Brightcom Group Limited (Formerly Lycos Internet) - Way to Digitalization

Stock Screening
198

Initially even I was negative on this stock but later I investigated the company closely on the fundamentals and business frontier and found it to be a good business at undervalued price.
My analysis is as below.

Segment wise Valuation of Lycos Internet

(a) Digital Marketing Segment(Ybrant/Brightcom and subsidaries)

Net Profit = 608.08 CR

EPS = Net profit/ number of shares = 608.08/47.62 = 12.7

Intrinsic value assuming a PE of 7 = 7 * 12.7 = 89 RS

Intrinsic value of Digital Marketing Business of Lycos = 89 RS

(b) Software Development Segment(LGS Global software)

Net Profit = 79.3 CR

EPS = Net profit/ number of shares = 79.3/47.62 = 1.6

Intrinsic value assuming a PE of 7 = 7 * 1.6 = 11.6 RS

Intrinsic value of Software Development Business of Lycos = 11.6 RS

Total valuation = Digital Marketing Business + Software Development Business
= 89 + 11.6

Total valuation = 100.6 RS

Fundamentals from balance sheet:

Liquid cash: 430 CR
Shareholders money in total investment = 82%
Share of Short term debt = 14.5%
Share of Long term debt = 3.5%

For paying RS 250CR ($36.6 million) to Daum the following funds can be used

  • Liquid cash for 430 CR can be used

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Conclusion:

  1. Its software business alone worth(11.6 RS/share) more the current market price(8.3 RS/share)
  2. The stock is beaten because of the negative impression around the management
  3. Force motors stock was also down for a long time because of negativity about management and “porinju veliyath”, the famous value investor, took advantage of this and the stock proved to be a mulitbagger for him in few years.
  4. Company has good liguid cash and Lions share of business investment coming from share holders
  5. Strong Software Business from LGS with very respected client base. Strong digital business with cutting edge brightcome technologies and fortune 500 companies and household famous brands as clients.

In conclusion this a business I would like to buy because of huge potential for growth and also huge undervaluation of the business.

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