• Adding depth and breadth to amobee
• Positive on Alibaba/SingPost deal
• Higher S$4.08 fair value

Acquires two more digital firms

SingTel, through amobee, has acquired two digital ad technology firms. The first is Adconion for US$209m cash (excluding debt), which provides multi-channel digital advertising solutions like mobile, video, email, display and social across all devices on a unified platform. The second is Kontera for US$150m – a digital content intelligence and market technology company that has the capability to analyse data in real time, thus allowing advertisers and agencies to make real-time decisions about their brands and marketing campaigns to achieve better returns.

Still likely work in progress

According to management, Adconion (which posted US$185m in revenue in FY13) will contribute to amobee’s topline, while Kontera will boost amobee’s technical capabilities. Management also expects the integration of both companies into amobee to be fairly straightforward and should be done by end Mar 2015. While the acquisitions will help SingTel further its Digital Life strategy of being the global leader in mobile-led digital advertising space (US$100b global market opportunity in 2017 according to eMarketer), we believe that it is still a “work in progress”. For one, the integration may take some time to bear fruit. Secondly, SingTel alluded that it may still take three to five years for amobee to break even and become profitable. Nevertheless, SingTel stresses that it is not just about cash and profitability, but value too. It also calls the move to buy Adconion and Kontera as “a game changer” for amobee.

SingPost and Alibaba

Separately, the recent move by Chinese ecommerce giant Alibaba to take a 10.4% stake in SingPost for S$312.5m would see SingTel’s 26% stake easing to 23%; but we see some positives in the move. We opine that the partnership between Alibaba and SingPost could also benefit SingTel, as it could open the door for the telco to the Chinese market; not so much in the traditional telco space but more in e-services and digital advertising.

Maintain BUY with improved S$4.08 fair value

There are no major changes to our FY15 and FY16 estimates but we made minor tweaks to our estimates further out, resulting in our fair value edging up from S$4.00 to S$4.08. Maintain BUY.

Source: OCBC Research - 13 Jun 2014