Here is a view from Sameet Sinha, the analyst at Kaufman Bros, a New York-based equity research firm, on Sify‘s acquisition of Globe Travels, an online travel company based in the US.
# The travel vertical works well into SIFY’s “click and bricks” strategy. SIFY’s 3,300 cyber cafes in 153 cities provide possibly the largest retail chain in India (in term of number of store fronts). These provide an ecommerce access point for a country that has less than 5% PC penetration. Additionally, since credit card penetration is low in the country, consumers can utilize the cafes to pay in cash and the operator facilitates the transaction.
# Valuation.
Our price target of $17 on BUY-rated SIFY is based on our DCF analysis. Our DCF utilizes a 10-year forecast of the company’s estimated unlevered free cash flow discounted at the cost of equity of 11.6%.
# Bottom line. SIFY management understands that the online advertising market in India is still young, and is looking at ways to grow the company’s market opportunity. The travel vertical opens a new revenue stream for the company, improves its value proposition for users and leverages the country-wide reach with its cafes. We believe that this acquisition will be accretive for SIFY and will update our numbers once the company provides further details.
Related:
–Sify Acquires India-US E-Ticketing Company Globe Travels
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