Stock Name: CBSACompany Name: CBSA BERHADResearch House: OSK
CBSA Bhd
(June 16, 41.5 sen)
Upgrade to buy at 41.5 sen with revised fair value of 51 sen (from 32.5 sen): CBSA announced that it has entered into a content licence agreement with Google for the provision of business listings in six Southeast Asia countries (Malaysia, Singapore, Indonesia, Thailand, the Philippines and Vietnam) for five years. In return, CBSA will receive licence fees and annual update fees amounting to 10% of the initial licence fees during the duration of the agreement.
In 2007, CBSA embarked on a partnership with Google to include business listings from Superpages.com.my in Google Maps for the latter to tabulate the locations accordingly on Google Maps. The newly signed agreement is extending this partnership to include business listings from Panpages.com in Singapore, Indonesia, Thailand, the Philippines and Vietnam.
This will result in more Southeast Asia businesses being found through searches on Google Maps. We understand that charges will now be based on per business listing as opposed to the bundled arrangement under the previous agreement.
With 23 million SMEs registered in the six countries involved, we see huge potential for CBSA to build up its database and subsequently reselling the listings to Google. Regional database teams which mainly comprise locals are already in place in the respective countries.
More importantly, we believe the move complements CBSA's ambition of penetrating the regional advertising business by replicating its advertising model in more Southeast Asian countries. The cost of collecting the SME database, which is the bread-and-butter of the business, would ultimately be borne by Google, which mitigates the risk arising from its overseas ambition.
We revisited our model and adjusted our EPS forecasts by 8.9% for FY11 and 2.4% in FY12 to incorporate contribution from the extended tie-up. Given the improving outlook for its regional advertising market foray, we peg a higher FY11 PER of 10 times (seven times previously), with our 'fair value' now at 51 sen.
Upgrade to 'buy', with re-rating catalysts including potential for capital management to optimise its balance sheet and further expansion to the regional advertising markets. ' OSK Research, June 16
This article appeared in The Edge Financial Daily, June 17, 2011.
