OnMobile Global banking on mobile gaming, entertainment to drive growth

Earlier this year, the stock has rebounded from its low of Rs 33 per share in June 2018.

Bengaluru-based OnMobile is returning wealth to shareholders via steady dividend payouts and also undertaken a couple of buybacks, but business has run into rough weather in the past few years as shown below.

Listed on both the NSE and the BSE, the company is highly exposed to forex fluctuations as it gets only 19 percent of its revenues from India and the exchange rates in euro will have its on its business.

Adverse movement in the euro has impacted the business of OnMobile, but recent strength in the euro will support the numbers to be reported.

 

Over the past few years, the company reduced its mobile ringback tones business, which now constitutes only 40 percent of FY18 revenues, but it continues to be the cash cow as no added investments are required to be made.

When a subscriber changes their ringtone, the service provider and OnMobile split the monthly fee.

Need to note that ring tone business as a percent of revenues has come down from 49 percent in FY15 to 40 percent in FY18, while videos has scaled up from 28 percent of revenues in FY14 to 36 percent of revenues.

Newly launched games business now constitutes nine percent of revenues and management sounds bullish on the games and videos business.

The company states that their strategy for FY19 is:

OnMobile has launched regional video portal in Vodafone India, notably short video content across 12 categories and in five languages to start with namely Telugu, Tamil, Kannada, Malayalam and Bengali. The company has also launched videos in Middle East and Africa.

In Europe, Movistar games service launched in April with Movistar Spain under the name and brand “Movistar Juegos”

In India, the company has launched bundled pack across Idea, Airtel and BSNL, but the company don't have a tie up with the fastest growing service provider, Reliance Jio.

The company has launched contests for IPL lovers and also for FIFA enthusiasts.

OPEX rationalisation, which includes closure of dormant legal entities, exiting high cost offices, bringing US back to profitability and also manpower optimisation through automation.

The management is also focused on converting content deals from fixed fee to revenue share model, increasing yield from investments and repatriation of funds to India from countries like Netherlands and Spain.