Baillieu Holst analysis of MBE

Sorry about the formatting of the one above.

Hopefully this is easier to read!



It will be interesting to see if this counteracts the negative effects of the Bell Potter analysis. You can bet it won't!

But a solid strategic aquisition by MBE all the same.

• Mobile Embrace acquires Eggmobi, a profitable mobile advertising business that specialises in providing rich-media creative. The price is $1.4m, with additional earn-out contingent on performance in line with the company’s growth targets. Eggmobi is expected to enjoy FY2015 revenue of $2.0m and NPBT of $0.6m.
• Mobile Embrace is a Sydney-based mobile marketing and payments company. The company’s 4th Screen business develops marketing strategies and campaigns for brands seeking to target consumers on their mobile phones, while the company’s Convey business has developed a mobile payments infrastructure based on Direct Carrier Billing that allows consumers to pay for products and services with their mobiles. We see Mobile Embrace as being highly leveraged to the growth of ‘m-commerce’, that is, the buying and selling of products using smartphones and tablets.
• Mobile marketing is the growth segment of online marketing. With around a quarter of the world’s population now owning a smartphone and mobile internet access now exceeding fixed in many geographies, brands are moving to better target mobile consumers. Mobile Embrace’s 4th Screen business, which grew revenue 63% in FY14, to $5m, is leveraged to the increased spend brand owners are now willing to make in mobile marketing.
• The era of mobile payments is here. Increasingly around the world consumers have grown comfortable with the idea of paying for goods and services or transferring money via their mobiles. We see Apple’s move to grow in mobile payments as further stimulating this trend, benefiting the Convey mobile payments system, which is based on Direct Carrier Billing. Convey grew revenue 55%, to $14m, in FY14.
• FY14 was a good year for mobile embrace. Mobile Embrace has been profitable at the EBITDA line since FY11. In FY14 Mobile Embrace increased EBITDA by 185%, to $3.2m, a result which was ahead of guidance. We expect further growth over the next three years as 4th Screen gains new business and as the Convey business adds new products and starts working in new geographies.
• Mobile Embrace has solid management. CEO, Chris Thorpe and MD, Neil Wiles have progressively moved their company up the value chain over the last decade to the point where it is now a leading mobile marketing player.
• Mobile Embrace is  undervalued on our numbers. We value Mobile Embrace at $0.45 per share base case and $0.69 optimistic case using a DCF approach. Our $0.45 target price sits at our base case valuation.

	Column 1	Column 2	Column 3	Column 4
0	Rating:	Buy​	Price Target:	$0.45​
1	Risk:	Medium​	Share Price:	$0.145​