Stocks’ Details

oOh!media Limited

Recovery in Out of Home Audiences: oOh!media Limited (ASX: OML) is a leading Out of Home media company, engaged in improving public spaces. The market capitalisation of the company stood at ~$1.01 billion as on 22^nd December 2020. In a recent business update, the company stated that it has experienced robust recovery in key Out of Home audiences after COVID-19 lockdown. The company added that Road and Retail Out of Home audience volumes were around 87% of their 2019 levels in late November 2020 within Australia. During 1H FY20, the company recorded revenue amounting to $205.0 million, reflecting a fall of 33% over pcp.  Underlying EBITDA for the year amounted to $10.8 million against $56.0 million of 1H FY19.

Key Metrics (Source: Company Reports)

Guidance: For FY20, the company expects revenue in the range of $420 million-$430 million and net debt of between $120 million and $130 million. The company expects to report capital expenditure below $20 million in FY20.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Looking forward, the company is focused on maintaining a strong balance sheet with decent financial flexibility. In the last one month, the stock has corrected 1.17%. As a result, the stock is trading towards its 52-week low level of $0.550, offering a decent opportunity for accumulation. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price, which is offering an upside of low double-digit (in percentage terms). For the purpose, we have taken peers such as Nine Entertainment Co Holdings Ltd (ASX: NEC), Southern Cross Media Group Ltd (ASX: SXL), and HT&E Ltd (ASX: HT1), to name a few. On a technical front, the stock has a support level of $0.709 and a resistance level of $1.919. Therefore, considering the recovery in key markets, focus on the strong balance sheet, current trading level and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $1.685 per share, down by 1.462% on 22^nd December 2020.

IVE Group Limited

Signing of Long-Term Contract:  IVE Group Limited (ASX: IGL) is engaged in marketing and print communications. The market capitalisation of the company stood at ~$194.15 million as on 22^nd December 2020. The company has bought back 176,000 shares for $219,749.29 with respect to its on-market share buy-back program of up to 10% of its ordinary shares as part of its ongoing capital management strategy, which was announced on 12^th November 2020. In the month of October 2020, the company inked a long-term contract with Australian Community Media (ACM) for printing and distribution of publications currently published and managed by ACM. The contract is likely to produce revenues of around $100 million in the span of five years. During FY20, the company maintained high levels of customer service through a hybrid of continuing operations despite the COVID-19 pandemic. During the year, the company reported revenue amounting to $691.5 million as compared to $723.6 million in FY19. Underlying EBITDA from continuing operations amounted to $76.6 million against $82.0 million in FY19.

Financial Summary (Source: Company Reports)

Guidance:  For the upcoming year (FY21), the company anticipates underlying EBITDA to be consistent with FY20. In addition, the net debt (excluding any impact of the share buy-back) at the end of the upcoming year is expected to be around $95 million. This follows the divestment of IVE Telefundraising for $16.5 million.

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: As on 30^th June 2020, the cash balance of the company stood at $51.6 million. The stock of IGL has provided a positive return of 41.43% in the past six months. The 52-week low-high range for the stock stands at $0.240 - $2.560, respectively. We have valued the stock using the price to earnings multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). On a technical analysis front, the stock has a support level of ~$0.574 and a resistance level of ~$1.481 Hence, in light of the signing of a contract with ACM, expected fall in debt position, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $1.255 per share, down by 4.199% on 22^nd December 2020.

5G Networks Limited

Acquisition of Networks Data Centre: 5G Networks Limited (ASX: 5GN) mainly provides data network and cloud services. The market capitalisation of the company stood at $150.20 million as on 22^nd December 2020. On 19^th November 2020, the company announced that it has reached a lease agreement for the acquisition of ex-Pipe Networks Data Centre in Fortitude Valley for $1.1 million, which includes all operating infrastructure at the facility. The acquisition would be financed via existing cash reserves, with a generous rent-free period on a 10-year lease basis.

Financial Highlights: FY20 has proved unique and exciting for the company. This was underpinned by numerous key strategic initiatives including a number of acquisitions, such as ColoAU for enhancing and scaling up its wholesale sales channel. 5GN experienced a growth of 16% in recurring revenue, fueled by the migration of customers to the higher-margin recurring revenue stream. During FY20, the company reported total income amounting to $49.8 million as compared to $51.2 million. During September 2020 quarter, 5GN recorded decent growth in sales and a strong pipeline aided by $5.9 million of new and re-signed revenue. The company recorded strong cash receipts of $14.3 million, which indicates the continuous shift to higher-margin annuity services.

Key Financials (Source: Company Reports)

Guidance: For FY21, the company expects to report revenue in the range of $60 million and $65 million before material acquisitions and EBITDA of between $8 million and $8.5 million before material acquisitions

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company ended September 2020 quarter with a cash balance of $47.5 million. This includes proceeds of $27.5 million from placement.  The stock of 5GN has corrected 16.13% and 20.65%, respectively in the last one and three months. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price, which is offering an upside of low double-digit (in percentage terms). On a technical analysis front, the stock has a support level of $1.114 and a resistance level of $1.776. Therefore, considering the recent acquisition, decent sales growth and strong pipeline, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $1.310 per share, down by 0.758% on 22^nd December 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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