NORTH MEDIA A/S North Media
Market: OMXC Mid cap | Ticker: NORTHM |
Company-sponsored material: 19.03.2024
Share price (DKK): 66.7 | Market cap (DKK): 1.3bn |
Net cash (DKK): 658.5m
Enterprise value (DKK): 681.1m
Share information
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Mar-23 | May-23 | Jul-23 | Sep-23 | Nov-23 | Jan-24 | Mar-24 |
North Media | OMXC Mid Cap |
Ytd: | 2.6% | 1 year: | 17.0% |
1 month: | -12.7% | 3 year: | -32.4% |
Note: We apply the closing price from 18 March 2024 (Source: Refinitiv) The graph is rebased to North Media's share price on 20.03.2023.
Financials
DKKm | 2022 | 2023 | 2024E* |
Revenue | 995.3 | 949.1 | 1,310-1,375 |
Revenue growth | -3.7% | -4.6% | 38% - 45% |
EBITDA | 219.2 | 176.9 | 170-210 |
EBITDA margin | 22.0% | 18.6% | 13%-16% |
EBIT | 191.5 | 149.9 | 110-150 |
EBIT margin | 19.2% | 15.8% | 8-12% |
Net income | 2.1 | 264.4 | N/A |
Net income margin | 0.2% | 27.9% | N/A |
Net cash | 650.9 | 658.5 | N/A |
Note: *North Media's own 2024 guidance
Valuation multiples
2022 | 2023 | 2024E* | |
P/S (x) | 1.1 | 1.4 | 1.0 |
EV/Sales (x) | 0.5 | 0.7 | 0.5 |
EV/EBITDA (x) | 2.2 | 3.6 | 3.2-4.0 |
EV/EBIT (x) | 2.6 | 4.3 | 4.5-6.2 |
P/E (x) | 570 | 4.9 | N/A |
P/B (x) | 1.1 | 1.1 | N/A |
P/CF (x) | 6.0 | 10.3 | N/A |
Note: Multiples for 2022 and 2023 are based on historical numbers *Multiples in 2024 are based on North Media's own guidance
Company description | Key investment reasons |
North Media connects businesses with customers through its Last- mile packing and distribution network and Digital Services. Its Last- mile segment (FK Distribution and SDR Svensk Direktreklam) packs and distributes printed matter e.g., leaflets and newspapers, reaching 80% of Danish and 90% of Swedish Households. Its Digital Services include BoligPortal, Ofir, and Bekey. BoligPortal and Ofir provide platforms for the rental and employment markets, respectively, while Bekey provides digital access solutions. Furthermore, Karman Connect (50% owned fintech company) matches borrowers and lenders.
Investment case
North Media's FK Distribution generates strong cash flows relative to North Media's valuation; and while its industry faces structural decline, FK Distribution maintains a leading market share in Denmark. End-2023 SDR Svensk Direktreklam, Sweden's largest private distributor of unaddressed leaflets and newspapers, was acquired, providing potential for mutual development of products and infrastructure in the two markets. The positive cash flows are used to return dividends to shareholders and support the development of North Media's Digital Services, whose long-term growth potential may partially offset declines in FK Distribution.
FY 2023 group revenues declined 4.6% (FK Distribution: -6.2%; Digital Services +3.6%), while EBIT margin contracted 3.3pp due to lower last-mile revenues and acquisition costs. Dividends of DKK
4.0 per share will be paid, reflecting a 6.2%* dividend yield. BoligPortal continued driving growth in North Media's Digital Services from greater advertising revenues, while Ofir and Bekey lagged, facing lower volumes and slow sales development, respectively. A turnaround in Bekey is currently initiated.
North Media continues generating significant operating cash flows, with a 10.3% cash flow yield FY 2023. Its valuation relative to peers is most pronounced on an EV/EBIT basis, as seen below in the peer group below.
FK Distribution continues generating strong cash flow, and can continue to do so over the medium-term, despite a structurally declining market. Additionally, integrating acquired SDR Svensk Direktreklam (Sweden's largest distributor of unaddressed leaflets) and realising mutual development of products and infrastructure may support earnings growth. North Media's high capital reserves (cash & securities DKK 813m) may support additional acquisitions.
North Media is committed to paying stable dividends, which can be supported by FK Distribution's ongoing cash generation, paying DKK 4.0 per share FY 2023, reflecting a 6.2% dividend yield, (DKK 4.0 in 2022).
