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Equity Bottom-Up

We cut our fair value estimate on oOh media by 7% to AUD 4.60 per share. Full-year 2018 organic EBITDA growth of just 5% to AUD 94 million (excluding Adshel contributions) fell shy of our 8% forecast, implying no year-on-year earnings growth in the second half. While we had anticipated investment into systems and capability (especially in data and sales), the 18% cost increase was still higher than expected. It suggests the investment phase to bring oOh media to a more digital and data-led…

oOh media continues to enjoy buoyant outdoor advertising market conditions, with the sector posting another 11% year-on-year increase in the recent September quarter. The growth was notably driven by strong spending from gambling operators and travel-related advertisers. For 2018 calendar year-to-date, the outdoor market is up 12%, tracking broadly in line with our 10% full-year revenue growth projection for oOh media. This provides increasing confidence the group will achieve management's…

The 11.5% lift in oOh media's fiscal 2018 first-half underlying EBITDA to AUD 37.9 million was broadly in line with our expectations, as was the 1.5% drop in normalised net profit to AUD 16.1 million. However, the quality of the result was noteworthy, with a stellar 16.4% jump in revenue from the key roadside billboard category (38.7% of group revenue) and AUD 14.6 million in free cash flow the highlights. In fact, the 119% EBITDA/cash flow conversion was the highest ever recorded for the June…

We recommend eligible shareholders subscribe to oOh media's non-renounceable 1.0-for-2.3 shares retail entitlement offer at the fixed price of AUD 4.60 per share. The closing date is July 11, 2018. The offer price is 4% below the current stock price and 7% below our AUD 4.95 fair value estimate. Our intrinsic assessment already incorporates the total AUD 330 million capital raising to help fund oOh media's AUD 570 million purchase Adshel.
Analyst: Brian Han

oOhmedia's 2017 result is likely to temporarily ease concerns regarding rising competitive intensity in the outdoor advertising market. The 23% lift in full-year normalised EBITDA to AUD 90 million not only hit management's guidance and our estimate, but we believe it somewhat understates the group's margin and cash flow resilience.
For instance, second-half EBITDA margin jumped to 27.2%, from 24.9% a year ago, principally driven by 57% growth in higher-margin digital inventory revenue which now…

Australia

oOh!media Ltd is a media company. The Company provides advertising and marketing solutions, campaign production, campaign management, creative and digital solutions.

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