MPS moves up the Value Chain

I just watched the future of the Magazine. It is mouth watering. Take a look before going forward.Mag+’s version of the magazine

I attended the con call yesterday and there seems to be a bit of confusion in what MPS is doing. In reality, its actually very simple. Its just that we seem to want to evaluate every company like it were a steel plant. Looking at margins and cost etc etc. You can’t judge and elephant by its ability to climb trees.

Anyway, MPS has gone and created an awesome facility for wage arbitration, maybe one of the top 3 in the country and probably one of the cheapest in the world too. Now that it has cost and fulfilment under control, it moved up the value chain by by getting into content production with its earlier acquisitions – ELEMENTS, EPS & TSI. It also created DigiCore to stay ahead of the curve in terms of efficiency and cost.

Mag+ is a whole new ball game. It has some incredible capacities, but Bonnier, the earlier owners of Mag+ probably made a great product but couldn’t execute it because their services cost is way higher than MPS and the market couldn’t probably afford that.

Mag+ were the first guys effectively put a magazine on the iPad. Steve Jobs talking about how awesome Popular Science feels on the iPad

Acquisitions of this sort can be big game changers. Bonnier spend over 125 crores developing this project and MPS bought it out at 23cr and has the team along with it. These moves are ones that we should really be focusing rather than being petty and noticing differences in margins over small periods of time.

MPS really understands the platform game. By platforms i mean things like :

• Google Play
• Apple’s App Store
• Apple Pay
• Amazon Webservices

These are incredibly sticky businesses with low risk that do extremely well because they are essential. Once they recover their fixed operating costs, their margins can just explode.

Some other updates from the call yesterday :

• 400 crore revenue aspiration on track.
• Licensing revenue from the SAAS model
  • DigiCore and its modules
  • Mag+ and its Apps, Designd and Semble

• The Journals business is predominantly on DigiCore today.
• With the new acquisitions and increased efforts of mining, MPS is looking at newer areas of outsourcing in the publishing business.
• Mag+ will probably be a front runner in the next wave of mobile publishing.
• Mag+ Current revenue
  • 65% revenue from Enterprise customers
  • 35% from Magazine customers
• There is a good supply of deals available in the market and one can wait and cherry pick. MPS can due to its costing, also be competitive in case it wants to bid too, but knowing Nishith Arora, he loves to give life to companies that have great product, but are just about to kick the bucket because of the economics 

The company (excluding cash for this year) trades for about 1,100 cr. Last year they generated about 70 cr PAT and operating cash (after taxes) of about 50 cr, i.e they are trading at about 22 x free cash, with a ROCE of 81% on existing wage arbitrage business, and about 17-18x PAT. What is not being taken into account is the magic that Nishith is capable of.

I think this is a clear case of Heads i Win, Tails i Don’t loose much.

Psssst, Stay invested.