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Monitise buys US rival Clairmail

Shares in Monitise have almost doubled since our buy tip, but they still look attractive
March 28, 2012

Monitise , which provides the software for payment systems on mobile phones, has made its first acquisition, buying US-based rival Clairmail for about $173m (£109m) in an all-share deal, which will be completed by the end of this year.

IC TIP: Buy at 36p

While Clairmail, like Monitise, is still in its growth stage and loss-making, the enlarged company could break even by the end of 2013, with gross profit margins of more than 70 per cent being achieved by June 2013. This will result from cross-selling opportunities and cost-savings; analysts at broker Canaccord estimate the deal will boost Monitise's order book by 36 per cent to £113m and revenues by 87 per cent to £63m.

The acquisition will raise Monitise's issued equity by 36 per cent to about 1.12bn shares.