Taptica International Ltd. (TAP) is a leading advertising technologies company having operations in more than 60 countries. The company offers advertising services taking maximum advantage of the latest video and display technology to reach users for every app, service and brand. The company work for more than 450 leading advertisers including Amazon, Twitter and Disney etc. The outstanding market capitalisation was around £127.12 million and a dividend yield of 2.72 per cent.

Recent Development
On 19th Taptica International released its Financial year’s results showing a significant increase in the revenue by 31 per cent and gross profit by 38 per cent. The company remained highly cash generative and management is confident about the overall outlook for the group.

Financial Results and Review – H1 Financial Year 2018 ($, Thousand)

(Source: Semi-annual Report, Company Website)

In the first half of the Financial year 2018, Taptica International Ltd. reported revenue of $144,027 thousand in the H1 of the financial year 2018 ending June against $65,642 thousand for the previous year of the same period. There was a significant increase in revenue in H1 2018 due to the expanded international presence and successful acquisitions done by the company in the current financial year 2018. The company reported operating profit of $13,904 thousand in H1 of FY2018 against $10,344 thousand for H1 of FY2017. There was an increase of 34.42 per cent mainly because of strong revenue generated by the company in the current FY. The profit before taxes on income for H1 of FY2018 stood at $14,233 thousand as compared to $10,346 thousand in H1 of FY2017. The profit for the period stood at $10,802 thousand in H1 of FY2018 as compared to $8,712 thousand in H1 of FY2017. The Basic earnings per share for H1 of FY2018 stood at $0.1612 against $0.1440 in H1 of FY2017.

Financial Ratios
The reported gross margin in H1 FY2018 increased by 1.2 by per cent to 40.6 per cent against 39.4 per cent reported last year for the same period. The reported EBITDA margin of 13.4 per cent for the H1 of FY2018 stood lower than the industry median of 19.1 per cent. Return on equity stood at 12.6 per cent which was higher than the industry median of 6.2 per cent. On the liquidity front, Taptica’s current ratio of 2.02 was higher than the industry median of 1.03, reflecting the sufficient current assets to pay its short-term obligations. On leverage front, the debt-equity ratio was significantly lower as compared to the industry median, reflecting that the company is less leveraged as compared to its peers.  
 
Share Price Performance

Daily Chart as at Mar-20-19, before the market close(Source: Thomson Reuters)
 
On 20th March 2019, at the time of writing (before market close, GMT 08:52 AM), Taptica International Ltd shares were trading at GBX 186.75, up by 0.95 per cent against its previous day closing price. Stock's 52 weeks High and Low is GBX 401.40/GBX 130.00. 
 
Valuation Methodology


Conclusion
The company had shown good financial growth as compared with the previous year. There had been strong growth in the overseas business of the company. Recently released results for the financial year 2018 also showed the strong growth outlook of the company. But there had been a significant surge in the expenses of the company which is offsetting the strong revenue. Based on the strong growth prospects of the company and the valuation done using the above method at the closing price of GBX 185.00 (as on 19th March 2019) with single-digit upside potential based on 2.1x NTM Enterprise value to EBITDA (approx.) on FY19E EBITDA, we have given a Speculative BUY recommendation, given the risks at hand.

Note: All forecasted figures and peers have been taken from Thomson Reuters. Currency exchange rate taken for 1 USD = 0.756 GBP

*The buy recommendation is also valid for the current price as covered in the report (as on Mar-20-19).

Note- GBp or GBX are interchangeably used for Pence Sterling.

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