Growth prospects extremely good for Geodesic stocks: Ambareesh Baliga

In an interview with ET Now, Ambareesh Baliga, VP Karvy Stock Broking Ltd, talks about Geodesic. Excerpts:

With a target of Rs 135, what are the key investment rationales that you are seeing in Geodesic?

Basically, valuation wise it looks extremely cheap. It's currently quoting at about 4 times FY10 and in fact looking at the sort of a growth which is possible in the next 2 to 3 years we are looking at a top line CAGR of around 31%-32% bottom line CAGR of around 22% looking at that level of 135 is very much possible. Its basically into that space of mobile telephony like they provide software for that. They are into internet radio platform where nearly 100 channels are there. So I think the growth prospects are extremely good for this stock and its in fact quoting at extremely cheap valuation.

Are they able to charge and provide SMS services by Mundu?

Absolutely, they are also in that Mundu is messenger in addition to having a radio platform by the same name. But they also have a messenger service and again they are able to surely charge because if you look at their operating margins, it’s close to 50% and that has been consistent. The net margins are close to around 38%-40%, which actually shows that they are able to charge.

What business do you believe they are really in? Are they really developer of perhaps internet platforms or software through which you can do messaging or you can perhaps listen to an internet radio? Are they provider of the content itself or are they providing software services to other companies? Which way would you categorise them?

They are in fact the platform providers. They are not the content providers but the platform providers and going ahead looking at the way that mobile telephony is going to develop especially with 3G I think the growth can be exponential if they get their act together and which they have been especially if you see the last 4-5 years history. They have been making the right moves. So basically its quite surprising that it is quoting at just about 4 PE.