oOh!media Limited

OML Details

H1FY21 Financial Performance: Ooh!Media Limited (ASX: OML) is an out-of-home media company engaged in digital marketing at public places.

• Top Line Update: In H1FY21, OML’s revenue climbed by 23% PcP and stood at $251.6 million, amidst strong recovery across critical formats – Road, Retail and Street Furniture – in Australia and New Zealand.
• Bottom Line Update: Gross margins inclined by 8.8 percentage points and stood at 42.5%. Leveraging margin expansion and top-line uplift translated to healthy underlying EBITDA of $33.3 million.
• Financial Position: OML’s financial position has strengthened with the gearing ratio down to 1.1x relative to 1.8x, and net debt has significantly shrunk by 16% relative to 31 December 2020. Free cash flow declined by 75% and stood at $19.7 million.

Operating Metrics for H1FY21, Analysis by Kalkine Group

Key Risks and Challenges

Considering OML’s operations, the business is highly sensitive to any potential containment restrictions in Australia, as the business model is excessively reliant on commute and road formats. The media industry has become highly competitive with increased exposure on online streaming platforms; hence out-of-home media can become redundant.

Outlook

OML projects 38% PcP revenue growth in Q3FY21 and 74% relative to Q3FY19. The overall media market has strengthened relative to Q2FY20 levels. As a result, FY21 capex is expected to be at or lower than $25 million, focusing on concession renewals and growth opportunities.

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

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation

The stock of OML gave a negative return of ~6.745% in the past one year. The stock is currently trading lower than the 52-weeks’ average price level band of $1.395 - $2.040. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price low double-digit (in percentage terms). The company might trade at a slight premium compared to its peers, considering low financial leverage and improving operational efficiency. For valuation, few peers like Prime Media Group Ltd (ASX: PRT), HT&E Ltd (ASX: HT1), Seven West Media Ltd (ASX: SWM), and others are considered. Considering OML’s dominance in the media market, bulging topline growth, low leverage levels, valuation, and key risks associated with the business, we give a 'Speculative Buy' rating on the stock at the closing market price of $1.590, down by ~3.637%, as of 20 December 2021.

OML Daily Technical Chart, Data Source: REFINITIV

Note: The purple line reflects the RSI (14-day period)

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined: - 

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest. 

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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