Brightcom Research Report
Brightcom Research Report
Brightcom Research Report
TARGET PRICE - ` 12
CMP : ` 6.30
Book Value : 63.08 Kalyanam Bhaskar
EPS - TTM : 9.24 Senior Equity Analyst
P/E : 0.68 SEBI-NISM-201800165521
P/Book : 0.10 * See last page for disclaimers
Dividend Yield : 0%
Turnaround Stock – Grabbing the eyeballs
BETA : 0.31
Niche Player in Digital Marketing, Digital Ecosystem, Artificial
Listed : BSE / NSE Intelligence and Information Management.
Code : 532368 / BCG
Bloomberg : BCG:IN Well poised to grab the opportunities arises out of Covid-19
Reuters : BRIH:NS pandemic ( social distancing - stay at home - online orders –
over the top media platforms - high internet usage and increase
Face Value : ` 2.00
Outstanding Shares : 47.62 Cr in digital advertisement budget spending by Corporates)
Market Cap : ` 300 Cr Turnaround Company with proven track record, pioneered by
US$ 40 Mln experienced promoters and management team.
Average Volume : 8,81,356 Attractive valuations trading at a huge discount to book value
Average Turnover : ` 0.41 Cr 0.20 X adj B.Value of Rs. 32 with a promising upward potential.
Low Beta stock { 0.31 } in these volatile market conditions.
Shareholding Pattern
Only listed (small cap) pure Digital Company in India to hedge
Promoters - 39 %
your portfolio.
FIIs & Funds - 8%
Institutions - 10 %
Share Price
Retail Public - 43 % 8
Board of Directors 7
Vijay Kancharla 5
Allam Raghunath
4
Dr. K Jayalakshmi Kumari
3
Dr. Surabhi Sinha
Y. Srinivasa Ro 2
12-Jul-19
26-Jul-19
10-Jan-20
06-Mar-20
24-Jan-20
20-Mar-20
03-Apr-20
09-Aug-19
23-Aug-19
17-Apr-20
13-Dec-19
27-Dec-19
07-Feb-20
06-Sep-19
20-Sep-19
04-Oct-19
18-Oct-19
21-Feb-20
01-May-20
17-May-19
31-May-19
14-Jun-19
28-Jun-19
15-May-20
01-Nov-19
15-Nov-19
29-Nov-19
Auditors
PRELUDE
BCG – Brightcom Group ( Formerly, Lycos Internet Limited - incorporated in the year Jan-1999) is a Hyderabad
– Indian based Digital Marketing and Software Development Company, actively engaged in providing technical
and economical solutions to Digital Advertisement, Marketing and Information Management sectors across
INDIA, USA, AUSTRALIA, ISRAEL, BRAZIL, ARGENTINA, URUGUAY etc.,
The Company has 463 employees and consultants, working at 22 offices spread across the world. The software
development services are based in India.
The group has the following subsidiary companies, spread across the world.
REVENUE MODEL
BCG provides comprehensive online – digital marketing services to Direct Marketers, Brand Advertisers,
Marketing Agencies, Ad Exchanges and Networks.
Segments -
a. Video advertisements
b. Display advertisements
c. Search marketing
d. Email-marketing
e. Lead generation
f. Affiliate marketing
g. Social media marketing
h. Mobile marketing
BCG-Technology Play
Header bidding (selling) auction was introduced with SSP “Compass” - sell traffic in a more efficient way with
lesser overload to the users and improved yield.
Header Bidder- Buying: BCG’s bidder was implemented in several publishers, allows the company to reach
and compete for new traffic sources.
Prebid JS adapter – Officially approved as a partner of Prebid.JS initiative and we’re now one of the Prebid
official partners in the market.
Traffic quality automation focus - Pixelate “Prebid” was officially implemented on 100% of BCG’s inventory,
allowing the company to guarantee control & a high level of traffic quality.
Investment in Automation “trends” reporting –indicates spikes, preventing non-habitual cases, reduces risk of
budget overspending and giving the team a better control around the clock.
BCG-Major Clients
1. Yahoo 2. Google
3. American Express 4. Unilever
5. Sparcmedia 6. Mercado libre
7. Petco 8. Starcom
9. Optimedia 10.Rubicon
During the lockdown, people have used internet, mobile apps and digital infrastructure for their everyday
needs. This unavoidable shift in behavior can be capitalized for economic growth, improved productivity, cost
minimization and scaling up of business and brand positioning etc., which in turn benefit the Digital
Marketing Companies like Brightcom.
Education–Education industry will take the most advantage of technology behavior change and become easier
to access for all. Online learning and teaching will be the new norm of life in the future.
Agriculture–Technology can be used to connect market, retail and supply chain basically building Virtual B2B
and B2C marketplaces. This will help farmers to get competitive value for their harvest. Information about
seeds availability, latest techniques to improve productivity, rainfall and weather information and patterns,
crop prices etc., will be shared instantly and digitally to the farmers.
Healthcare – The WHO estimates deficit of 6 lakhs doctors and 20 lakhs nurses in India. E-consultations will
vastly improve access to healthcare in rural areas. It is expected that, around 60% of cases will be diagnosed
in this new form of E-consultations manner.
Technology –Virtual meetings, work from home, would be new normal in the post Covid-19 World. Since IT
had been a strong point of India, the IT and digital Industry will be definitely supported by Government
Reforms and Initiatives to export the digital solutions across the world.
