ANALYSIS: oOh!media’s surprise earnings upgrade

Chris Pash
By Chris Pash | 5 December 2019

The sudden upgrade by oOh!media of its full year earnings forecast may have more to do with market share than a lift in advertising across media segments. 

Analysts have done much head scratching after oOh!media’s surprise upgrade on the back of “improved bookings for September and the fourth quarter”.

It was only in August that the out of home advertising specialist downgraded guidance in an "extremely tough" advertising market being felt by all parts of the advertising industry.

The company now expects underlying EBITDA (earnings before interest, tax, depreciation and amortisation) to be between $138 million and $143 million.

This is an improvement on the guidance given in August of $125 million to $135 million.

But the company gave little detail about what drove this improved performance.

Analysts at Macquarie say the new guidance does imply solid operating momentum in the December quarter.

“We believe oOh! has re-claimed some market share from other out of home operators during the period,” the analysts write in a note to clients.

“In addition, the recent updates from TV and radio operators imply that out of home continues to take market share from those categories.”

The analysts believe Entertainment/Media spend is strong along with Online/Tech. Some Retail spend may have also returned.

The Macquarie analysts have a 12-month price target of $4.65 for oOh!media.

“We continue to see long-term structural growth for OML and scope for positive operating leverage when ad markets recover, making it an attractive asset within the media landscape at its current price,” the analysts write.

Brian Han, senior equity analyst at Morningstar, calls the upgrade a surprise at a time when the overall advertising market is down.

“The obvious explanation may be that the positive 6% December-quarter forward pacing seen back in August has been sustained, although such green shoots of recovery are nowhere to be spotted in other media segments,” he writes in a note to clients.

“Perhaps advertiser flight to quality in the current uncertain environment is benefiting oOh!media, given its market leading inventory scale and diversity in the structurally sound outdoor platform.

“Or it may just be a case of management too spooked by the advertising downturn back in August now partly winding back the shock 20%-plus EBITDA guidance downgrade given at that time.”

Morningstar has a $4 a share fair value estimate.

oOh!media’s shares closed yesterday $3.73, up almost 24%.


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