North Media trades at a very low valuation on an enterprise value (EV) basis, as cash and securities account for around 65% of its market value. Therefore, the earnings power of the business can be acquired at a low multiple adjusted for cash and securities.
Key investment risks
North Media's Last-mile segment will likely continue facing structural decline due to digitalisation. While its Digital Services offer the potential to partially offset the decline, Ofir and Bekey have struggled to reach consistent profitability, with the mid-point Digital Services EBIT guidance for 2024E around breakeven. Additionally, realising synergies in SDR Svensk Direktreklam, may take longer than expected.
North Media holds most of its cash and equivalents in a securities portfolio, worth DKK 698.6m as of 31.01.2024, c. 55% of the market cap. While the portfolio value has appreciated significantly since 2015, the direct link to broader equity prices deters some investors.
Denmark's ruling to maintain its NejTak scheme for receiving leaflets eliminates tail-risk of large volume declines from a Ja-Tak scheme. However, the environmental impact of leaflets remains a discusses topic and may resurface as a debate the future.
Note: Dividend yield and cash flow yield calculated using closing prices at year-end 2023
Peer group
Company | Price | Total return | Market cap Latest net debt | EV/EBITDA | EV/EBIT | Price/EPS | EBIT margin | FCF yield | |||||||
(local) | YtD | (EURm) | (EURm) | 2023E | 2024E | 2023E | 2024E | 2023E | 2024E | 3-yr avg | TTM | 2023E | |||
Average of publishers | 0.9% | 866 | 194 | 6.6x | 7.4x | 13.8x | 11x | 15.3x | 13.4x | 9.4% | 9.5% | 13.8% | |||
Average of platform companies | -3.1% | 8,772 | 836 | 16.7x | 13.7x | 34.4x | 19.9x | 33.2x | 21.3x | 18.9% | 20.3% | 4.5% | |||
Weighted peers (94% / 6%) | 7.3x | 7.8x | 15.1x | 11.6x | 16.4x | 13.9x | 10.0% | 10.2% | 13.2% | ||||||
North Media A/S | DKK 66.7 | 2.6% | 180 | -88 | 3.6x | 3.1x | 5.3x | 4.2x | 4.7x | 5.3x | 20.3% | 15.8% | 9.5% | ||
Premium (+) / Discount (-) to peers | -65% | -61% | -79% | -80% | -51% | -76% | |||||||||
Note: Data from 19/03/24 | Source: Refinitiv | ||||||||||||||
Disclaimer: HC Andersen Capital receives payment from North Media for a Digital IR/Corporate visibility subscription agreement. The authors, Rasmus Køjborg and | Investment Case | ||||||||||||||
Philip Coombes do not own shares in North Media. This is not a piece of advice to buy, not to buy, sell, or not to sell shares. HC Andersen Capital assumes no | 1 | ||||||||||||||
One-pager |
responsibility for the correctness of the contents of the material. Published 09:30 19.03.2024, Rasmus Køjborg and Philip Coombes, HC Andersen Capital.
Company-sponsored material
Appendix - Peer Group
Estimates and Assumptions: Data in the peer group has not been calculated by HC Andersen Capital but is instead composed of consensus analyst estimates from Refinitiv. Some peers have no or limited analyst cover; hence N/A shows for some data points. HC Andersen Capital assumes no responsibility for the correctness of the numbers in the peer group; however, considers Refinitiv a credible source of information. It is worth noting that no perfect peers for North Media exist, and therefore, direct comparisons may not be appropriate.
Weighting Assumptions: The peer group has been weighted with a 94% to 6% split between publishing and platform peers, to reflect North Media's FY 2023 EBIT split between its Last Mile (publishing) and Digital Services.
Selected publishing and platform companies overview:
Alma Media: is a Finland-based digital media company focusing on digital services and journalistic content. Alma Media has divested its printed newspaper publishing business and has only its digital media arm now.
PunaMusta Media: is a Finland-based communications group that owns companies engaged in publishing and printing newspapers in Eastern Finland, including one company that operates printing plants. The company also provides services in graphic design and is a suitable peer to FK Distribution.
Sanoma Oyj: is a Finnish media group with physical and digital media brands. The company also develops printed and digital learning materials for teachers.
TX Group AG: is a Swiss media group that hosts the largest editorial network in Switzerland, publishing and printing Sunday newspapers and magazines, as well as hosting digital marketplaces and digital media brands.
