oOh!media’s share price suffered following a trading update which at first glance was the opposite to upbeat assessments of the outdoor advertising market.
Australia’s largest outdoor media player described the advertising market as “softening” when most expected the climb out of the pandemic restrictions to go unhindered.
The company’s share price then went on a slide, dropping by almost a quarter and slipping further yesterday by around 4% to close at $1.190, a long way from the year high of $1.732.
oOh!media said the “softening media market” at the end of the March quarter and into the June quarter was due to a decline in the broader macroeconomic environment in Australia and New Zealand.
The update is at odds with industry numbers.
The Outdoor Media Association (OMA) reported net media revenue 11.8% higher to $259.4 million in the March quarter 2023.
Analysts at Canaccord Genuity described oOh!media’s trading update as a surprise that led to “punishment” in the form of a share sell off.
“March and April appear to have been troublesome but pacing is reported to be back on a positive trend,” the analysts write in a note to clients.
“We have lowered our earnings forecast as a result of the update but we see value in shares heavily sold off.
“The underperformance was attributed by OML (oOh!media) to private equity owned QMS’ rollout of its City of Sydney contract costing … 1.9 points of share
"Government spend was also cited as a key detractor."
Canaccord Genuity has lowered its June half revenue forecast by 3% to around $614 million but sees oOh!media as a buy.
Brian Han, director at Morningstar, says the sell off is excessive and that oOh!media has the balance sheet to weather near-term cyclical headwinds.
“Revenue recovery was never going to be smooth this year, and the prior-year comparisons are especially tough early this year (high-teens growth the first four months of 2022),” he said in a note to clients.
“oOh media's 3% revenue growth in the March quarter was below the 12% for the outdoor market.
“However, most of that underperformance can be attributed to the Street Furniture unit (affected by QMS' City of Sydney contract launch).
“Critically, outdoor is the only traditional advertising medium that is growing this year.
"There are long-term structural tailwinds behind it, oOh media is the clear market leader (40% share) and we continue to forecast solid earnings growth longer-term.”
Outdoor media has been surging since the end of restrictions during the pandemic.
In February oOh!media reported revenue jumping 18% to $592.6 million for the full year to December. Statutory net profit after tax was 400% higher at $31.516 million, compared to $10.28 million loss in 2021. Adjusted net profit after tax was $56.2 million, up 343%.
The latest trading update delivered to a Macquare Bank conference:
Have something to say on this? Share your views in the comments section below. Or if you have a news story or tip-off, drop us a line at adnews@yaffa.com.au
Sign up to the AdNews newsletter, like us on Facebook or follow us on Twitter for breaking stories and campaigns throughout the day.