If, like me, you’re enjoying the latest series of The Apprentice, you’ll be pleased to hear that, thanks to this company, you can watch clips from the programme on your mobile. This may seem unimportant, but distributing mobile content is far more challenging than using the internet. There’s the range of handsets, most of which run incompatible software and have different screen sizes. Then there are the different networks, which require different formats. Lastly, there are the many different ways to communicate and transact securely on a mobile phone – and the next wave of wireless services will make this task even harder, requiring greater levels of technical expertise.
Gamble of the week: Mobile Streams (Aim: MOS)
This is where Mobile Streams steps in, with its Vuesia system. Vuesia is one of the few global platforms that enables content to be distributed in any format to any handset on any mobile network. This versatility helped the firm win the mobile contract to promote Sony films The Da Vinci Code, Spider-Man 3 and Casino Royale. Research analysts predict the mobile-entertainment market will be worth $31.7bn by 2009. Mobile Streams’ 2006 sales were up 62% to £8.2m, with organic growth of around 40%. Europe generates 44% of turnover, with the rest derived from North (22%) and South (28%) America and Asia (6%). In December, Mobile Streams had net funds of £4.1m. In January 2006, Liberty Media Corporation invested £3.6m in the company at 95p a share – highlighting the strategic importance of mobile content to the industry. A month later, Mobile Streams listed on Aim, raising a further £6m at 87p.
So far so good, but what are the risks? Being a small company servicing large content-owners and network operators means there’s a risk it will be squeezed from both sides. Margin pressure could also intensify, although this should be partly offset by higher sales volumes. Finally, revenue visibility in the industry is typically short term, while more onerous regulation of premium-rated mobile content (look at the recent scandal over TV competition phone-ins) could impact on results.
Yet at the AGM, the board said they “remain confident that the company has the cash, management and technical resources to benefit from the growth in mobile media”. Bridgewell Securities expects 2007 sales and earnings per share of £14.6m and 2.36p respectively. At 40p a share, Mobile Streams trades on a 2007 p/e ratio of 17, which, while punchy, is good value for a such a high-growth stock. In fact, three directors, including the CEO, think so too, having recently purchased 345,000 shares at 40p in January.
Recommendation: SPECULATIVE BUY at 40p (market cap £14m)
• Paul Hill also writes a weekly share-tipping newsletter, Precision Guided Investments