With the increasing popularity and subscription of value added services among mobile users, OnMobile Global stands a good opportunity to milk this customer base. The company offers value added services, through its software, which are frequently and highly used by mobile users. Services such as miss call alerts, news, games, ringtones, and ticket buying movie, railways, mobile radio, voicemails, and updates - markets, sports. As regards the interactive services, the company offers services like user-generated content solutions, wherein subscribers get access to contests, auctions, and classified advertisements.
An added advantage of these services OnMobile offers is its gamut. The sheer extent to which the mobile-fascination has emerged across the demography (from a teenager to an adult), it has no longer remained a necessity-demands-instant-communication device of mature adults. And thanks to the television (reality shows, contests), these services are all the rage and used to a larger extent.
More so, the company's clientele includes all the big companies in telecommunications, with the likes of Vodafone Essar, Bharti Airtel, and Reliance Communications. Hence, OnMobile Global has a wide and consolidated customer base to milk the potential involved in value added services.
One of the hurdles in gaining mammoth revenues in the value added services business is the revenue sharing model with the service providers. It is the ability of the service providers to market and price the companys services. Also, the extent of subscription of value added services, though increasing, are still in a stage, which cannot be termed as a 'well-captured-subscriber-base.
However, considering the data available, the company has a good track record. Its sales and operating profit have grown at a CAGR of more than 90% respectively. Also, the company's net profit margin is getting stabilised at around 25-26%, which is a good sign.
But sustainability would be a concern, if its subsidiaries (in all seven), which are loss making, continue to do so.
On the valuation front, considering annualised earnings, on a fully diluted equity basis, the company quotes a P/E of around 39(x) and 42(x) at the lower and higher end of the price respectively. The company has a limited operating history and hardly has peers to draw parallel to performance. Investors must take into consideration the above facts before making investment decisions.