Opera 3Q10 preview outlook report

8/8/2019 Opera 3Q10 preview outlook report

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FONDSFINANS ASA, HAAKON VIIS GATE 2, P.O.BOX 1782 VIKA, NO-0122 OSLO, TEL: +47 23 11 30 00, FAX: +47 23 11 30 03, [email protected] refer to important information written later in this report

Opera Software BuyPreview 3Q10 08 November 2010 Share Price: NOK 29.80 (05.11.2010)Results Date 15 November 2010 Target: NOK 40.00 (30.00)

Share data (NOK) 08.11.2010

Sector IT - Software

Reuters/Bloomberg OPERA.OL/NO

Risk rating High

Outstanding shares 119,6

Market cap 3 563Net interest bearing debt -550

Enterprise value 3 013

Free float 53 %

Average volume 474 753

High/low 52w 29,2 / 16,1

Weight OSEBX 0,23 %

Rel. Perf 3/6/12 10 / 21 / 16

Abs. Perf. 3/6/12 22 / 32 / 44

Share Price

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OPERA

Estimate changesCurr. Prev. Curr. Prev.

2010E 2010E 2011E 2011E 2010E 2011E

Sales 686 690 881 885 -4 -5

EBITDA adj. 146 150 249 254 -4 -5

EBITDA 129 133 229 235 -4 -6

EBIT 106 110 186 192 -4 -6

Pre-tax profit adj. 83 87 202 208 -4 -6

EPS adjusted 0,70 0,72 1,22 1,25 -0,02 -0,04

Curr. Prev. Curr. Prev.

2010E 2010E 2011E 2011E 2010E 2011E

PC/Desktop 227 230 224 246 -2 % -9 %

Operators 219 218 379 369 0 % 3 %

Device OEMs 134 133 181 175 0 % 3 %

Mobile OEMS 80 81 49 50 -1 % -1 %

Mini Consumer 27 28 48 45 -2 % 8 %

Change in

Change in %

Excellent play on mobile data growth

In the last months, we have seen a very clear message from about everymobile operator that data users and traffic is exploding. Being evident in themost advanced markets for a few years, this is now a universal trend, alsoinfluencing emerging and low-ARPU markets. This seems to be the strongest

trend shift we have seen in the telco world since the introduction of GSM.Operators will be seizing the opportunity to capitalize on this trend andincrease ARPU while managing network capex. Opera Mini is a unique valueproposition to both users and operators to realize the mobile web, and we seean extremely good business environment for Opera now and in coming years.

We expect Opera to report 3Q sales of NOK 176m. This represents YoYgrowth of 31%. This is the first quarter of high growth since the realignment inQ3 last year. We expect EBIT at NOK 35m, reaching 20% margin. Therevenue estimate is in the middle of Operas guided range for Q3, while theEBIT is above the high end due to a lower OPEX forecast.

The most important driver for Opera is without doubt development and outlook

for licensed Mini users, both in OEM deals (AT&T, Vodafone etc) and revenuesharing deals. We expect the Q3 report to show 6.8m licensed users, up from4.5m at Q2. We also expect Opera to announce users by end of October,which we estimate at 7.8m. This implies 850k net additions per month in thethree months since the last known data point, which was 5.2m by end of July.

Being a large part of revenues, Opera Desktop is still important, and we expect47m active users with NOK 58m of revenue. Q3 should also see a meaningfulincrease in Device OEM revenues coming from Internet connected TVs. Weforecast NOK 36m of revenue in the segment, up 20% QoQ.

We upgrade the growth trend in the forecasts and DCF model to reflect thecurrent very strong trends toward mobile data in emerging markets and arrive

at a new DCF-based target of NOK 40, keeping a Buy recommendation.

