Monitise Trading: Strong Start To FY13

Monitise’s (MONI.L) year-end trading update confirms that revenues have grown by more than 140% y-o-y, as expected, and gross margins have beaten our forecast. Our FY13 revenue forecast is two-thirds covered by the year-end order book and new users continue to be added at a rate of half a million per month. With the Clairmail deal now complete, the combined US operation can now focus on accelerating growth in US users through both the direct sales force and via partners FIS and Visa Inc.


FY12 results in line with our forecasts
Monitise expects to report revenues of c £34m for FY12 (+142% y-o-y), in line with our £34.0m forecast. Gross margin is expected to be c 66%, higher than our 64.9% forecast. Registered users are approaching 16m, and are growing at a rate of 0.5m per month. The year-end order book totalled $170m in committed minimum orders plus a further $250m of additional revenues expected from existing contracts, totalling more than $420m or £270m. Of this, £48m (18%) is due to be delivered in FY13.

FY13 forecasts on track
Monitise expects to generate c £70m of revenues in FY13, versus our £71.9m forecast, and expects gross margins to exceed 70% by H213 (versus our 69.0% forecast for FY13). Our FY13 revenue forecast is already two-thirds covered by the year-end order book. The company continues to target break-even EBITDA by the end of CY13. The company noted that it is changing its accounting policy for joint ventures, and will move from proportionate consolidation to equity accounting from preliminary FY12 results. This will add c £2m to FY12 revenues (to £36m) and c £3m to EBITDA/operating profit, but will not have any impact at the net income level and will have a minimal impact in FY13.

Valuation: Milestone driven
Monitise is trading on an EV/sales multiple of c 9x FY12e and c 4x FY13e (based on the market cap calculated using all initial consideration shares). In the absence of profitability metrics, we expect the share price to move with progress on key milestones (eg US and European banks adopting Visa Inc and Visa Europe services respectively, progress with JV partners in Asia, progress with direct customers in the US and the UK, uptake of Simply Tap). Recent sector M&A highlights Monitise’s potential strategic value to larger technology companies.

To Read the Entire Report Please Click on the pdf File Below.