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WPPGY's JWT to Acquire Converge

by Zacks Equity Research

March 22, 2012 | Comments : 0 Recommended this article: (0)

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Advertising titan, WPP plc (WPPGY - Analyst Report) via its global advertising and communications subsidiary, JWT, recently signed an agreement to subscribe for new shares of Pakistan-based, Converge Technologies Pvt. Limited.

The company seeks a minority stake in Converge and aims to capitalize on its expertise in technology-based marketing solutions and digital marketing services. Converge will be providing 360 degree activation, digital content marketing, customized applications for SMS, interactive voice response, web, WAP, kiosk and platforms, digital viral marketing, data and research management and content services.

The acquisition goes well with the company’s strategy of expanding its operations in emerging markets through acquirement. Converge’s client base includes big names such as Nokia, Pakistan State Oil, PTCL and Unilever, which will compliment JWT’s businesses. The target company employs roughly 90 people and generated PKR 187 million in revenues and PKR 76 million in gross assets for the period ended June 30, 2011.

In the recently announced 2011 financial results, WPPGY reported a 19.4% increase in net earnings and about a 7.4% augmentation in revenue. Geographically, the company fared well posting impressive growth in all regions. Margins went up in the year while cash and cash equivalents soared 22% year over year.

The current Zacks Consensus EPS Estimate for WPP plc. is $5.75 and $6.30 for the fiscal years 2012 and 2013, respectively. The estimate represents a year-over-year growth of 6.84% for 2012 and 9.53% for 2013.

Based in Dublin, Ireland, WPP Group plc provides advertising and communications services worldwide. The company faces stiff competition from its peers including Interpublic Group of Companies Inc. (IPG - Analyst Report), Omnicom Group Inc. (OMC - Analyst Report) and Publicis Groupe SA (PUBGY.PK).

We maintain a Neutral recommendation on WPPGY. The stock currently has a Zacks #2 Rank, which translates into a short-term (1-3 months) Buy rating.

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