Credit Suisse has retained its Outperform rating on oOh!media, despite its downgrade on earnings for the full year.
Analysts, in a note to clients, write that “current ad/sector headwinds are transient”.
They have placed a $3.70 price target on oOh!media. They closed yesterday at $3.07, down from a 52 week high of $5.44 but up on the year low of $2.29.
oOh!media this week posted a half year profit dragged down by subdued trading during the May federal election and a softer economic environment.
Underlying net profit after tax was $9 million, down 24%, in the six months to June. The statutory result was $515,000, down from $9.27 million in the same half last year.
The result followed a strong of companies reporting weak, challenging or tough advertising market conditions. Morgan Stanley has called an advertising recession in Australia.
Seven West Media posted a loss and talked of a "softer advertising market", Nine "a tough ad market" and Southern Cross said "local advertising slowed". And today WPP AUNZ posted a $253.55 million loss for the half year to June.
The market reacted mostly to oOh!media’s trading update showing weaker advertising bookings in July and August. The shares fell by as much as 10% before making up some lost ground.
The Credit Suisse analysts write: “Against the backdrop of a challenging media environment, OML delivered a very respectable 1H.”
They say first half revenue of $305 million, up 5%, was in line with expectations.
oOh!media says the high margin roadside billboards business suffered with a 9% fall in revenue over the six months.
“We would argue that, at least on a percentage margin basis, that Road continues to be the most profitable in the group,” the analysts write.
“Historically, much of the OOH industry’s growth has been Road driven, given structural audience drivers and digitisation. This most recent result (down 9% YoY and 13% below expectations) is concerning.
“OML has called out weakness in Banks and Auto business-wide, and these two categories are most prevalent in Road. That said, noting recent competitor results, clearly some share has been lost and this channel does require some work (keep in mind OML has close to market leading inventory).”
oOh!media is forecasting underlying EBITDA to be between $125 million and $135 million for the full year. Previous guidance was between $152 million and $162 million.
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