Company - Globo (GBO)
Current Share Price - 22p
Market Cap - 74.2m GBP
Shares in Issue - 337.29m
NAV - 58.47m GBP
Cash (at current exchange rate, reported at last interim results) - 21.04GBP (net cash 10m GBP)
Disclaimer - I have held shares in Globo since December 2010, and it is my single largest holding.
Revenue and profits for sequential 6 month periods are detailed below.
All data taken from digitallook. All figures in euros as this is what Globo report in.
Apologies for any confusion that this causes, but I have tried to make things clear.
There appears to be a considerable 2nd half weighting to the results, which is why I have reported all
figures for consecutive 6 monthly periods and highlighted to aid analysis.
Euros (millions)
Income Statement 30-Jun-12 31-Dec-11 30-Jun-11 31-Dec-10 30-Jun-10 31-Dec-09
Revenue 25.22 25.7 19.61 18.38 12.53 15.15
Profit After Tax 4.37 6.52 2.36 3.39 1 2.01
EPS 1.4c 2.3c 0.9c 2.1 0.7 1.4
Current broker forecasts (conveniently in GBP, just to keep you on your toes)
Year Ending Revenue (£m) Pre-tax (£m) EPS P/E PEG EPS Grth. Div Yield
31-Dec-12 42.17 12.25 3.04p 7.2 0.5 +16% n/a 0.0%
31-Dec-13 55.66 19.65 4.40p 5.0 0.1 +45% n/a 0.0%
Personally, I think that broker forecasts for the financial year just finished will be comfortably beaten,
but even at current levels, they are not on a demanding valuation.
Now, on to what Globo actually do.
Globo have three parts to their business. They started life as a domestic Greek telecoms company,
but have expanded aggressively over the last 3-4 years into the mobile S.A.A.S. (software as a service)
market with a number of products aimed at consumer and enterprise customers. They have recently disposed
of 51% of their Greek operations by way of an MBO. Their domestic business had been shrinking and increasing
losses due to the recent Greek financial crisis. Even prior to the disposal, they had increased the proportion
of their revenue coming from international mobile business to 68% of total revenue.
1. Legacy Greek business - Revenue for the last six months compared to the corresponding period in 2011
reduced from 10m euros to 3.7m euros, with gross profit falling from 1.2m euros to a 970k euro loss. Eye
wateringly awful. The management state in the interim results that this is a result of the economic crisis
and market slowdown in Greece. The good news is that they have now divested of 51% of this business by way
of an MBO, completed on 4th December 2012. The total consideration for the disposal was 11.2m euro and they
state that the business sold had revenue of 8.7m euro and PAT of 74k euro. Only 1 million euro of the consideration
will be paid upfront, with the remainder to be paid over the next 4 years. The RNS announcing this divestment stated
that this will result in a significant reduction in debt and debtor days for the continuing group. (both concerns up
until this point for investors in the company). The transaction is net cash positive for the group, even before the
collection of the proceeds.
2. Mobile Solutions - Here lies the reason I feel the company is a good investment and should enjoy rapid growth
in revenue and EPS.
The company have a number of software products for consumer and enterprise customers
- CitronGO! and GO!Social - Basically, these are mobile phone products which give feature phones many of the same
abilities as smartphones. They launched this product in 2009, focused on developing economies, where the majority
of mobile phone users do not own smartphones. They have seen consistent subscriber growth, mainly marketed through
agreements with mobile network operators. Subscribers increased from 1.4million to 1.8 million in the first 6 months
of the 2011 financial year. They currently offer these products in 25 countries, with one of their largest markets
being Indonesia. They usually have a revenue sharing agreement with MNOs, and customers sign up to a monthly subscription
to use the service.
- GO!Enterprise Server - This product is the "big one" for Globo in my opinion. It is an enterprise mobility phone
software product which enables workers to combine their normal mobile phone with their work mobile phone, riding the
current wave of BYOD(bring your own device). Globo's product can be used on all smartphone operating systems, and
appears as an "app" on the users home screen. When the user enters the app, they go into a new phone desktop. The app
is protected by what the company informs me is excellent security, exceeding the level provided by Blackberry, for example.
The employer can customise what the user sees in the GO!Enterprise app and can push new content and remove content remotely.
The employee will have access to work files, emails, contacts etc when they use the application. Globo launched this product
in the second half of 2011 and had maiden revenues of 2m euro, and revenue of 4.4m euro for the first half of the 2011
financial year. They have announced partnerships with two MNOs since launch and with a number of distributors, to help
sell their product. Newsflow has been increasing, with 2 distribution agreements and 1 contract with a tier-1 MNO announced
in the last 3 months. They have most recently, in Autumn 2012, launched their product in the USA, where they see considerable
potential. Other points to note, are that they price the product considerably more cheaply than Blackberry and modestly
cheaper than their direct competitors. The other major advantage is that Globo's product works on any smartphone, rather
than being tied to the blackberry brand. There are a number of other competitors in this space, but Globo have certainly
been consistently positive about the superiority of their product and I feel that their early sales revenues and contracts
suggest that it will do well. An RNS on 24/12/12 informed the market that they currently have 900 active customers and 140 000
active licences as well as 80 000 licences of an alternative version of the software for B2C use.
Revenue and gross profit for this business segment for the 6 months to Jun 2012 was 19.3m euro and 12.8m euro respectively.
The corresponding period in 2011 was 8.06m euro and 4.9m euro respectively. This represents a 137% increase in revenue and
161% increase in gross profit.
3. The third part of Globo's business is telecom S.A.A.S. solutions. This is made up of 3 strands. Firstly, some managed wifi
services, secondly, the operations of dialect technologies, a New York based acquisition which the company acquired approximately
1 year ago. This has synergistic technology which they are incorporating into GO!Enterprise, including the ability to have your
desk phone/landline automatically transferred to your mobile when you are not at your desk in work. Thirdly, they provide further
telecom services via another acquisition, Reach Further Communications, whom they purchased in November 2011. This segment reported
revenue of 2m euro for the 6months to June 2012 and a loss of 661k, compared to a gross profit of 216k euro on revenue of 1.3m euro
a year earlier.
I hope I haven't bored you to tears reading this, so here is a very brief summary of the investment pros and cons as I see them.
Positives: - Fast growing mobile business in "hot" BYOD sector.
- Divestment of legacy, low margin Greek business.
- High margin mobile solutions, with rapid growth in revenue and profit.
- Excellent growth forecasts and low PE and PEG
- Low debt.
Negatives: - Association with Greece. (Although the company have taken steps to divest the Greek business to distance
themselves from this and increase investor confidence).
- Poor cash collection. Long debtor days, although reducing.
- Cash flow<EPS for last few years, but recent swing to cash flow positive and the company expects cash
generation to improve over time.
- Rapidly changing BYOD market. Can the company maintain it's technological lead.
- GO!Social and Citron!GO undoutedly have a shelf life as more customers get smartphones.
- Increase in shares in issue from 175m to 330m over the last 3 years.
This is the first proper write up of a share that I have done on Fool.co.uk, although I have been a long time (10 years+)
member and only very occasional poster. I'm glad the NFSC has stimulated me to write this and hope you find it in some way
useful. I'd appreciate any comments or feedback that anyone has.
Cheers
Greendaze