Adevinta ASA: is a leading global operator of digital marketplaces with activities in 15 countries, connecting buyers and sellers from real estate, automobiles, consumer goods and more.
Seek Ltd: is an online employment marketplace with international activities primarily based in APAC. Seek Ltd operates on a larger scale than North Media's Ofir, but can be considered an appropriate peer.
Scout24 SE: is a German-based digital marketplace for residential and commercial real estate. It has also launched activities in Austria and is a suitable peer to North Media's BoligPortal.
Ziprecruiter Inc: is US-based online employment marketplace that also has activities in the UK. The company operates on a larger scale than North Media's Ofir, but can be considered an appropriate peer.
Company | Price | Total return | Market cap | Latest net debt | EV/EBITDA | EV/EBIT | Price/EPS | EBIT margin | FCF yield | ||||||
(local) | YtD | (EURm) | (EURm) | 2024E | 2025E | 2024E | 2025E | 2024E | 2025E | 3-yr avg | TTM | 2024E | |||
Alma Media Oyj | EUR 9.8 | 2.1% | 809 | 145 | 10.3x | 10x | 12.9x | 12.2x | 14.7x | 13.8x | 23.3% | 23.9% | 6.4% | ||
PunaMusta Media Oyj | EUR 2.6 | -8.3% | 33 | 36 | 3.9x | 7.7x | N/A | N/A | N/A | N/A | -1.4%-0.2% 27.5% | ||||
Sanoma Oyj | EUR 6.4 | -8.3% | 1,043 | 640 | 5.2x | 4.7x | 12.2x | 10.4x | 15.6x | 12.6x | 11.1% | 9.6% | 8.1% | ||
TX Group AG | CHF 143.0 | 18.4% | 1,578 | -44 | 7.1x | 7.1x | 16.2x | 10.4x | N/A | 13.7x | 4.5% | 4.8% | 13.2% | ||
Average of publishers | 0.9% | 866 | 194 | 6.6x | 7.4x | 13.8x | 11x | 15.3x | 13.4x | 9.4% | 9.5% | 13.8% | |||
Adevinta ASA | NOK 113.7 | 1.2% | 23,372 | 1,723 | 17x | 14.4x | 24.3x | 19.2x | 24.3x | 19.2x | 16.9% | 19.5% | 4.2% | ||
Seek Ltd | AUD 25.6 | -4.3% | 5,470 | 765 | 21.1x | 17.8x | 29x | 23.6x | 24.0x | 29x | 32.5% | 29.2% | 1.6% | ||
Scout24 SE | EUR 69.0 | 7.6% | 5,178 | N/A | 15.6x | 14.1x | 17.7x | 15.9x | 17.7x | 15.9x | N/A | N/A | 3.8% | ||
Ziprecruiter Inc | USD 11.7 | -15.8% | 1,066 | 20 | 13.3x | 8.6x | 66.6x | 20.9x | 66.6x | 20.9x | 7.3% | 12.3% | 8.2% | ||
Average of platform companies | -3.1% | 8,772 | 836 | 16.7x | 13.7x | 34.4x | 19.9x | 33.2x | 21.3x | 18.9% | 20.3% | 4.5% | |||
Weighted peers (94% / 6%) | 7.3x | 7.8x | 15.1x | 11.6x | 16.4x | 13.9x | 10.0% | 10.2% | 13.2% | ||||||
North Media A/S | DKK 66.7 | 2.6% | 180 | -88 | 3.6x | 3.1x | 5.3x | 4.2x | 4.7x | 5.3x | 20.3% | 15.8% | 9.5% | ||
Premium (+) / Discount (-) to peers | -50% | -60% | -65% | -64% | -71% | -62% | |||||||||
Note: Data from 19/03/24 ; No adjustments made for Seek ltd skewed reporting season which runs from 1 July 2023 - 30 June 2024 | Source: Refinitiv |
Disclaimer: HC Andersen Capital receives payment from North Media for a Digital IR/Corporate visibility subscription agreement. The authors, Rasmus Køjborg and | ||
Philip Coombes do not own shares in North Media. This is not a piece of advice to buy, not to buy, sell, or not to sell shares. HC Andersen Capital assumes no | Investment Case | 2 |
responsibility for the correctness of the contents of the material. Published 09:30 19.03.2024, Rasmus Køjborg and Philip Coombes, HC Andersen Capital. | One-pager |
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North Media A/S published this content on 19 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 March 2024 11:36:04 UTC.
