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Just Dial likely to open strong on Buyback announcement

Just Dial has announced that its Board of Directors have approved a proposal for Buyback of Equity Shares of the company, subject to approvals, for an aggregate amount not exceeding Rs220cr, at a price not exceeding Rs800 per share. The buyback will be on a proportionate basis through tender offer route in accordance with the provisions contained in SEBI Buyback Regulations. The buyback price is at 38% premium to its closing price of Rs580 on July 20, 2018.

Just Dial has reported broadly in-line set of numbers for Q1FY19E. The company reported a 24.6% yoy growth in unique visitors to 125.2mn. Of the 125.2mn, mobile traffic constituted 73.7% of the overall traffic. The company has added 829 employees during the quarter, of which, 660 additions were in the sales force. This hints at an improving demand scenario for the company. Also, the unearned revenue for the company has increased by 27.9% yoy, which is also a sign that the subscription for longer duration packages is increasing.

At current market price, the stock trades at ~20x its FY20E earnings. The buyback price of Rs800 implies a P/E multiple of ~28x FY20E EPS, which makes the exit multiple attractive. Investors seeking to capitalise on the 38% premium offered by the company can tender the entitled quantity, while the performance of the company continues to improve.

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