but I'm not sure where he got it from. A broker's note, presumably...
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Blinkx (1S) 1H10 Results • Event Preview — Blinkx is due to report 1H results before the open on Tuesday 9 November. The company has already given a clear pre-close trading update indicating that it is on track to deliver $27m of revenue and c.$1m of operating profit in the 1H. This compares with Citi/Consensus at $25-$26m and $0.5-$0.8m respectively and leaves the group on track to hit our FY estimates of $58m and $5.6m respectively. • Focus — We see three areas of focus at the results. First, we are looking forward to an update on some of the operational KPIs, in particular video search volume growth. A steeper gradient of search volume growth is the most direct way for the group to deliver EPS upgrades. A secondary focus will be cash usage. Following the recent capital raise, the group has nearly $50m of cash on its balance sheet. Acquired search volume is an alternative driver of revenue upside. Third, following its recent public launch, we look for an early view on prospects for the group’s transaction highjacking offering, cheep (www.getcheep.com) • Action — Whether it is organic, or via acquisition, momentum looks like it will continue to be positive for Blinkx’s core video search business. While we anticipate something of a slow burn on the transaction hijacking business, we note that our forecasts include limited revenue/profit (sub £5m) longer-term. Overall we are upbeat on prospects for the group, and see the 1H results as a further positive potential catalyst for the group. We would be long going into results. • Valuation and Investment Case: Still Bullish — Having rallied from little over 15p to 86p now (via 100p at one point), valuation is no longer as extreme as it was. Blinkx trades at 17x 2012E (March Y/E) EV/EBITDA and 26x 2012E P/E. However, while this appears extreme in a sector context, with a 3-year revenue/EPS CAGR of 25%/70% respectively we expect the multiple to fall fast. We believe a DCF-based analysis justifies a FV of c. 100p implying an ETR of 15%. We rate Blinkx Buy/Speculative. • Meeting/Conference Call Details — The company will host an investor meeting at 11am UK time. The meeting will be held at Financial Dynamics, Holborn Gate, 26 Southampton Buildings, London, WC2A 1PB. The meeting will also have a dial-in: +1 866 803 8344 (U.S.), +44 (0)20 7162 0125 (U.K. and Europe), password: blinkx. It will also be webcast at www.blinkx.co
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