Stock Idea: Geodesic Ltd.

Geodesic Ltd (Rs 136)
(BSE Code- 503699 NSE Code- GEODESIC)
(P/E- 4.4, Mkt. Cap-1253 cr.)
Geodesic Ltd, formerly Geodesic Information Systems Ltd, has been an innovator in software products focused on information, communication, and entertainment for mobile phones and desktop computers. Among its retail products are instant messenger service, software applications (VoIP or Voice over Internet Protocol) and Mundu Radio (allows users to navigate numerous radio stations and news channels on mobile phones). Its institutional products help enterprises manage customer data, reduce advertising and communication costs and enable communication across the enterprise
Geodesic offers applications under the brand name 'Mundu' for retail segment and is also the owner of Chandamama, the library of 15,000 exclusive stories. Geodesic offers communication and collaboration solutions. It provides innovative front-end applications, the Mundu suites of products. Mundu instant messaging (IM), (voice-over-internet protocol) Mundu speak, Mundu Radio, Montage, etc. Mundu Radio technology is used by Idea Cellular's 'Idea Radio' and Geodesic also has technology allowing live TV on mobile handsets. Mundu IM has been recognised as one of top 10 applications of 2007-08 and is used by more than 7% of iPhone users. Mundu suite of products helps reduce 60-65% of communication costs. In 2005, Geodesic acquired three companies including Bangalore based Picopeta Simputers and Hong Kong based Engage solutions and took a stake in Swedish Clangula IT. In 2007, it acquired web development company E Dot solutions and children's magazine Chandamama. Its latest acquisition was South American Interactive Networks (INT), which has given Geodesic access to secure private IM solutions for enterprises, private label IM solutions for internet services and IM solutions for mobile operators.
There are an estimated 360 million smart phones worldwide and what Geodesic offers is mostly related to Internet services on mobile phones-a market that's growing 30% a year. Call and message rates in India are already very low and there is little room for competition on the price front. The next wave will come from value-added services(VAS) such as VoIP and entertainment content. As a niche content provider, Geodesic can tap this opportunity. Instant messaging is a rapidly expanding mode of real-time communication across the world. The global messaging market, which was $65 billion in 2007, is predicted to touch $117 billion by 2012 according to Portio Research. A more recent report also states that Mobile Instant Messaging, which generated $2.5 billion in 2008, is expected to increase to $12.4 billion by 2013.
Geodesic reported a consolidated topline of Rs 642.94 cr. in FY09, a whopping 103.18% jump over Rs 316.44 cr. in FY08 on consolidated basis. Net profit at Rs 282.84 cr. grew a handsome 90%. On a equity of 18.44 cr.(Promoter's stake-23.25%, FII/MF stake- 58.32%) The EPS on a Rs 2 paid up share stood at Rs 30.67 and the dividend declared is 80% (Rs 1.60 per share). Geodesic has a strong balance sheet with Rs 380 cr. of cash, part of which was used to buy back $8.5 million outstanding FCCBs. In the March quarter, Geodesic finalised a deal with Bright Star Corporation, Miami, to launch Mundu IM on mobile phones and also got orders from Atom Technologies, Mumbai, Venture Infotech and Fullerton India Credits Ltd for implementing a biometric enabled mobile terminal. It inked deals with Business India and Ahli United bank BSC, Bahrain, as also with some leading stock broking firms in India and Mirae Asset Global Investment Hong Kong. Besides, Toonz has recently tied up with the company for using Chandamama stories for full-length animated films. For the Q1 ended June 2009, Geodesic posted net profit of Rs 59.04 cr. on net sales of Rs 163.2 cr. on consolidated basis. The stock is trading 4.4 times its FY09 earnings and appears extremely cheap for a products company with a net profit margin of over 44%, much higher compared to most other listed, products-focussed technology companies. Investors can start accumulating the stock at current levels and add more on declines for decent returns of 50%-60% over the next 6-8 months.

Source: Internet (Valuenotes by Sanjay Chhabria)