Key figures (NOKm) 2009 2010E 2011E 2012E 2q10 3q10E

Revenues 613 686 881 1 131 168,9 176,0

EBITDA 68 129 229 344 34,3 41,3

EBIT 54 106 186 280 28,8 35,1

PTP 44 83 202 303 26,6 38,4

EPS adjusted 0,38 0,70 1,22 1,82 0,18 0,23

CEPS 0,49 0,90 1,58 2,35 0,23 0,28

Revenue growth 23 % 12 % 28 % 28 % -2 % 31 %

EBIT margin 9 % 15 % 21 % 25 % 17 % 20 %

EV/Sales 3,0 4,4 3,4 2,7

EV/EBITDA, static 27,4 23,3 13,1 8,8

EV/EBIT, static 34,1 28,5 16,2 10,7

P/E 53,2 42,6 24,5 16,4

P/E ex current cash n.m. 57,5 22,5 14,9

ROE 5 % 9 % 19 % 23 % Source: Opera / FF research

Prepared by analyst:Arild NystherFondsfinans ASATEL: +47 23 11 30 [email protected]


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Opera Software Preview 3Q010

Page 2 8 November 2010 Fondsfinans Research

Operas unique value proposition

With opera for mobile phones, the browser on the phone communicates with

Operas server farms and not to the Internet directly. Operas servers fetch therequested page, compress it and send a ready-processed image of the page backto the phone. To the user, the technicalities are under the hood and the experienceis equal to a traditional browser in almost all cases.

This framework has a number of very important benefits:

Since the processing is done on the servers, the requirements of phone arevery low. With other browsers, the full web experience requires a veryadvanced and costly mobile phone. With Opera, the full web is experiencedon just about any phone.

Since only a compressed image is sent to the phone, data traffic is reducedby 80-90% compared to the same page in HTML. This makes data cost

drop by as much for the users. For operators, it means less utilisation offixed data plans.

Because data traffic is reduced by 80-90%, Opera makes surfing fast evenon slow or congested networks. Opera works well on 2G networks,important for emerging markets. The benefits are as great in the mostdeveloped market on 3G networks, as the rapid adoption of smart phoneshas congested networks.

For emerging market users with low or mid-end phones it means that the fullweb is accessible for the first time and at a reasonable usage cost.

For developed markets users, it is a way of saving considerably on high

data charges, to use when travelling or to get through in congestednetworks. It is also a better browsing experience than the included browseron most smart phones.

For the network operator, it is a unique value proposition. Driving datausage penetration, it is a way to increase ARPU. Iphone/Android/Win7 nowaccount for about 20% of new phones. The other 80% needs a browser todrive data ARPU. Operas systems have demonstrated for years how itdrives usage to a different level than standard browsers. Since theincremental data traffic is limited, the increased ARPU is achieved withlimited capex.

The compelling advantages of Operas software for phones have led to a user baseof 70 million active Opera branded users.

A number of operators have licensed an OEM version of the software recently. Thisincludes tier one operators in both developed and emerging markets.


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Preview 3Q10 Opera Software

Fondsfinans Research 8 November 2010 Page 3

Operas contracts and ramp-up pipeline

Opera signed Vodafone and AT&T during 2009, and ramp-up began towards theend of the year. Since the contracts were signed, the operators have shown greatcommitment and are phasing launches through markets and phone segments.

Since then, Opera has signed several new significant contracts, including Sprint, SKTelecom (no1 in Korea), Verizon and Telenor (no7 overall in the world). In emergingmarkets, Opera is working to convert the large user base into licences users, andhas struck deals with MTS, Megafon and Tele2 (combined 70% of Russian market),Telkomsel (no1 Indonesia), Smart (no1 Philippines) as well as several others.

We estimate that operators under contact have about 1.2 billion subscribers andexpect this number to increase significantly with new contracts.

Q2 news flow. Q3 could also see announcements


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Development

Licensed user development total

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Millactiveusers

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F M A M J J A S O

Netaddspermonth

Developing the product and interest in the market, Opera spent three years gettingto the first million licensed active users in 2009. By the end of 2010 we expectOpera to reach 10 mill users. With the continued ramp up of existing contracts aswell as flow of new deals, the additions should continue to accelerate going forward.Revenue will scale about linearly with users, as Opera gets paid per active user perquarter on a recurring basis. The fee varies, but is about EUR 0.5 per user perquarter.

