Post-Q3 Earnings: Rediff Gets A Thumbs Up, Sify Downgrade

Post Q3 earnings, the investor community has greeted India’s two Nasdaq-listed internet companies differently. While Rediff.com has got a thumbs up from analysts, Sify Ltd has received a downgrade rating.
First on Rediff; Ashish R Thadani, analyst with Gilford Securities, has upgraded Rediff from a “Hold” to “Buy”. Gilford has set a price target of $23 from $13 currently for Rediff, following an excellent financial results in Q3 FY2007. Rediff’s revenues grew 54 per cent at $7.75 million, and net income grew to $1.51 million from $0.32 million in the same quarter last year. A report by Gilford said: “Our estimates imply 55%/40% compound revenue/EPADS growth in calendar 2006-08. We project that EBITDA per ADS should advance 72% annually during this period. On the strength of our revised estimates plus a valuation upgrade, we are raising our target price from $13 to $23.”
On the other hand, Samit Sinha, analyst with Kaufman Brothers, has downgraded Sify to a HOLD, and has reduced the price target to $8 from $13. Although the revenues are on target ($31.5 million in Q3), the gross margins stood at 46.3 per cent (below Kaufman’s estimate of 47.5 per cent), and adjusted EBITDA was $3 million versus Kaufman’s expectation of $4.5 million. Besides, there was an incremental $1 million in bad debt.
Sinha, however, says that Sify has good prospects in the long term while there are concerns in the near term. “We believe the long term opportunity for Sify is intact but in the near term we have reduced visibility of operations and financials.”
Here is another analyst coming down heavily on Sify. Himanshu Pandya writes in Seeking Alpha: “I think Sify is dead money for now unless they announce something huge or there is a buyout.”

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