01-29-2013, 06:02 AM
NQ: Some New Players (And NQ Partners) Join The Party (condensed
2013-01-28 10:03:10.487 GMT
SECURITY SOFTWARE & INFRASTRUCTURE
January 28, 2013 NQ Mobile Inc. (NQ - $6.60)
Company Update
RATING: Buy
Price Target: $20.00 Some New Players (And NQ Partners) Join The Party
Please_click_here_for_full_report
Frederick Ziegel, CFA Summary
fz@topekacapitalmarkets.com We are reiterating our Buy rating and $20
Tel: 231-347-1298 price target. We note our 2013 estimates
Topeka Trading: 212-709-5750 do not incorporate the recently closed
acquisition of Feiliu which is expected
STOCK DATA to add $20-25mm to revenues and to be EPS
Price $6.60 accretive. One of NQ's several go-to-
Price Target $20.00 market strategies is to be pre-installed
Market Cap ($M) $338 on the smartphone and then to monetize
52-Week Range $5.07 - $12.70 the opportunity. NQ has pre-install
Shares (mil) 51.2 partnerships with the majority of the
ADTV (000) 350 leading smartphone vendors, including
Enterprise Value ($M) $209 some new entrants into the top five.
Free Cash Flow ($M) $13 Key Points
Dividend Per Share $0.00
Yield 0.0%
* IDC recently released its 4Q12 and 2012
worldwide smartphone market estimates
FINANCIAL DATA shown in the table below. In 4Q, Huawei
2011A 2012E 2013E (002502.sz-$9.27:NR) and ZTE (0763.hk-
P/E Ratio 13.5x 11.0x 6.5x $14.36:NR) broke into the top five
EBITDA/ Share $0.33 $0.55 $1.02 fueled by their focus on low price
EBITDA Margin 41.3% 31.2% 33.4% smartphones. In addition to Huawei and
EV/ EBITDA 12.5x 7.4x 3.2x ZTE, NQ has pre-install agreements with
EV/Sales 5.1 2.3 1.3 Samsung (SSNLF-$1,350.00:NR), Nokia
FCF Yield 2.8% 3.8% 10.4% (NOK- $4.20:NR) and HTC (2498.tw-
$284.00:NR)
REVENUE ($M)
FY December 2011A 2012E 2013E
Q1 7.6 16.0A 32.5E
Q2 8.9 20.0A 35.5E Valuation
Q3 11.3 25.8A 41.0E We believe investors have been unwilling
Q4 12.8 29.3E 46.8E to apply a reasonable multiple to the NQ
FY 40.7 91.0E 155.8E Mobile story with concerns about the
quality of some of the recent China-based
IPOs and uncertainty around the
EPS monetization of the "freemium" model. Our
FY December 2011A 2012E 2013E $20 target price assumes a multiple that
Q1 0.08 0.13A 0.19E is 50% of the projected 40% long-term
Q2 0.11 0.14A 0.22E growth rate, a discount that should more
Q3 0.15 0.16A 0.27E than adequately reflect questions around
Q4 0.14 0.17E 0.32E the freemium business model.
FY 0.49 0.60E 1.01E
2013-01-28 10:03:10.487 GMT
SECURITY SOFTWARE & INFRASTRUCTURE
January 28, 2013 NQ Mobile Inc. (NQ - $6.60)
Company Update
RATING: Buy
Price Target: $20.00 Some New Players (And NQ Partners) Join The Party
Please_click_here_for_full_report
Frederick Ziegel, CFA Summary
fz@topekacapitalmarkets.com We are reiterating our Buy rating and $20
Tel: 231-347-1298 price target. We note our 2013 estimates
Topeka Trading: 212-709-5750 do not incorporate the recently closed
acquisition of Feiliu which is expected
STOCK DATA to add $20-25mm to revenues and to be EPS
Price $6.60 accretive. One of NQ's several go-to-
Price Target $20.00 market strategies is to be pre-installed
Market Cap ($M) $338 on the smartphone and then to monetize
52-Week Range $5.07 - $12.70 the opportunity. NQ has pre-install
Shares (mil) 51.2 partnerships with the majority of the
ADTV (000) 350 leading smartphone vendors, including
Enterprise Value ($M) $209 some new entrants into the top five.
Free Cash Flow ($M) $13 Key Points
Dividend Per Share $0.00
Yield 0.0%
* IDC recently released its 4Q12 and 2012
worldwide smartphone market estimates
FINANCIAL DATA shown in the table below. In 4Q, Huawei
2011A 2012E 2013E (002502.sz-$9.27:NR) and ZTE (0763.hk-
P/E Ratio 13.5x 11.0x 6.5x $14.36:NR) broke into the top five
EBITDA/ Share $0.33 $0.55 $1.02 fueled by their focus on low price
EBITDA Margin 41.3% 31.2% 33.4% smartphones. In addition to Huawei and
EV/ EBITDA 12.5x 7.4x 3.2x ZTE, NQ has pre-install agreements with
EV/Sales 5.1 2.3 1.3 Samsung (SSNLF-$1,350.00:NR), Nokia
FCF Yield 2.8% 3.8% 10.4% (NOK- $4.20:NR) and HTC (2498.tw-
$284.00:NR)
REVENUE ($M)
FY December 2011A 2012E 2013E
Q1 7.6 16.0A 32.5E
Q2 8.9 20.0A 35.5E Valuation
Q3 11.3 25.8A 41.0E We believe investors have been unwilling
Q4 12.8 29.3E 46.8E to apply a reasonable multiple to the NQ
FY 40.7 91.0E 155.8E Mobile story with concerns about the
quality of some of the recent China-based
IPOs and uncertainty around the
EPS monetization of the "freemium" model. Our
FY December 2011A 2012E 2013E $20 target price assumes a multiple that
Q1 0.08 0.13A 0.19E is 50% of the projected 40% long-term
Q2 0.11 0.14A 0.22E growth rate, a discount that should more
Q3 0.15 0.16A 0.27E than adequately reflect questions around
Q4 0.14 0.17E 0.32E the freemium business model.
FY 0.49 0.60E 1.01E