Opera Branded development total

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F M A M J J A S ONetaddspermonth

Opera has seen great success in the land grab phase of the Opera Branded andfree version of Opera Mini. Opera now has 70 mill active users on a monthly basis,and this is about double the level of a year ago. Currently Opera has a searchreferral deal with Google which provides some income. The greater potential lies inconverting these users into licensed deals, which Opera has been successful with inRussia so far. In addition there is great monetization potential with advertising, asOpera controls the front screen of the browser. We also believe this user base is ofgreat strategic value. If development continues, Opera will with a strong brand

control the front screen of 100 150 mill emerging market web users, whichprobably has a large value to the right buyer.


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Source: FF research

Opera Model

2009 2010E 2011E 2012E 1q09 2q09 3q09 4q09 1q10 2q10 3q10E 4q10E

DESKTOP

Active users 39 238 49 609 49 907 49 907 34 500 37 950 38 500 46 000 52 000 49 000 47 530 49 907

ARPU USD 0,789 0,766 0,766 0,766 0,206 0,190 0,183 0,210 0,181 0,188 0,197 0,200

DESKTOP REVENUE MNOK 184,9 226,5 223,6 223,6 47,0 44,8 42,8 50,4 52,0 59,1 58,5 56,9

59 % 22 % -1 % 0 %

OPERATORS

Quarterly active Mini users 1 200 5 891 16 456 28 842 1 100 950 1 100 1 650 2 500 4 500 6 817 9 749

Quarterly active Widget/turbo users 0 0 0 0 0 0 0 0 0 0 0 0

Licence per active user EUR 4,9 2,6 1,9 1,8 1,26 1,26 1,26 1,1 0,78 0,67 0,6 0,55

Mini licence revenue mNOK 50,4 115,8 251,6 416,4 12,4 10,6 12,1 15,2 15,8 23,9 32,5 43,5

Opera Mobile Shipments 8 400 9 539 10 510 10 720 2 100 2 100 2 100 2 100 2 500 2 300 2 346 2 393

Licence per shipment USD 0,4 0,4 0,4 0,4 0,4 0,4 0,4 0,4 0,4 0,4 0,4 0,4

Mobile licence revenue mNOK 21,1 23,0 24,6 25,1 5,8 5,5 5,1 4,8 5,9 5,7 5,8 5,6

Sum operator licence revenue NOK 71,5 138,7 276,2 441,5 18,2 16,0 17,3 20,0 21,7 29,6 38,3 49,1

Development income EUR 4,4 3,9 5,2 5,2 1,2 1,4 0,8 1,0 0,8 1,5 0,8 0,8

Development income NOK 38,5 31,2 42,7 42,7 10,8 12,4 7,0 8,4 6,5 11,9 6,4 6,5

Maintenance & support EUR 6,7 6,1 7,3 8,7 1,7 1,7 1,7 1,7 1,4 1,4 1,5 1,8

Maintenance & support NOK 58,3 48,7 59,8 71,7 15,0 14,8 14,6 14,0 11,1 11,1 11,9 14,6

OPERATORS REVENUE MNOK 168,3 218,7 378,6 555,9 43,9 43,2 38,8 42,4 39,3 52,6 56,6 70,2

73 % 30 % 73 % 47 %

MOBILE OEM

Opera Mobile shipments OEM 11 800 8 972 8 332 9 558 4 900 2 400 2 400 2 100 2 900 2 400 2 040 1 632

Licence per shipment USD 0,41 0,69 0,50 0,50 0,40 0,40 0,40 0,40 0,40 0,85 0,80 0,80

OEM Mobile licence revenue NOK 30,3 37,2 24,4 28,0 13,5 6,2 5,9 4,8 6,8 12,7 10,0 7,6

Share of segment 24,9 % 46,4 % 49,8 % 53,2 % 33 % 20 % 21 % 23 % 27 % 59 % 56 % 48 %



Share of segment 75,1 % 53,6 % 50,2 % 46,8 % 67 % 80 % 79 % 77 % 73 % 41 % 44 % 52 %

