Several large U.S. technology companies, including Fiserv, Oracle and IBM, are said to be in early-stage takeover discussions with mobile-money specialist Monitise.
Citing a Sky News report, Mark Palmer and Guiliano Bologna of BTIG Research in their February 17, 2015 research report, reiterated their “Buy” recommendation on Monitise and pegged the price target at 52p from the current 24p.
Monitise takeover would be a “good fit”
As reported by ValueWalk on January 22, Monitise announced that its FY15 revenue would be essentially flat year-over-year. The mobile-money specialist also disclosed that it had hired Moelis & Co. to explore strategic options.
Following the negative guidance, Monitise shares plunged. Mark Palmer and Guiliano Bologna of BTIG in their research report dated January 22, 2015 also reiterated their “Buy” recommendation on Monitise, though they cut their price target by 40% from 92p to 52p.
However, following Sky News’ report yesterday identifying the three potential acquirers, the BTIG analysts believe the interest of multiple companies in Monitise Plc who believe the firm to be a good fit should help address concerns of some skeptics. Echoing the takeover news, Monitise Plc’s shares rose more than 12% in trading in London on Tuesday to 24 pence.
Take-away from “Capital Markets Day”
The BTIG analysts note Monitise co-CEO Alistair Lukies during a Capital Markets Day presentation today indicated the mobile-money specialist “absolutely” hasn’t put itself up for sale. Lukies indicated that the results of the company’s strategic review thus far had provided validation of the company’s value. Lukies also promised that the review would be “pithy” as opposed to drawn-out.
During today’s presentation, Monitise management also reaffirmed the 1H15 results it had pre-released on January 22, including FY 15 revenue and EBITDA guidance of £90-100 million and (£40-50 million), respectively.
The BTIG analysts note during today’s presentation, Monitise management also reiterated its guidance of 200 million registered users with an ARPU of £2.50 by the end of FY 18. Though Monitise’s registered user count stood at 33 million at YE14, the analysts highlight that Monitise’s co-CEO Elizabeth Buse emphasized that the 200 million registered users represented 50% penetration by the mobile-money specialist of customers that have already signed up with the company and services that are already in the market.
The BTIG analysts note a key to the potential achievement of management’s guidance will be the launch of the Monitise Central Platform, the open-API interface technology platform that should accelerate the on-boarding of banks and other customers, while opening broader reseller channel adoption. Though the MCP platform is not slated to go live until April, management indicated that it has already been selling the platform in collaboration with IBM.
During today’s presentation, Lukies pointed out Monitise’s ARPU figures to date have been weighed down by the large chunks of user licenses it had sold prior to its switch to a subscriber model in March 2014. Exuding confidence to achieve ARPU target of £ 2.50 by FY 18, Lukies stressed that Monitise has several customers currently generating ARPU greater than £2.50.
The BTIG analysts have arrived at 52 pence price target based on 12x FY 18E EBITDA of £114.79 million discounted back at 12%. The following chart depicts BTIG’s estimates for Monitise Plc:
