NASDAQ GM / TASE – 100 INDEX symbol: IGLD
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Transcript of NASDAQ GM / TASE – 100 INDEX symbol: IGLD
NASDAQ GM / TASE – 100 INDEX symbol: IGLD
Eli Holtzman, CEODoron Turgeman, CFOQ4 2006
Internet GoldInternet GoldLeading Israeli communications Leading Israeli communications
and Interactive media Groupand Interactive media Group
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Forward-Looking Statement
The statements contained herein that are not purely historical are forward-looking
statements. These forward-looking statements, and
especially those regarding the 012 merger, involve risks and uncertainties and actual
results could differ materially from the results discussed in these statements.
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History April 92’ - Euronet Golden Lines when Communications market starts
liberalization process. 1st line of activity – Audio text. Terminated after 2 yrs.
1993 - EDC - Euronet Digital Com. – private data lines via satellite
- EIC - Euronet Int’l Com. – limited service via call back
- EDC / EIC terminated ~ 1996
Jan 96’ – commence ISP service
Aug 99’ – leading Israeli ISP. Public on NASDAQ
2000 – subsidiaries - GoldMind / GoldTrade / IGI / MSN Israel
Q1 2000 – signed partnership with MS / April 2000 – msn Israel is up
Mid 2001 – turn & remain profitable / growth throughout almost all Q’s
August 2004 – ILD service is launched with 015
April 05’ – Dual listed on TASE (Dec. 06 – enters TA100 index)
Jan 06’ – re-org & re-brand to Smile - GT => SCL / GM => SML
Aug. 06’ – acquisition of 012 Golden Lines from the Fishman Group
January 2007 – 012 deal closing. Actual merger starts
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Corporate Structure
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Committed to growth…2007 - crossing the 250 M$ revenue line
2006– Build-out of International
VoIP Telephony services
– Expansion of InternetAdvertising
– Expansion of BusinessServices
– 012 acquisition to be completed and operations to be consolidated - Q4/06
2007– 1st full year of the merged
operation
– Continued growth expected in all lines of business (under both ‘smile’ and ‘012’ brands)
Primary drivers:
in us $ millions
296
9843 52 70
0
50
100
150
200
250
300
350
2003 2004 2005 2006 2007Goal *
Organic CAGR = +20%
M&A CAGR = +47%
* post-merger
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Israel’s telecommunications market
Cellular, $2.7
Multi-Channel TV, $0.7
ILD, $0.4
Fixed line & data, $1.2
Internet, $0.3
Source: Israeli MoC
2005 total – US$ 5.3 B
In US$ Billion
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Competition
Business Overview and Strategy cont.
Market is rough on new entrants & small players ILD – x-fone 018 / Netvision’s 017 and also 015 ISP – many micro ISP’s who never expanded
* Partner is the only independent cellular player / Eurocom was a co-founder / excellent working relations
Internet Access (k subs)
Internet VAS Residential
Internet Business
e-Advertising (US$ M’)
e-Commerce (US$ M’)
DATA
ILD (m’ $) incl. hubbing
Fix telephony (VOB)
Cellular *
Multi Channel TV
Radio stations
Residential Comm. Equip.
Satellite services
Relative strength
Smile Group
Related companies
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Leveraging Strong Positioning
Access Services
Major market share in a stable market
Stronger emphasis on biz sector
VoIP/VOB/TDM Telephony
Two strong brands to drive growth in market share
Commercial penetration of domestic VoB
Online Advertising
We expect our advertising revenues will grow as media budgets continue to shift to the Internet
Efficient merger
1 + 1 = 3…
Significant savings on opex / capex
Efficient management of the two brands
Conservative estimation of 11-14M $/yr savings
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1 + 1 = 3
Multiple Synergies between the two companies
Global data networks Roaming services Call centers Fixed domestic
telephony Pre/post paid cards TDM platform
Value Added Services Biz services
Hi level integration
Hi level data security
Dealer network e-Media & e-
Commerce
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The Merged Company: A Communications Powerhouse
Revenues 81.2 169.3 250.5 272
EBIT 7.6 19.8 27.4 40-43
EBITDA 12.7 35 47.7 60-63
Employees(February 28, 2007)
728 1,160 1,888 Synergy
Total
2006*
* pro-forma
F/Y - 2007**
** company’s goals for the 1st full year of merged communications operations
SC
L
communications activities onlyIn US$ millions
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Leveraging state of the art telephony infrastructure
To drive further growth
Most sophisticated VoIP platform World class TDM platform Auxiliary platforms (anti-fraud / billing / CRM etc.)
ILD – growing in volume and revenue terms
International voice traffic from Israel - up 9.1% in 2006 vs. 2005(Source: Israeli MOC)
International voice revenues for H1 2006 up 3% vs. H1 2005(Source: IDC)
= cash generator
ILD, $0.4
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State-of-the-art telephony infrastructure
Solid investment in class 5 fixed telephony No further significant investments required Auxiliary platforms (anti-fraud / billing / CRM etc.)
Fixed telephony Total fixed telephony market in Israel - US$ 1.2B in 2005
012 currently have only ~ 15k subscribers’ lines Our goal ~ 5% market share of this significant segment within 2-3
years Future marketing to rely on existing customer base of ~ 800 k
subscribers
072 - additional growth driver
Fixed line &
data, $1.2
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2006/2007: Growth of Online Advertising
continues
19
17
67
1012
02468
101214161820
2002 2003 2004 2005 2006 2007*
Source: PWC IAB Internet Advertising Report, Sept. ‘05
US Internet Advertising CAGR = +21%
Source: Market surveys & IGLD estimates
Israel Internet Advertising CAGR = +38%
& company's estimates
85
50
36
2212
65
0
10
20
30
40
50
60
70
80
90
2002 2003 2004 2005 2006 2007
*
* Q3/06 - Media market affected by war conditions
in US$ billions
in US$ millions
estimated
Israel’s broadband penetration is among the highest in the world~70% of Israeli households have Internet access ~ 95% are connected via broadband!>40% of users are online >10 hours per week. 2.7M users per day!
Israel’s online ad budgets are low compared to exposure –ad budgets always follows ratingInternet Advertising in Israel is currently > 6-7% of overall media spending (~ $900M in 05’) - growing fast
SEARCH - additional growth potential: US search revenues - 40% of total e-Adv. much higher than in Israeli market
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Smile.Media – Content & Portal
BrandsProperty IGLD’s
ownership Description
msn-Israel 50.1% SML(49.9% MS Corp.)
Hebrew language portal Messenger, Hotmail Israel & MSN Search Israel
start 100% General portal & Search engine
nirshamim 100% Academic portal
zahav.ru 100% Russian language portal
V-games 100% Games content portal
TheMoney 100% Lead-generation financial portal
tipo 52% Children’s portal
seret 51% Cinema portal
yahala 51% Arab-language portal
Radius100FM 50% Leading Israeli radio station
portal
SML Network Exclusive
marketing rights
E-advertising network in 4 portals
netex Search engine & directory
goop Youth portal
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Leading e-Commerce Brands
Property IGLD’s % Description
P1000 100%
One of Israel’s top 4 e-Commerce sites
Outlet for >100 of Israel’s largest consumer product suppliers
Growing revenues, positive EBIT Low-risk commission model with
fulfillment directly from suppliers
LMT 50% Leading Israeli on-line travel site
getprice 51%
Leading Israeli price comparison site
dbook 50% Leading Bookstore
Paid content
marketing rights
Online magazines, newsletters, recruitment & jobs search and other content services
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19
3.1 3.9 4.1
14.1 16.018.6 18.9 20.8
23.0
3.3 4.1 4.8
27.8
17.419.1
22.5 23.024.9
Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06
Smile.media Smile.communications
Revenues
0.6 0.9 0.8
0.7 1.11.3 2.1
2.3
0.90.70.7
1.9
3.2
2.7
2.21.7
1.4
2.8
Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06
Smile.media Smile.communications
US$ in millions
EBIT
Quarterly Growth
US& in millions
Two pure-play subsidiaries
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24171287
8159
4436
272
9871
5243
296
2003 2004 2005 2006 2007*
Media Communications
Revenues
3215
1
5 5 58
39
44
6 6 711
2003 2004 2005 2006 2007*
Media Communications
US$ in millions EBIT
Two pure-play subsidiaries
Annual Growth
* Ebitda goal for 2007 ~ 71 / estimate for finance exp. ~ 9.5
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Effective Balance sheet overview*
Total assets 332
Total liabilities 287
Total shareholders’ equity 45
in US$ millions
Total Debt Short-term 70
Total Debt Long-term 71
Total effective finance Debt 141
* Post bonds issuance
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ComparablesInteresting market opportunity…
KCSA to send new slide
as of Mar. 07 2007
Year ended
Ticker IGLD Sify IIJI PCNTF SINA SOHU
Share price $12.13 $8.41 $9.25 $9.47 $32.55 $22.54
Communications
Revenues (M$) 250.5 97.6 424.0 123.1
EBITDA 47.7 5.9 56.3 9.0
Market cap (M$) N/A N/A 755.9 128.0price to revenues multiple N/ A N/ A 1.8 1.0
price to EBITDA multiple N/ A N/ A 13.4 14.2
Media
Revenues (M$) 17.0 7.7 212.8 134.2
EBITDA 4.4 0.6 47.4 33.2
Market cap (M$) N/A N/A 1,755.3 822.6price to revenues multiple N/ A N/ A 8.2 1.5
price to EBITDA multiple N/ A N/ A 37.0 24.8
Total
Revenues (M$) 267.5 105.3 424.0 123.1 212.8 134.2
EBITDA 78.4 6.5 56.3 9.0 47.4 33.2
Market cap (M$) 244.5 356.5 755.9 128.0 1,755.3 822.6price to revenues multiple 0.9 3.4 1.8 1.0 8.2 6.1price to EBITDA multiple 3.1 54.8 13.4 14.2 37.0 24.8
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Goal: to become Israel’s Leading Full
Suite Alternative Service
Provider
Technology Value added services
VoB & business integration
VoWi-Fi / Wi-MAX
IP seamless mobility
IPTV
e-Commerce & paid content
International Long Distance (ILD) & Internet Access
Portals & e-Advertising
20091997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20081996
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Strong Shareholders / Dedicated Management
Public ~ 37%
Eurocom Communications ~ 63% Focused, communications-oriented controlling parent group Leading Israeli private communications group representing
exclusively Nokia, Panasonic, GE and more Also holds equity in radio stations, DBS TV service provider,
satellite communications, cellular and more
Closely-knit, results-oriented management team Most all level of management grows from within Experienced upper level management
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Investment highlights
Leading Communications Group
Today: controls 1/3 of its markets with a continuously growing market share
Tomorrow: entering new markets
Positioned to lead rapidly growing media markets
over 30 portals & e-Commerce sites
High rate of market growth
Working from strong cash generating platform
All activities in both companies are major cash generators
Merger anticipated to save ~ US$ 11-14M in exp/inv
No difficulty in servicing loan (fin. exp. ~15% of Ebitda)
Proven management & ownership
Both company's management teams, working together with Eurocom (as controlling shareholder), have proven capable of carrying out aggressive growth / leadership strategies
Thank you!