MOBILE OEM REVENUE MNOK 121,6 80,2 49,0 52,6 40,4 31,9 28,6 20,8 25,0 21,4 18,0 15,7

-25 % -34 % -39 % 7 %

DEVICE OEM

Licence fees EUR 10,8 12,6 17,3 21,6 2,3 4,7 1,5 2,3 2,5 2,6 3,5 4,0

Licence fees NOK 94,5 101,2 141,9 177,4 20,6 41,6 13,1 19,1 20,3 20,6 27,8 32,5

Share of segment 77,3 % 75,7 % 78,4 % 78,4 % 73,0 % 84,7 % 63,8 % 79,0 % 69,4 % 69,3 % 77,8 % 83,3 %



Share of segment 22,7 % 24,3 % 21,6 % 21,6 % 27,0 % 15,3 % 36,2 % 21,0 % 30,6 % 30,7 % 22,2 % 16,7 %

DEVICE OEM REVENUE MNOK 122,1 133,6 181,0 226,2 28,2 49,1 20,5 24,2 29,2 29,7 35,8 39,0

7 % 9 % 35 % 25 %

MINI CONSUMER

Opera Mini users 32 872 68 099 108 597 143 520 23 075 26 464 35 635 46 314 55 275 59 469 71 073 86 578

ARPU USD 0,079 0,072 0,079 0,089 0,021 0,019 0,018 0,021 0,020 0,018 0,018 0,018

MINI CONSUMER REVENUE MNOK 14,3 27,3 48,4 73,0 2,9 3,1 3,5 4,9 5,9 6,3 7,0 8,1

115 % 91 % 78 % 51 %

Totals

Desktop 184,9 226,5 223,6 223,6 47,0 44,8 42,8 50,4 52,0 59,1 58,5 56,9

Operators 168,3 218,7 378,6 555,9 43,9 43,2 38,8 42,4 39,3 52,6 56,6 70,2

Mobile OEM 121,6 80,2 49,0 52,6 40,4 31,9 28,6 20,8 25,0 21,4 18,0 15,7

Devices OEM 122,1 133,6 181,0 226,2 28,2 49,1 20,5 24,2 29,2 29,7 35,8 39,0

Mini Opera Branded 14,3 27,3 48,4 73,0 2,9 3,1 3,5 4,9 5,9 6,3 7,0 8,1

SUM REVENUES 611,3 686,3 880,6 1 131,3 162,4 172,0 134,2 142,7 151,4 169,0 176,0 189,8Growth 23 % 12 % 28 % 28 % 58 % 53 % 8 % -9 % -7 % -2 % 31 % 33 %

Desktop 30 % 33 % 25 % 20 % 29 % 26 % 32 % 35 % 34 % 35 % 33 % 30 %

Operators 28 % 32 % 43 % 49 % 27 % 25 % 29 % 30 % 26 % 31 % 32 % 37 %

Mobile OEM 20 % 12 % 6 % 5 % 25 % 19 % 21 % 15 % 17 % 13 % 10 % 8 %

Devices OEM 20 % 19 % 21 % 20 % 17 % 29 % 15 % 17 % 19 % 18 % 20 % 21 %

Mini Opera Branded 2 % 4 % 6 % 6 % 2 % 2 % 3 % 3 % 4 % 4 % 4 % 4 %

Revenue by type

Licence fees 196,3 277,1 442,5 646,9 52,3 63,9 36,2 43,9 48,7 62,9 76,2 89,2

Online content 199,2 253,8 272,0 296,6 49,9 47,8 46,2 55,3 58,0 65,3 65,6 64,9

Maintenance & support 58,3 48,7 59,8 71,7 15,0 14,8 14,6 14,0 11,1 11,1 11,9 14,6

Consulting 157,5 106,7 106,3 116,1 45,3 45,6 37,2 29,5 33,6 29,7 22,3 21,1

SUM 611,3 686,3 880,6 1 131,3 162,4 172,0 134,2 142,7 151,4 169,0 176,0 189,8

Licence fees 32 % 40 % 50 % 57 % 32 % 37 % 27 % 31 % 32 % 37 % 43 % 47 %

Online Content 33 % 37 % 31 % 26 % 31 % 28 % 34 % 39 % 38 % 39 % 37 % 34 %

Maintenance & Support 10 % 7 % 7 % 6 % 9 % 9 % 11 % 10 % 7 % 7 % 7 % 8 %

Consulting 26 % 16 % 12 % 10 % 28 % 26 % 28 % 21 % 22 % 18 % 13 % 11 %


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DCF Valuation

NOK million 2009 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E Term.

Total net revenue 613 686 881 1 131 1 358 1 629 1 873 2 155 2 478 2 552

Revenue growth 23 % 12 % 28 % 28 % 20 % 20 % 15 % 15 % 15 % 3 %

OPEX (ex. depr., option cost) 531 540 631 764 950 1 140 1 311 1 508 1 734 1 786EBITDA 82 146 249 368 407 489 562 646 743 766

EBITDA margin 13 % 21 % 28 % 32 % 30 % 30 % 30 % 30 % 30 % 30 %

Depreciation 13 23 44 63 54 65 75 86 99 102

EBIT 54 106 186 280 353 424 487 560 644 664

EBIT Margin 9 % 15 % 21 % 25 % 26 % 26 % 26 % 26 % 26 % 26 %

Calculated tax 15 30 52 79 99 119 136 157 180 186

Cashflow from operations 52 100 177 265 308 370 426 490 563 580

Net investments wc -44 -55 -33 -43 23 27 24 28 32 7Net investments assets 43 79 41 49 54 65 75 86 99 102

Net cash flow 53 76 169 259 232 278 326 375 432 470

Years 0 0,1 1,1 2,1 3,1 4,1 5,1 6,1 7,1 7,1

Discounted cash flow 0 75 152 211 172 187 200 209 219 238

ASSUMPTIONSBeta 1,2

Net present value CF 11-12 363 Risk premium after tax 5 %

Net present value CF 13-17 987 Risk free rate 4 %

NPV terminal value 3 415 Tax 28,0 %

Estimated EV 4 764 Return equity 10,0 %

Net cash 31.12.10 -586 Return debt 0,0 %

Value equity 5 350 Debt ratio 0,0 %

No. of shares (fully diluted) 127,2 WACC 10,0 %

NPV share NOK 42 WC/Sales 10 %

Capex/Sales 4 %

NPV today 41

Source: FF research


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Cash flow and balance

INCOME STATEMENT 2008 2009 2010E 2011E 2012E 1q10 2q10 3q10E 4q10E 1q11E 2q11E 3q11E 4q11E

PC/Desktop 116 185 227 224 224 52 59 59 57 53 55 58 58

Internet Devices 381 428 460 657 908 99 110 117 133 144 156 170 186Revenues 497 613 686 881 1 131 151 169 176 190 197 211 228 245

Growth 58 % 23 % 12 % 28 % 28 % -7 % -2 % 31 % 33 % 30 % 25 % 29 % 29 %

Operating expenses 408 545 557 651 788 141 135 135 147 157 159 161 175

EBITDA 89 68 129 229 344 10 34 41 43 40 52 67 70

EBITDA margin 18 % 11 % 19 % 26 % 30 % 7 % 20 % 23 % 23 % 20 % 25 % 29 % 29 %

Depreciation 8 13 23 44 63 5 6 6 7 8 10 12 14

EBIT 81 54 106 186 280 5 29 35 37 32 42 55 56

EBIT margin 0 0 0 0 0 0 0 0 0 0 0 0 0

Net financial items 24 10 10 16 22 2 2 3 3 4 4 4 5

Pre-tax profit 130 44 83 202 303 -22 27 38 40 36 46 60 61

Income tax -40 -14 -23 -57 -85 6 -7 -11 -11 -10 -13 -17 -17

Net Income 90 31 60 146 218 -16 19 28 29 26 33 43 44Adjustments 17 -14 -24 0 0 -21 -3 0 0 0 0 0 0

Net Income adjusted 73 45 84 146 218 5 22 28 29 26 33 43 44

EPS basic 0,8 0,3 0,5 1,2 1,8 -0,1 0,2 0,2 0,2 0,2 0,3 0,4 0,4

EPS adjusted 0,6 0,4 0,7 1,2 1,8 0,0 0,2 0,2 0,2 0,2 0,3 0,4 0,4

Cash flow 2008 2009 2010E 2011E 2012E 1q10 2q10 3q10E 4q10E 1q11E 2q11E 3q11E 4q11E

Net profit 90 31 60 146 218 -16 19 28 29 26 33 43 44

Other 60 33 60 96 130 5 20 15 20 17 23 27 29

Cash flow operations 150 64 119 242 348 -10 39 42 48 43 56 70 73

Net investments -17 -43 -79 -41 -49 -52 -7 -8 -12 -8 -8 -9 -15

Free cashflow 132 20 40 201 299 -62 32 35 36 35 47 61 58

Cash flow from finance -36 -37 -1 0 0 -1 0 0 0 0 0 0 0

Net change in cash 97 -17 40 201 299 -63 32 35 36 35 47 61 58

Balance sheet 2008 2009 2010E 2011E 2012E 1q10 2q10 3q10E 4q10E 1q11E 2q11E 3q11E 4q11E

Cash 564 562 586 787 1086 483 516 550 586 621 668 729 787

Trade rec. and other 185 161 282 363 469 225 251 261 282 293 313 338 363

Total current assets 748 723 868 1 150 1 555 708 766 811 868 914 981 1 067 1 150

Fixed assets 32 43 55 52 38 46 48 49 55 55 54 51 52

Intangible fixed assets 16 56 151 151 151 151 151 151 151 151 151 151 151

Total non-current assets 48 99 206 203 189 198 199 200 206 206 205 203 203

Total assets 796 822 1074 1354 1744 906 965 1012 1074 1120 1186 1269 1354

Equity 598 603 679 844 1086 591 614 646 679 709 747 795 844

Liabilities 199 219 395 509 658 315 352 366 395 411 439 474 509

Total equity & liabilities 796 822 1 074 1 354 1 744 906 965 1 012 1 074 1 120 1 186 1 269 1 354

Key Figures 2008 2009 2010E 2011E 2012E 1q10 2q10 3q10E 4q10E 1q11E 2q11E 3q11E 4q11EWorking capital -14 -58 -113 -146 -189 -90 -101 -105 -113 -118 -126 -136 -146

Net int. bearing debt -564 -562 -586 -787 -1086 -435 -516 -550 -586 -621 -668 -729 -787

DSO 134 94 148 148 149 134 134 134 134 134 134 134 134

Source: Opera / FF Research


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Revenue break-down

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Active users Mini Opera Branded

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4q07 1q08 2q08 3q08 4q08 1q09 2q09 3q09 4q09 1q10 2q10 3q10E

0,165

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Active users ARPU


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Risk assessment

Risk must be regardedhigh

Opera is exposed to several risk factors. The future in the mobile market is veryuncertain, with Microsoft and Nokia developing own mobile browsers, andOperas present technological leadership might not last. At the same time the

structure in the market is hard to predict, operators wants more advancedphones in order to sell more services, but need to give producers an incentive.Market shares within different segments are also difficult to predict as well as thedevelopment in number of different phones.

Furthermore the company is highly sensitive to the US dollar. All desktop incomefrom licenses is in US dollars while a significant part of mobile income also is indollar. Totally, the split between dollars and euro are approximately equal.

The upscale of business will also involve some risk factors. The company willhire several employees this year, to prepare for further growth. This is a move ofinvesting in future, however, if growth remains slow, the company will still sufferfrom high costs.


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Definitions of ratings

Buy Low risk: with a potential of min 5%. Medium risk: with a potential of min 10%. High risk: with apotential of min 15%.

Neutral Low risk: -5% to +5%. Medium risk: -10% to +10%. High risk: -15% to +15%.

Sell Low risk: min 5%. Medium risk: min 10%. High risk: min 15%.

Risk ratings are based on price volatility, fundamental criteria and perceived risk. Ratings are: Low (L), Medium (M) and High (H).

Target: Our valuation as of today.