( source : research report by CA Dassani Associates )
BCG FINANCIALS
Consolidated
Standalone
INVESTMENT POSITIVES
Niche Player in global digital marketing market, with a track record of more than twenty years.
Operations - strategically spread across the world with more than 22 offices, in order to target,
penetrate and capitalize on the demand for digital media across the globe.
Proven track record with consistency in turnover. Top MNCs are BCG’s major clients.
Loaded with latest technology solutions and global marketing network, Brightcom is well poised to
grab the opportunities flooding out of Covid-19 pandemic, with reference to digital advertisement,
growing mobile and internet penetration and change in consumer behavior towards digital economy.
Preferential Issue at this time is a huge morale and financial booster to the company. BCG is coming
closely into the vicinity of Bull’s Eyes for strategic acquisition by Funds / MNCs due to its pure digital
play and may to be a multi-bagger stock in the future.
Only listed (small cap) – pure digital marketing company in Indian Stock Market, to hedge your
portfolio during these volatile market conditions with a very low beta of 0.30
Attractive Valuations. BCG’s current market price of Rs 6.30 is trading at a huge discount of 0.20 X
times to adjusted Book Value of Rs. 32.27 ( see page no. 11 )
Price Price
Name of the company - stock Symbol Currency % gain
March-20 low 22-May-20
Alphabet Inc - Google GOOG $ 1,056 1,413 34%
Facebook Inc - Facebook FB $ 146 235 61%
Netflix Inc - Netflix NFLX $ 298 429 44%
Amazon Inc - Amazon AMZN $ 1,676 2,436 45%
Bharti Airtel BHARTIAIRTL Rs 404 593 47%
Reliance Industries - Jio RELIANCE Rs 884 1,433 62%
Affle ( India ) Limited AFFLE Rs 1,085 1,550 43%
Brightcom Group BCG Rs. 3.05 6.30 107%
INVESTMENT CONCERNS
Though the consolidated financials seems to be consistent and maintaining, however the parent
company – standalone financials are not doing well and losing money year after year.
BCG’s Investments in Subsidiaries (recorded at cost value) and their return on equity are not
encouraging. Also the Financials of the subsidiaries were not audited regularly. Needs big write-off in
the value of Investments for adjustments towards fair value.
The contingent liabilities, tax dues and bank borrowings will be a big constraint for the company.
Due to the shocking economic disruption for the world wide lockdowns to curtail Covid-19 spread,
most of the BCG’s clients may not be in a position to clear the receivables. Due to which, the company
has to provide much for the bad debts.
Illiquid stock BCG’s average daily turnover is around 0.88 mln shares with an average daily turnover of
Rs. 4.14 Mln ( US$ 0.06 mln )
PEER GROUP
CMP - Rs. Market Cap Revenue Net Profit Net Worth P/E P/B.V Financial
Name of the company Symbol
22-May-20 Rs. Cr Rs.Cr Rs.Cr Rs.Cr Ratio Ratio Period
AFFLE ( INDIA ) LIMITED AFFLE 1,550 3,952 341 67 230 59 17 Dec 19- 9M Anld
BRIGHTCOM GROUP BCG 6.30 300 2,577 443 3,003 0.68 0.10 Mar-19 year end
RECOMMENDATION
With an excellent track record and a proven player in the Global Digital Marketing Space, Brightcom is all set
to penetrate more and capitalize on its technological and networking strengths and grab the opportunities
coming up in the Digital Marketing Industry in the world, due to Covid-19 pandemic. With the raise of equity
capital by way of Preferential Issue and reducing the Bank Liabilities to a major extent, BCG’s fundamentals
may looks attractive in the future and the company may become Investor Friendly in the future.
VALUATION
Though BCG is posting consistent consolidated revenue and bottom line coupled with EBITDA & Net
Margins, However the parent - standalone bottom line is still under pressure with low margins and
losses. The consolidated profitability of the group may not be used for valuation purpose, since the
subsidiaries financials are not audited regularly.
Except for Affle ( India ) Limited, which came for an IPO and listed last year, there are not much Small
Cap Indian Peer Group companies (pure digital companies ), listed in Indian stock exchanges in order
to consider comparable market multiples for valuation. Affle’s market cap is around Rs. 3,95s Cr., when
compared Rs. 300 market cap of BCG. Affle is a subsidiary of a Singapore Based Company and is purely
into mobile marketing platform and a regional play, where as BCG is a global play.
However, considering the Shareholder’s Equity-Book value of the group, we arrived at an adjusted
Book Value of Rs. 32.27 after providing for necessary adjustments and discounts to the book value.
We recommend a STRONG BUY of the BCG share at the current price of Rs. 6.30 with a target price
of Rs. 12.00 ( upside potential of around 90% )
Target price will be revised after analyzing the FY 2019-20 year end annual and March 20 quarterly
results, once announcement by the company.
Kalyanam Bhaskar
Disclaimer
This advice / opinion / research / recommendation / document has been prepared and issued by the above Author / Analyst /
Consultant on the basis of publicly available information, internally developed data and other sources believed to be reliable. While all
care has been taken to ensure that the facts stated are accurate and the opinions given are reasonable, neither the Author nor any
employee, consultant, analyst shall be in anyway responsible for the contents of this report. The Author, Analyst, Conusltant ,
Company or any of its group companies may have a position and may perform buying / selling for itself or for its clients in any security
mentioned in this report. This is not an offer to buy or sell the investments referred therein.