List­ing will draw more in­vestors’ at­ten­tion

Financial Mail - Investors Monthly - - Analysis - Marc Hasenfuss

Though it has largely stripped down to be­ing a pure me­dia play, there is a com­pelling op­er­a­tional depth at Tiso Black­star Group (TBG) that most mar­ket watch­ers have been over­look­ing.

The core re­mains Times Me­dia Group — the largest na­tional English pub­lish­ing

group (with ti­tles like the Sun­day Times, Busi­ness Day, the

Sowe­tan and the Fi­nan­cial Mail) but the com­pany has made great strides on­line and now ranks as the sec­ond­largest dig­i­tal pub­lisher in SA.

Then there are the niche broad­cast me­dia as­sets in SA, as well as promis­ing ra­dio and tele­vi­sion plat­forms in Kenya, Nige­ria and Ghana. TBG is also the owner of a sprawl­ing mu­sic (Gallo) and in­de­pen­dent film cat­a­logue, and a se­ri­ous player in the re­tail so­lu­tions mar­ket through Hirt & Carter.

There are sev­eral fac­tors that make TBG worth mulling as an in­vest­ment at this junc­ture, be­sides the un­der­ly­ing op­er­at­ing as­sets ap­pear­ing woe­fully un­der­val­ued.

The first is that, fol­low­ing the sale of its R1.5bn stake in em­pow­er­ment com­pany Kag­iso Tiso Hold­ings (KTH), TBG is poised for deal mak­ing. The KTH pro­ceeds will fund a spe­cial div­i­dend of R40m (around 15c/share) and also set­tle debt at the cen­tre, relieve TBG of a heavy in­ter­est bill and set up the com­pany for a size­able ac­qui­si­tion (or two). At a re­cent in­vest­ment pre­sen­ta­tion TBG CEO An­drew Bon­amour in­di­cated a pref­er­ence for pur­su­ing a “chunky” deal — which reck­ons might well be a gamechang­ing ac­qui­si­tion in terms of economies of scale in this me­dia con­glom­er­ate.

The bal­ance sheet could be fur­ther bol­stered if TMG re­ceives at­trac­tive of­fers for its re­main­ing non­core in­vest­ments — the 51% stake in steel tub­ing and pip­ing spe­cial­ist Ro­bor and 100%-owned cladding and roof­ing busi­ness Con­sol­i­dated Steel In­dus­tries.

TBG’s en­deav­ours to seek out a value- and earn­ingsac­cre­tive deal are helped enor­mously by its core me­dia busi­ness hav­ing turned prof­itable. There is also the added ad­van­tage that me­dia as­set val­ues have dwin­dled markedly in the past five years. It is com­mon knowl­edge that TBG was in­ter­ested in un­listed Pri­me­dia, and this should pro­vide a hint of the scale of a pos­si­ble ac­qui­si­tion.

Oper­a­tionally, what man­age­ment did bet­ter than most other lo­cal me­dia com­pa­nies — even though us jour­nal­ists hate to feel the squeeze — was to

em­bark on a stream­lin­ing and cost-cut­ting ex­er­cise that did not sac­ri­fice the qual­ity of con­tent. Ac­knowl­edg­ing that “con­tent is king” will pay off hand­somely in the longer term, as qual­ity jour­nal­ism draws eye­balls — and as read­ers are less re­sis­tant to pay­walls when re­li­able news­gath­er­ing stands out in a frag­mented so­cial me­dia seg­ment that is in­creas­ingly in­fil­trated by so-called “fake news”.

IM be­lieves TBG is wor­thy of closer in­ves­ti­ga­tion at cur­rent share price lev­els. Net as­set value — which ob­vi­ously in­cludes a heap of good­will and in­tan­gi­bles — stands at R13.73/share. But a key fig­ure is that cash flow from op­er­a­tions topped R280m, equiv­a­lent to more than 100c/share for the in­terim pe­riod.

A key change, set for June this year, will be the (long over­due) trans­fer of TBG’s list­ing from the AltX to the JSE’s main board. TBG is not big enough to break into any sig­nif­i­cant in­dex that is tracked by the big in­sti­tu­tional in­vestors, but the move will bring the share to the at­ten­tion of many more main­stream in­vestors.

A steady sec­ond-half per­for­mance could well see sen­ti­ment start turning for TBG.

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