Research house maintains ‘hold’ call on integrated media group with target price of RM1.10
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MEDIA Prima Bhd’s valuations in its proposed acquisition of REV Asia Holdings Sdn Bhd (RAH) are fair, said Maybank Investment Bank (Maybank IB).
It said the purchase consideration valued RAH at 21.5 times last year’s enterprise value (EV) to earnings before interest, tax, depreciation and amortisation (EV/Ebitda) and 4.5 times of last year’s EV to revenue.
Maybank IB said these valuations were fair based on previous acquisitions involving Catcha Group’s subsidiaries jobsDB at 22 times of 2010 EV/Ebitda, JobStreet.com at 22 times of 2013 EV/Ebitda, and iProperty at 28.7 times of 2015 EV/revenue.
It said RAH posted revenue of RM23.5 million, a 32 per cent year-on-year growth, and net profit of RM4.2 million, or 27 per cent year-on-year growth.
On Monday, Media Prima, Malaysia’s largest integrated media group, announced that it would acquire 100 per cent of RAH from REV Asia Bhd and Youth Asia Sdn Bhd for RM105 million cash.
RAH is mainly engaged in providing advertising, publication and Internet social media services through nine digital brands that have a digital reach of 4.6 million.
With RAH, Media Prima will grow its digital reach to nine million (assuming a 30 per cent overlap) from 5.8 million and establish itself as the third largest digital media company in Malaysia. The acquisition is expected to be completed by the third quarter of this year.
Maybank IB said it gathered that the acquisition would be debt-financed despite RM300.1 million of existing debt due to be repaid in December.
It said assuming 4.4 per cent interest rate, the interest expense of RM4.6 million per year would approximate RAH’s net profit of RM4.2 million last year.
Maybank IB had trimmed its financial years 2017, 2018 and 2019 Ebitda estimates by 4.0, 2.0 and 2.0 per cent, respectively, to impute RM10 million more overheads per year after accounting for the acquisition.
Its financial years 2017, 2018 and 2019 earnings forecast are cut by 17, 11 and six per cent, respectively, due to negative operating leverage.
Maybank IB has maintained its “hold” call on Media Prima with an unchanged target price of RM1.10.