Singtel – Maybank Kim Eng

Beefing up digital ad capability

  • Paying USD359m for Adconian and Kontera to beef up the capability of Amobee in digital advertising market.
  • While marginally EBITDA dilutive in the short term, the acquisitions could help Amobee to break even earlier.
  • Our BUY case of growth resumption starting FY3/15E stays intact. Maintain BUY with a SOTP TP of SGD4.35.

 

What’s New

SingTel is pressing ahead into the adjacent digital mobile advertising space with its subsidiary Amobee paying USD359m for Adconian (for USD209m) and Kontera Technologies (USD150m). We expect the acquisitions to be neutral for SingTel. The acquisitions will be EBITDA-dilutive in the short term but they are in line with market expectations given that SingTel had, up until now, only used a fraction of the SGD2b budgeted for Digital Life investments. Maintain BUY, TP SGD4.35.

What’s Our View

This development will transform Amobee from a mere digital advertising company operating on a single channel/screen into an all-rounded mobile-led digital marketing company that provides advertising & data analytics solutions on multiple channels/screens on a real-time basis. This makes sense, as the market has evolved since 2012 when SingTel first bought Amobee.

Notwithstanding the short-term EBITDA dilution, Digital Life investments were never about short term returns. Revenue and profit targets aside, the investee companies’ bigger objective is to enable the operating companies to better compete via more advanced technology.

With the standalone investee companies aiming to break even in 3-5 years, there is a good chance that Adconian and Kontera will accelerate the process for Amobee. Adconian will triple Amobee’s existing salesforce and both sides will have additional services and solutions to sell, while the new capabilities brought by Kontera will open up new markets for Amobee.

Singtel – Maybank Kim Eng

Beefing up digital ad capability

  • Paying USD359m for Adconian and Kontera to beef up the capability of Amobee in digital advertising market.
  • While marginally EBITDA dilutive in the short term, the acquisitions could help Amobee to break even earlier.
  • Our BUY case of growth resumption starting FY3/15E stays intact. Maintain BUY with a SOTP TP of SGD4.35.

 

What’s New

SingTel is pressing ahead into the adjacent digital mobile advertising space with its subsidiary Amobee paying USD359m for Adconian (for USD209m) and Kontera Technologies (USD150m). We expect the acquisitions to be neutral for SingTel. The acquisitions will be EBITDA-dilutive in the short term but they are in line with market expectations given that SingTel had, up until now, only used a fraction of the SGD2b budgeted for Digital Life investments. Maintain BUY, TP SGD4.35.

What’s Our View

This development will transform Amobee from a mere digital advertising company operating on a single channel/screen into an all-rounded mobile-led digital marketing company that provides advertising & data analytics solutions on multiple channels/screens on a real-time basis. This makes sense, as the market has evolved since 2012 when SingTel first bought Amobee.

Notwithstanding the short-term EBITDA dilution, Digital Life investments were never about short term returns. Revenue and profit targets aside, the investee companies’ bigger objective is to enable the operating companies to better compete via more advanced technology.

With the standalone investee companies aiming to break even in 3-5 years, there is a good chance that Adconian and Kontera will accelerate the process for Amobee. Adconian will triple Amobee’s existing salesforce and both sides will have additional services and solutions to sell, while the new capabilities brought by Kontera will open up new markets for Amobee.

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