QMS Media Limited

QMS Details

Stock Surged 23% on the Announcement of Scheme Implementation Deed:QMS Media Limited (ASX: QMS) is a leading outdoor media company in Australia, New Zealand, and Indonesia. It has specialisation in premium digital and static billboards, street furniture, and sport, and transit media. Three of its distinct business segments are QMS Australia, Mediaworks and QMS Sport.

Recently, the company entered into a Scheme Implementation Deed (SID) with an entity controlled by Quadrant Private Equity and its institutional partners. The agreement stated that Quadrant Private Equity would acquire 100% of the issued share capital of QMS Media for a cash price of $1.22 per share by way of a court-approved scheme of arrangement. The scheme values QMS media equity at around $420.6 Mn and at an enterprise value of $571.6 Mn, implying an EV/CY19 EBITDA multiple of 9.4x. Under the scheme, QMS Shareholders will also be entitled to a final dividend of up to 1.3 cents for the FY19, subject to QMS Board approval.

In another update, the company informed the market that MediaWorks New Zealand intends to sell MediaWorks TV and its Flower Street property associated with the TV business, including its head office and studios. QMS holds a 40% interest in MediaWorks, following the merger of QMS NZ and MediaWorks in September 2019.

H1CY19 Key Highlights for the period ended June 30, 2019:Group Statutory Revenue for the period increased by 23% to $128.9 Mn as compared to the previous corresponding period. This was mainly due to the decent growth in revenue and earnings from QMS Australia in the competitive landscape.Under core Australian media business, media revenue increased by 6.3% and large format billboard revenue increased by 8.3%. Overall, digital revenue contributed 81% of the Australian media revenue. QMS Sport’s revenue grew by 119%, reflecting the company’s earlier investments in sports technology and rights, and the initial contribution from TGI, following the completion of that acquisition during the half-year.

Underlying EBITDA for the period increased by 144% on pcp to $56.4 Mn. NPAT for the period increased by 65% on pcp to $16.5 Mn.The Board of Directors declared a fully franked final dividend of 1.2 cents per share, with record date and payment date on September 20, 2019 and October 21, 2019, respectively.


H1CY19 Income Statement (Source: Company Reports)

What to Expect:The Company’s singular focus on quality digital assets and a market first approach to audience data and insights are expected to continue to deliver value for advertisers. QMS Australia is expected to carry positive momentum in the second half of the year, with Q3CY19 media revenue expected to be in the range of 15-20% as compared to the previous corresponding period. QMS Sport is transforming into a global integrated platform, underpinned by new technology providing further consolidation opportunities in a fragmented market. The company has reaffirmed CY19 EBITDA guidance of $60-$62 Mn.

Stock Recommendation:QMS’ share generated a positive YTD return of 25.00%, whereas in the span of 6 months, it has delivered a return of 36.05%. The stock closed at its new 52-week high of $1.235. With the recent scheme implementation deed between QMS Media and Quadrant Private Equity, the business is expected to deliver innovative market-leading solutions to customers across Australia & New Zealand Media and Global Sports divisions.However, on valuation front, its EV/Sales and EV/EBITDA multiples on TTM basis stand at 2.5x and 9.3x, higher than the industry median of 1.0x and 6.1x, respectively, indicating over-valued position at the current juncture. Hence, considering the aforesaid facts, valuation parameters, and current trading levels, we recommend a “Sell” rating on the stock at the current market price of $1.235, up 23.5% on October 29, 2019, taking cues from the release related to SID.

 
 QMS Daily Technical Chart (Source: Thomson Reuters)

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