Time frame of target: Target is what we value the share as of today.

Our investment recommendation is elaborated in accordance with The Norwegian Securities Dealers Associations standards.

This report has not been sent to the company for correction of any factual errors.

Fondsfinans is organized with Chinese walls between the Corporate Department and the Research/Broking Department. In addition,Fondsfinans has internal instructions and guidelines for handling sensitive information.

The analyst receives compensation that is impacted by overall firm profitability, including investment banking activities.

The analyst is partner in DIS Fondsfinans.

Fondsfinans is under supervision of The Financial Supervisory Authority of Norway.

The recommendation has not been changed. The previous recommendation was issued 26 August 2010.

Ownership per 08.11.10 in Opera:Analyst (including his/her closely related persons or companies):0, corresponding to 0% of the company share capital

Employees (including their respective closely related persons or companies):0, corresponding to 0% of the company share capitalGroup Fondsfinans (including the holdings of its Chairman, his spouse and their closely related companies, Erik Must AS and its 100%controlled subsidiaries):0, corresponding to 0% of the company share capital

Fondsfinans may hold shares in Opera as a result of daily trading/market making. Information on such holdings is not given when ofnon-significant value.

This report was issued and distributed 08.11.10.

Recommendation distribution as of 25.10.10:

Recommendation No Percent Recommendation No Percent

Buy 43 80 % Buy 9 21 %

Neutral 7 13 % Neutral 0 0 %

Sell 4 7 % Sell 0 0 %

Total 54 100 % Total 9

Companies in each recommendation category that have been

investment banking clients over the past 12 months:


11/11

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i d i thi t F d fi ASA f ti t ti t f it i t t i h ld iti i iti d i thi t U d i t l l ti l t t

OPERA SOFTWARE Analyst: Arild Nysther +47 23 11 30 82

Sector: Technology Price (NOK): 29,8 Shares outs.: 119,6m

Date: 08 Nov 2010 Market cap (NOKm): 3 563

Next result: 15 Nov 2010 Book equity per share (NOK): 5,4 Net int.-bearing debt (NOKm): -550

Target: 40,0 Equity ratio: 64 %

Recommendation: Buy 12 month high/low: 29,2 / 16,1 Enterprise value (NOKm): 3 013

