Future is GAMING which is growing exponentially @ 40% CAGR ~ $100+ Billion Opportunity!!!
Multibagger Pick (Small & Mid-Cap) of May'22 - OnMobile Global Ltd
Note: This stock idea was published in May 2022 to all our PAID subscribers of Super 6 Platinum Plan where we identify 10 best-in-class multibagger stocks from small cap & 6 game changer stock ideas from mid-cap in a year. To join WhatsApp to +91 9354179604 (Sanjay Gupta)
🌟 OnMobile Global Ltd (BSE: 532944 | NSE: ONMOBILE) 🌟
🏆🏆🏆 Market Cap ~ ₹ 1,372 Cr | Worldwide presence across 58 Countries | Partnership with 100+ Mobile Operators and counting | Two breakthrough products in Mobile Gaming | More than 75M Monthly paying users | Turnaround Story @ Reasonable Valuation | Promoter Holding : 48.2% | Highly Experienced Management Team. 🏆🏆🏆
✅ Pioneer and Undisputed global leader in providing ringtones. ✅
👉 Key product offerings of the Company are Ringback Tones, Digital Content Store and Infotainment.
👉 Company operates in 4 verticals - Ringtones, Videos, Challenges, Arena & Legacy Contests and Games (ONMO).
👉 Tones has 66 million users and 48 operators globally with 10B+ tones played per month. Tones contributed about 40% for FY22.
👉 Videos & Editorial contributes ~40% in revenue: Onmobile’s digital mobile web store offers a one stop destination for users to access curated content by paying a subscription fee. The content includes trending global and local topics across Sports, News, Entertainment, Kids, Games and Travel etc. Videos is a high growth market and the company is looking to upgrade the product, reposition this business and view this as an exciting future growth area.
✅ Leading in Cutting-Edge Mobile Gaming : Capturing the Mobile Gaming and Entertainment Market ✅
👉 The global mobile gaming market is expected to grow from $80 Billion to over $130 Billion by 2025.
👉 Outside the traditional core (ringtone & videos), they are focused on building cutting-edge mobile gaming products such as ONMO & Challenges Arena which they take to market through B2B and D2C channels.
👉 Key trends impacting growth of mobile gaming => Growing Smartphone Users + Growing Mobile Gamers + Rising Cloud/5G Gaming Spend + Growing Esports Audience & Competitions.
👉 Based on Q4FY22 Revenue - 38% revenue contribution is from Tones, 42% from Videos, 5% from Challenges Arena & 15% from Legacy Contests and Games (ONMO). It means 80% revenue is contributed from legacy businesses (with little growth) while 20% revenue contribution from high growth gaming business.
👉 We are betting BIG on the gaming business especially Challenges Arena which has shown terrific growth in Q4FY22 across all key metrics. Challenges Arena: Quarterly Subscribers Addition - Growth 100% QoQ (Net Active Base doubled every quarter in FY21-22).
👉 This B2C cloud gaming platform truly has a global opportunity to own the casual esports market with an addressable market that is over $10B.
👉 The player feedback has been good and they are working on adding more compelling features in the near future. Company Launched B2C Cash battles in India during Q4FY22.
👉 Challenges Arena, a single destination of casual challenges that provides an unparalleled gamified experience.
👉 Challenges Arena offers an immersive experience for gamers to play and compete on quizzes and various theme-based challenges with a real-time rank and leader-board.
👉 OnMobile Global has launched Crypto payments for players globally on ONMO platform. ONMO, the direct-to-consumer social eSports mobile gaming platform from OnMobile Global, is enabling transactions through Bitcoin for players across the globe.
✅ Access to 100Mn+ subscribers through Chingari Investment. ✅
👉 OnMobile led a $13 million investment round in Chingari. This investment will allow Chingari to accelerate its growth from 56 million users to over 100 million users.
👉 As part of the deal, OnMobile will integrate and distribute its direct-to-consumer gaming platform, ONMO, on the Chingari app and collaborate on other mobile product integrations to serve millions of users.
👉 Equity investment in Chingari doubled in the last year. Partnership provides ONMO with ~$15M in marketing value over the next 5 years.
✅ Strong Financials, Reasonable Valuation, Highly Experienced Management & Optimistic Future Prospects ✅
👉 FY’22 revenue stood at INR 544.3 crore, a de-growth of 5.5% YoY primarily impacted by Euro depreciation and customer-driven policies in Spain, which have since been mitigated.
👉 Despite various cash expenses, the company has maintained a strong cash balance by the end of Q4FY22 standing at 135.2 Crores. The company is virtually debt free.
👉 Challenges Arena: Revenue has been doubling every quarter; achieved a mark of over INR 3.5 crore monthly revenue in March 22. The revenue contribution from Challenges arena has increased up to 5% of the total revenue in Q4FY22 from its 2.3% contribution in Q3FY22.
👉 Well known investors such as Mukul Agrawal (1.61%) and Ajay Upadhaya (1.56%) took stakes in this company in the price range of 100-150rs.
👉 The company has 20 years of experience and also has a well-established management team with vast knowledge and experience. François-Charles Sirois (Executive Chairman), Sanjay Baweja (MD & Global CEO) & Krish Seshadri - Chief Executive Officer (ONMO), have worked in major corporations such as Zynga, Facebook, Flipkart, EY, etc.
✅ Vision 2025 - To have Mobile Operators ~ 200 + Enterprises ~ 1000 + Active Users ~ 250M + Edge Servers ~ 1000s. ✅
👉 Company aims at increasing the number of their mobile game operators that are responsible for deploying the company’s services to their network from current 100 plus operators to 200 operators by 2025.
👉 Along with this the company aims at reaching 250 million users from the current 76.5 million users by 2025.
👉 For challenges arena the company has a target of reaching 7.5 million gross payers by Q1FY23, which is currently at 4.4 million.
🏆🏆🏆 Overall, OnMobile global is definitely a strong player and a highly recommended investment option. Even though the financial performance of the company has been more or less stagnant over the past few years, the future prospects are bright, the management is impressive and of course the mobile gaming industry is on the rise, which the company is using to the best of its advantage. In general, mobile gaming stocks trade at 8-10x Sales while Onmobile is trading at 2.6x Sales Vs Nazara Technologies which is trading at 6.36x Sales.
