the company is expected to spend Rs 220 million in FY08 on R&D. “We believe that the company would grow at a CAGR of 59% in FY07-09E at net levels. This gives us a target price of Rs 706 for the stock --Rs 646 for the core business and Rs 60 for its non-core business (interest and dividend incomes),” said the brokerage in a note to its client. Spice Comm CMP: Rs 55 Target price: Rs 70 Citigroup has initiated coverage on Spice Communications with a ‘buy’ recommendation as the telecom entity is in the process of ramping up coverage in Punjab and Karnataka. “Moreover, we believe its suitability as an M&A target provides the icing on the cake,” adds the report. Access to 900 MHz and its small footprint make it an attractive and probably the only M&A candidate, explains the foreign brokerage. “New spectrum rules may dilute M&A prospects a bit, but on the flip side provides a chance to enter new circles, though constrained by size and management bandwidth,” it adds. However, the report adds that while new circle rollouts are possible if new spectrum norms are accepted by the department of telecom (DoT), Spice will remain constrained by its balance sheet size as well as management bandwidth. Citigroup has set a 12-month price target at Rs 70 per share. Incidentally, the price target includes a 15% M&A premium. We believe that the scope for merger/acquisition between Spice and other telcos such as Idea, RCOM and Aircel still exists, says Citigroup. Mindtree Consulting CMP: Rs 582.75 Target price: Rs 556 Religare has initiated coverage on Mindtree Consulting with a ‘sell’ recommendation as it feels that operational risks are raising concerns and valuations are expensive. While Mindtree has been one of the fastest growing mid-tier Indian IT services company, growth has slowed down significantly in FY07 and is further expected to slow down in FY08 due to rupee appreciation, says the report. “Risks to growth is significant as more than 65% of the revenues come from development projects which are highly dependant on the discretionary IT spend of clients. In the event of an economic slowdown in the US, discretionary IT spends would be curtailed,” adds the report. However, the report adds that the estimates do not factor in any large deals that the company might win that could fuel higher-than-expected earnings growth. IOB CMP: Rs 138.15 Target price: Rs 150 Angel Broking has recommended a ‘buy’ on Indian Overseas Bank with a 12-month price target of Rs 150. “IOB remains in a ‘sweet spot’ with its superior return ratios, consistently high net interest margins, better operating efficiency and higher leverage. Going ahead, with the government’s holding at 61%, IOB would be an active candidate in the consolidation process in the PSU banking space,” says the report. Meanwhile, the brokerage has valued the bank at a 10% discount to fair value to factor in its geographical concentration. The report has also factored in positives like well-managed assets and liabilities to drive earnings, a significantly derisked investment book and strong operating performance. Further, IOB is well-placed on the capital adequacy ratio (CAR) front. “For FY07, the bank reported CAR of 13.27% of which Tier I comprised 8.2%. Post implementing Basel II, management expects CAR would stand at 12%. IOB has to comply with Basel II guidelines by FY08 due to its overseas branch network. We do not expect the bank to dilute its equity in the near term,” adds the report.

Tanla Solutions

Tanla Mobile (a subsidiary of Tanla Solutions), leading provider of next generation mobile applications, m-commerce and interactive services, was selected by the UK-based mobile services provider Pocket Group to deliver multi-media entertainment services across the customer base.

The Pocket Group delivers a variety of compelling media-rich content including music, gaming and video downloads across a broad range of 2.5 and 3G mobile devices.

Net profit of Tanla Solutions rose 88.85% to Rs 19.47 crore on 47.89% rise in sales to Rs 25.88 crore in Q1 June 2007 over Q1 June 2006.

Tanla Solutions is the provider of integrated telecom infrastructure solutions and products. The company has got strong domain expertise in the non-voice mobile telephony industry. Its business is mainly targeted at the exponentially growing non-voice mobile messaging and data services market

Anand Rathi - Daily Equity Market , Emkay - Morning Notes, Sujana, Tanla Solutions

Anand Rathi - Daily Equity Market

Emkay - Morning Notes, Sujana, Tanla Solutions

Tanla Solutions: Hold

Investors with a high risk appetite may retain their exposure in the Tanla Solutions stock. At the current market price, the stock trades at a price earnings multiple of 20 times its 2006-07 per share earnings.

Our `Hold' recommendation on the stock is predicated on the fact that the company was only recently listed with a relatively short earnings history and its concentrated exposure to the non-voice mobile segment.

We had recommended investors to subscribe to the initial public offering made by Tanla Solutions in the price band of Rs 230-265 per share in mid-December and remain sanguine about its prospects. This is also evident from the strong financial performance of Tanla for the latest quarter and the year ended March 31, 2007. Investors can use any weakness in the broad markets to step up exposure in small lots.

The company's core strength lies in catering to a cross-section of the mobile messaging market, which has robust growth potential.

The company aims to capitalise on the multi-year growth potential of the non-voice mobile market that is broadly segmented into short messaging service (SMS) and multimedia messaging services.

Tanla offers telecom-signalling products to mobile operators; aggregation services (by acting as a single point interface between content developers and mobile network operators) and offshore services in the area of application hosting and infrastructure management. Its blue-chip clients include leading mobile operators in the UK such as 3G, Vodafone and Virgin Mobile.

Several research outfits have projected that messaging services will be a crucial experimental ground for mobile companies and Tanla's principal growth engine over the next few years. At the same time, the company has also indicated that it is conducting research in the area of telemetry and telematics. The company is likely to start marketing some of these technologies and products in the coming years.

The key risks, as we had spelt out in the IPO analysis, stem from high client concentration, slowdown in growth of 3G services if the price points for service prove to be too high, penetrating the new growth markets such as the US, and margin pressures arising from stiff competition in the aggregation services market in UK.

Of the Rs 420 crore raised through the IPO, the company has set aside a chunk for general corporate purposes, which include acquisitions that will provide it the beachhead in the US/Asia-Pacific markets.

Identifying the right acquisition target/s and integrating the acquisition with its offshore centre in India can prove a risky proposition.

Financial pep

In the latest quarter ended March 31, 2007, the company recorded consolidated revenues of Rs 78 crore and post-tax earnings of Rs 34 crore. On a sequential basis, the former have grown 37 per cent and the latter 47 per cent.

In the latest quarter, the operating profit margin dipped to 46.4 per cent from 52.2 per cent on a sequential basis. For the full year 2006-07, the operating profit margin was 49.8 per cent, down from 55.7 per cent.

Since the margin continues to be robust, there is no near-term concern, but over the next year maintaining the operating margin broadly in the 40 per cent range holds the key to sustaining post-tax earnings growth.