Analysts unfazed by Babylon decline
DS Brokerage VP research Eran Jacobi: Babylon is traded at a deep discount on its economic value.
By early afternoon, Babylon's share price fell 3.5% on the second largest turnover so far, and "Globes" has collected the latest recommendations of analysts and capital market sources about the company.
Commenting on Carmeli's departure, DS Brokerage VP research Eran Jacobi said, "We do not consider this to be great drama in the foreseeable future, nor do we see it as a hint that the offering in the US will be cancelled."
As for Babylon's new cooperation agreement with Yahoo! Inc. (Nasdaq: YHOO), Jacobi said that it was "better than we thought". He added, "If we estimated that, in contrast to the contract with Google, which was based on a fifty-fifty sharing of revenue, the contract with Yahoo was more favorable for Babylon, with 30% for Yahoo!, we now conclude that the average distribution will be higher for Babylon during the period of the contract."
Jacobi said that Babylon's results met expectations. "Cash flow is worth mentioning. We estimate that the company will have NIS 240-250 million in cash at the end of the year, compared with its current market cap of just over NIS 1 billion. Looking forward, the future appears less threatening than at the beginning of the year. We still believe that the company will show 30% revenue growth in 2013 and that it will have a net profit and disposable cash flow of more than NIS 140 million, despite the erosion of revenue caused by the diversion of traffic from Google to others. We believe that so long as the company's chairman and CEO are around to foster future activity and development, there is no need for over-excitement about the CEO's announcement. We continue to believe that the company is traded at a deep discount on its economic value," he said.
A top capital market source told "Globes" that Babylon's financial report was interesting, and showed that the company was a money printing machine with real cash flow of tens of millions of shekels per quarter. "At the company's current market cap, we're talking about a very handsome return on the money."
Union Bank analyst Benny Dekel believes that confidence in Babylon's business model has grown and that the company's operating risk has fallen sharply. He reiterates his "Buy" recommendation for the share.
Published by Globes [online], Israel business news - www.globes-online.com - on April 29, 2013
© Copyright of Globes Publisher Itonut (1983) Ltd. 2013
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