Numbers in NOKm 2008 2009 2010E 2011E 2012E 3q09 4q09 1q10 2q10 3q10E

Operating revenues 497 613 686 881 1 131 134,8 142,6 151,4 168,9 176,0

Growth Y/Y 57 % 23 % 12 % 28 % 28 % 8 % -9 % -7 % -2 % 31 %

Growth Y/Y const. currency 56 % 14 % 20 % 28 % 28 % -3 % 3 % 6 % 6 % 38 %

OPEX (excl depreciation) 408 545 557 651 788 135,4 134,6 141,1 134,6 134,7

EBITDA 89 68 129 229 344 -0,6 8,0 10,3 34,3 41,3

Depreciation 8 13 23 44 63 4,0 3,3 4,9 5,6 6,1

EBIT 81 54 106 186 280 -4,6 4,7 5,4 28,8 35,1

Net financial items 49 -10 10 16 22 2,0 2,3 1,9 1,8 3,2

Pre tax profit 130 44 116 202 303 -2,7 6,9 7,4 30,6 38,4

Tax -40 -14 -23 -57 -85 4,5 -3,0 6,1 -7,5 -10,7

Profit/loss reported 90 31 93 146 218 1,8 3,9 13,4 23,1 27,6

Adjustments 17 -14 0 0 0 0,0 1,0 1,0 1,5 2,0

Adjusted profit/loss 73 45 93 146 218 1,8 2,9 12,4 21,6 25,6

Cash earning reported 98 44 83 189 281 -8,0 7,3 -10,7 24,7 33,8

Cash earnings adjusted 81 58 107 189 281 2,1 7,3 10,2 27,6 33,8

EBITDA margin 18 % 11 % 19 % 26 % 30 % 0 % 6 % 7 % 20 % 23 %

EBIT margin 16 % 9 % 15 % 21 % 25 % -3 % 3 % 4 % 17 % 20 %

Pre tax margin 26 % 7 % 12 % 23 % 27 % -12 % 5 % -14 % 16 % 22 %

REVENUE PER SEGMENT

Desktop 116 185 227 224 224 43 50 52 59 59

Operators 98 168 219 379 556 39 42 39 53 57

Mobile OEM 162 122 80 49 53 29 21 25 21 18

Device OEM 114 122 134 181 226 21 24 29 30 36

Consumer 7 14 27 48 73 3 5 6 6 7

Sum 497 613 686 881 1 131 135 143 151 169 176

% CHANGE (YoY)

Desktop 73 % 59 % 22 % -1 % 0 % 53 % 20 % 11 % 32 % 37 %

Operators 73 % 30 % 73 % -5 % -20 % -14 % -14 % 28 %

Mobile OEM -25 % -34 % -39 % 71 % 65 % 66 % 56 % 53 %

Device OEM 7 % 9 % 35 % 27 % 27 % 24 % 21 % 21 %

Consumer 115 % 91 % 78 % 3 % 2 % 3 % 3 % 3 %

Sum 57 % 23 % 12 % 28 % 28 % 8 % -9 % -7 % -2 % 31 %Shares outstanding 119,5 119,5 119,5 119,5 119,5 119,5 119,5 119,5 119,5 119,5

Share price 17,9 20,1 29,8 29,8 29,8 22,5 20,1 29,8 29,8 29,8

Dividend 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0 0,0

EPS adjusted 0,61 0,38 0,70 1,22 1,82 -0,02 0,03 0,04 0,18 0,23

CEPS adjusted 0,68 0,49 0,90 1,58 2,35 0,02 0,06 0,09 0,23 0,28

P/E adjusted 29,4 53,2 42,6 24,5 16,4 Sensitivity EPS estimates 2010 2011

P/E adjusted excl current cash 21,7 77,9 57,5 22,5 14,9 Base estimates 0,70 1,22

P/CEPS adjusted 26,4 41,1 33,3 18,8 12,7

EV/SALES 3,2 3,0 4,4 3,4 2,7 + / - 10% sales growth 0,41 0,53

EV/EBITDA 17,7 27,2 23,0 12,1 7,2 + / - NOK 5m OPEX 0,03 0,03

EV/EBIT 19,5 33,9 28,1 14,9 8,8

P/BOOK 3,6 4,0 5,2 4,2 3,3

Return on equity (adj.) 12,9% 7,5% 13,1% 19,1% 22,6%

Numbers in NOKm 2008 2009 2010E 2011E 2012E 10 largest shareholders as of

Current assets 748 723 868 1 150 1 555 Name %

Fixed assets 48 99 206 203 189 Jpmorgan Chase Bank Na 17 000 14,2 %

- of which goodwill 4 18 109 109 109 Mozart Invest As 15 000 12,5 %

Total assets 796 822 1 074 1 354 1 744 Arepo As 14 012 11,7 %

Liabilities 199 219 395 509 658 Ludvig Lorentzen As 10 150 8,5 %

Shareholders' equity 598 603 679 844 1 086 Skandinaviska Enskilda Banken 4 470 3,7 %

Sundt As 4 405 3,7 %

Book equity/share 5 5 6 7 9 Vital Forsikring Asa(Omlp) 3 059 2,6 %

Equity ratio 75 % 73 % 63 % 62 % 62 % Dnb Nor Nordic Technology Vpf 2 092 1,7 %

Net int. bear. debt -564 -562 -586 -787 -1086 Holberg Norge 1 627 1,4 %

Net int. bear. debt/equity -94 % -93 % -86 % -93 % -100 % Dnb Nor Smb Vpf 1 210 1,0 %

Cashflow statement Total 10 largest 73 025 61,1 %

Cashflow from operations 150 64 119 242 348 Others 46 550 38,9 %

Net investments -17 -43 -79 -41 -49 Total 119 575 100 %

Free cashflow 132 20 40 201 299

2010-08-16

Opera 3Q10 preview outlook report

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