TIM W.E. (TMWE) is planning a 13,700,000 initial price offering late this week. Shares will trade at a proposed range of $5 to $6. After the initial price offering, TMWE will still own 77.9% of the company. The IPO will be led by Credit Suisse and Citigroup. The company will use the proceeds of the offering to accelerate expansion into new markets, enhance monetization options, and pursue strategic acquisitions.
TMWE operates under three business segments (% of 2011 Revenue):
· Mobile Money (11%)
· Mobile Marketing (42%)
· Mobile Entertainment (47%)
The company, based in Portugal, operates in more than 75 countries and has 26 offices found around the world. The money segment continues to grow as people around the world begin to utilize smartphones to make purchases at stores. The number of clients in the ,oney segment has grown from one in 2008 to seventy five in 2011, for TMWE.
TMWE operates in 75 countries and counts on Latin America for the majority of their revenue (72% of 2011 revenue). Brazil, the company's largest market, accounted for 43% of 2011 revenue. Listed below are the company's geographical revenues, with percentage of 2011's revenue.
· 43% - Brazil
· 13% - Andean (Bolivia, Colombia, Costa Rico, Dominican Republic, Ecuador, Guatemala, Honduras, Nicaragua, Panama, Peru, Puerto Rico, El Salvador, Venezuela)
· 11% - Africa
· 9% - South Cone (Argentina, Chile, Paraguay, Uruguay)
· 9% - Europe (Austria, Croatia, Cyprus, Estonia, Finland, France, Germany, Greece, Lithuania, Netherlands, Poland, Portugal, Romania, Serbia, Slovenia, Spain, Switzerland, United Kingdom)
· 7% - Mexico
· 4% - EECA (Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, Turkey, Ukraine, Uzbekistan)
· 3% - Middle East (Bahrain, United Arab Emirates, Iran, Iraq, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Yemen
· 1% - APAC (India, Indonesia, Malaysia, New Zealand, Taiwan, Thailand, Vietnam)
· <1% - North America
The company counts on more than 280 mobile carriers to make its revenue. TMWE counts on large telecom carriers like Vodafone (NASDAQ:VOD), VIVO (NYSE:TEF), American Movil (NYSE:AMX), and T-Mobile to employ its leading monetization efforts. It is these relationships that will hopefully continue to help the company expand into new markets, and fight off competition in existing markets.
In 2011, TIMWE's revenue by segment:
· Money - $31.0 million euro
· Marketing - $117.7 million euro
· Entertainment - $132.6 million euro
Revenue has broken down as (in euros):
· 2007 - $68 million
· 2008 - $125 million
· 2009 - $166 million
· 2010 - $234 million
· 2011 - $281 million
Net income (euros) and earnings per share (euros) over the last five years was:
· 2007 -$2.6 million, $0.03
· 2008 - $5.4 million, $0.07
· 2009 - $7.2 million, $0.08
· 2010 - $11.0 million, $0.12
· 2011 - $14.2 million, $0.25
· Reinforce our leading position in current, attractive markets
· Expand into new geographies - expansion targets mainly center around Africa, Middle East, and Asia Pacific
· Increase penetration of high-potential customer verticals - Had a great partnership with Kellogg (NYSE:K) to help customers in Mexico track calories with TMWE's calorie counter application.
· Deepen relationships with carriers and media groups
· Exploit significant opportunity in the mobile money market
· Capitalize upon smartphone app opportunity
Seeing Brazil as the main source of revenues is a huge risk factor. Brazil accounted for 43% of 2011's revenue. I think that this number will drop over the next three years as new markets are expanded into. The dominance in Latin America already makes this region a huge revenue driver (65%). Brazil's large portion of revenue may also be a blessing in disguise. Key events are coming to Brazil in 2014 and 2016 that will lead to an increase in companies attempting to increase revenue any way it can. The 2014 World Cup and 2016 Summer Olympics will be large world events that could make TMWE a huge winner.
Mobile monetization is one of the hottest fields right now. As people continue to watch less television commercials and listen to less traditional radio with advertisements, businesses are left with mobile as one key way to attack customers.
Look for the TMWE IPO to price at full range of $6. I am starting with a price target of $8 by the end of 2012. Subscriber numbers for the entertainment segment and the increased usage of mobile money payment via TMWE's MCOIN platform will be significant to 2012 earnings after the company is public.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.