Mphasis share price hits 52-week high on acquisition US-based Blink Interactive

#Buzzing Stocks, Mphasis, release

Mphasis share price touched a 52-week high of Rs 3,329.95 and rising over 2 percent intraday on September 23, a day after the company announced the acquisition of US-based Blink Interactive, Inc.

Mphasis shares were quoting at Rs 3,310.50, up Rs 57.50, or 1.77 percent. In the previous trading session, the share closed up 1.69 percent or Rs 54 at Rs 3,253.

“Mphasis Corporation, USA, a wholly-owned subsidiary of the company, has acquired Blink Interactive, Inc, a Washington Corporation, consequent to signing a definitive agreement regarding the acquisition,” company said in its release.

The acquisition is expected to provide access marquee logos, strengthen experience business and is leadership and revenue growth accretive, company said.

Headquartered in Seattle, with over 130 employees, Blink has additional studios in Austin, Boston, San Diego, and San Francisco.

Founded in 2000, Blink has over two decades of expertise using their Evidence-driven Design SM process to define digital user experiences for clients.

The company has acquired a 100% stake in Blink for a total consideration of up to USD 94 million, including earnouts.

Morgan Stanley has kept overweight call on the stock with a target of Rs 3,150 per share.

The acquisition of Blink is significant in comparison to recent acquisition, while it is selective, niche and bold move to expand addressable market, said Morgan Stanley

Citi has maintained neutral rating on the stock with a target of Rs 3,070 per share.

According to Citi, the Blink acquisition will add 2-3% to company’s revenue and Blink is expected to dilute margin by 100 bps over 2 years.

The company management expects to offset the margin impact through revenue & cost synergies, Citi added.

Motilal Oswal has maintained buy rating on Mphasis with a target price of Rs 3,560.

Mphasis is paying USD 94 million, including earn-outs, but excluding retention bonuses. Blink has clocked ~42% revenue CAGR over CY17-21 and has guided at a revenue of USD 33-35m in CY21. This implies a trailing EV/sales of 2.8x, which we view as reasonable, given the strong growth and cross-sell opportunities, said Motilal Oswal.

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