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Taptica International: THE INVESTMENT CASE

Taptica International beating expectations as it dodges Facebook contagion

The marketing group has already said profits for the full-year will be ahead of expectations despite only being halfway through its current financial year
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INVESTMENT OVERVIEW: TAP The Big Picture
Taptica's earnings are on the rise

Taptica International PLC’s (LON:TAP) is brushing off any potential contagion from the Facebook privacy scandal and is going from strength to strength, according to analysts at broker finnCap.

The smartphone advertising specialist said that its underlying earnings (EBITDA) for the current financial year will be “moderately” ahead of market expectations, driven by growth in its performance-based marketing and brand advertising businesses.

WATCH: Taptica targets new markets

FinnCap’s analysts have highlighted growth from the firms Tremor Video DSP brand advertising business, most notably within the Asia-Pacific region.

They added that improvements in operational and cost efficiencies at Tremor following its acquisition by Taptica would generate higher gross margins for the business.

READ: Taptica jumps as it forecasts 2018 earnings to be ahead of expectations

FinnCap has also lifted its numbers, estimating that Taptica will see its adjusted EBITDA rise to US$40mln from US$38.2mln this year and to US$44mln from US$42.7mln the next year.

Following the Facebook/Cambridge Analytica data scandal, Taptica saw a steep drop in its share price as the fallout tainted several advertisers. However, finnCap have said that the numbers show the group’s balance sheet is relatively unaffected by the issues and a limited exposure to Facebook as an advertiser and expects a “rapid recovery” in the shares with a target price of 550p.

The analysis seems to be fairly aligned with share movement following the earnings announcement, with prices sitting at 322.5p in late-morning trading on 19 June, up 18.5% on a 6-month low of 272p on 23 April following the Facebook scandal.

Europe and Asia-Pacific

FinnCap isn’t the only broker with a rosy view of Taptica. In January, broker house Berenberg said it believes Taptica will look to Europe and Asia-Pacific for companies with a similar profile to Tremor to fill both geographic and technological gaps to create an end-to-end mobile advertising solution.

Tremor is already in profit a year ahead of expectations and is a blueprint for similar acquisitions in the future.

“With ample firepower and a growing track record of successful M&A transactions, we believe M&A will continue to drive material upgrades over the coming years,” said the house.

Organically too, Berenberg is upbeat.

Tailwinds helpful

A number of tailwinds are helping its platform, it says, including a shift towards mobile-orientated advertising; an increasing share of social media on mobile and a performance-based pricing model.

Berenberg expects revenues in 2017 of US$210mln, rising to US$330mln and US$360mln over the next two years.

Underlying profits over the same timeframe are US$33mln, US$38mln and US$43mln.

At its current share price of 322.5p, Taptica's market cap stands at around £187.68mln.

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