How Mobile Embrace Ltd plans to be a market-thumping tech business

The shares of growing mobile commerce company Mobile Embrace Ltd (ASX: MBE) jumped almost 5% higher today, after it announced that it has expanded its services into Pakistan through a new agreement with Telenor Pakistan.

According to its release, Telenor Pakistan is the country’s second-largest mobile operator with over 38 million subscribers. The deal means Mobile Embrace is now live with 17 mobile operators in seven countries.

Mobile Embrace is a provider of direct carrier billing. Essentially this means that consumers can seamlessly engage with digital products and utilise carrier billing to conveniently pay the cost of the product or service, which is automatically charged to the consumers’ phone bill.

A country like Pakistan is a great place for the company to expand into and represents a huge direct carrier billing opportunity in my opinion. The country has over 133 million mobile subscribers, but only around 1.5 million credit card users.

Following a similar agreement with Telenor’s Digi in Malaysia, this is the second operator under the Telenor Group umbrella to sign with Mobile Embrace since it signed a global framework agreement with the mobile operator in August 2014. As Telenor has operations in 13 markets across the world, I feel there is a strong chance that there could be more to come in the future.

Management had this to say on the deal:

“With this new opportunity in Pakistan, and the recently announced partnership with StarHub in Singapore, MBE is continuing to rapidly grow its Direct Carrier Billing operations into very large consumer markets across Asia for very minimal capital outlay. The trend for consumers to transact through Direct Carrier Billing, where consumers use the positive credit of their mobile phone accounts to purchase products and services, is growing at a very rapid rate. This is in turn delivering pleasing revenue growth for MBE.”

I believe this makes Mobile Embrace a tempting investment. At 40x trailing earnings it doesn’t come cheap, but these agreements could prove to be a big boost to earnings growth that goes some way to justifying the premium.

Personally, I would suggest waiting for its preliminary report (which is expected to land at the start of August) before making an investment. This should give investors a clearer picture of how these new agreements are contributing to business growth.

In the meantime, I believe tech shares such as Appen Ltd (ASX: APX) and XERO FPO NZX (ASX: XRO) could be worth further investigation for investors looking at exposure to the information technology sector.

If you do end up wanting to add Appen to your portfolio I would highly recommend checking to see if you own one of these three rotten ASX shares. As they could be harming your portfolio, now might be an opportune time to swap them out.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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