Growing Media & Communication Industry: A look at AYS, HT1, WPP, OML, CNU

Fuelled by digital transformation, media & telecommunications industry is gaining massive traction in the work and home space around the world. A factor that plays a critical role in increasing digitisation is internet connectivity. Considering the case of Australia, the country has reached a significant landmark with the adoption of 5G technology which is expected to have a substantial impact on areas with inadequate internet connections. Other attributes contributing to the industry include hyper fibres for telecommunication infrastructure, and out-of-home (OOH) services, among others.

The Australian Communications and Media Authority (ACMA) was established in 2005 to maximise the social and economic benefits of media and communications for the country. With these advancements, there exists an opportunity to improve and flourish in remote areas as well.

Interesting Read: Communication Services - An Underweighted Sector in Australia?

In this context, let’s look at three stocks in the media and telecom space that are listed on the ASX, and glance at their recent financial results:

amaysim Australia Limited maintaining its FY20 guidance

Launched in 2010, ASX-listed company amaysim Australia Limited (ASX:AYS) provides energy and mobile services.

AYS, being Australia’s fourth-largest mobile service provider, is a proven market disruptor. The company has witnessed an increase of 3.4 per cent of its energy subscribers (201,00) and 11.8 per cent rise in its recurring mobile subscribers (706,000), as of 31 December 2019. The growth can be attributed to the recent acquisitions, upcoming plans and financial standpoint of AYS.

AYS Strategic Acquisition:

On 02 December 2019, the Company announced the 100 per cent acquisition of a mobile virtual network operator (MVNO), Jeenee Communications Pty Ltd. The total consideration was $7.8 million.

As an outcome of this deal, AYS expects to cement its position in Australia’s MVNO business. As a strategic rationale, adding Jeenee’s mobile subscribers of nearly 41,700 has brought AYS total recurring mobile subscriber base to 698,600 (as at 28 November 2019).

1H FY20 update:

AYS stock traded at a dip of 4.478 per cent on 24 February 2020, the date of 1H FY20 results release for the period ended 31 December 2019.

• Net revenue slipped 7.1 per cent compared to pcp, from $263.0 million to $244.4 million, due to lower ARPU across the energy and mobile business units.
• Underlying EBITDA was $24 million, a dip of 17.9 per cent
  • Mobile underlying EBITDA slipped by 49.7 per cent, supporting the significant increase in marketing investment
  • The underlying EBITDA for Energy business remained stable at $18.7 million
• Net PAT from continuing operations stood at $3.7 million, an increase of 177.5 per cent or $8.5 million.
• Net tangible assets per security were -$0.28 as on 31 December 2019.
• 

AYS is on track to meet its FY20 guidance:

AYS intends to reinvest in marketing initiatives to drive commercial and sustained viable growth. The company reiterated the figure for underlying EBITDA in the range of $33 million to $39 million. Also, amaysim intends to increase its capacity for acquisitions via an increase in its senior debt facility.

HT&E Limited has #1 metropolitan network

HT&E Limited (ASX:HT1) is an established media & entertainment company which also owns Hong Kong-based Cody, an outdoor advertising firm.

HT&E Limited is an abbreviation of Here, There and Everywhere, and indicates that the company delivers a complete audio offering covering the best depth and breadth of audio content to Australians.

In audio landscape, HT&E owns Australian Radio Network (ARN) which broadcasts across Australia. Few of its brands include Pure Gold Network, KIIS Network, iHeartRadio, and Mix106.3 Canberra. ARN regained the top position on national 10+ metropolitan radio network with 5.3 million national weekly radio audience.

FY2019 Results:

HT1 announced the results for FY2019 (period ended 31 December 2019). A fully franked dividend distribution of 8.6 cps was declared for the period. The snippet of the performance is mentioned below:

• Revenue and NPAT slipped by 7 per cent each compared to pcp, at $252.7 million and $34.2 million, respectively.
• EBITDA grew by 5 per cent pcp, from $71.8 million to $75.6 million.
• Net tangible assets per ordinary share were $0.17 as compared to $0.51 pcp.
• Underlying EPS of $12 million increased by 1 per cent pcp.
• The interim and final dividends were 4 cps and 4.6 cps, respectively. The record date for determining entitlements to the final dividend is 02 March 2020 and is scheduled to be paid on 23 March 2020.
• Net cash was $111 million at 31 December 2019, and undrawn debt was $250 million.

The reasons of the fall in specific figures mainly include the challenging situation of media market players in Australia, unrest conditions of protests prevailing in Hong Kong during the second half of the year, and non-renewal of material Cody contract.

The effect of the company’s FY 2020 result was seen in the stock market as on 24 February 2020, HT1 traded at $1.475, a decrease of 2.961 per cent compared to the previous closing price.

WPP AUNZ Limited has a strong geographical presence

WPP AUNZ Limited (ASX:WPP) is an innovative tech company that brings together the most creative minds to redesign business futures in communication, commerce, experience and technology. The company operates in various cities in Australia, South-East Asia and New Zealand. WPP employs more than 4,000 people and has over 60 brands.

On 24 February 2020, WPP released its FY2019 (period ending 31 December 2019) results. Also, the company introduced its new corporate strategy aiming to grow its business and become a market leader. The key highlights include:

• The company declared fully franked dividend distribution of 4.4 cps, having a record date of 31 March 2020 and a payment date of 07 April 2020.
• Total net sales dropped to 4.4 per cent pcp, with net sales from the continuing business of $712.5 million, a decrease of 2.6 per cent pcp.
• EBITDA was $91.8 million, a dip of 8.7 per cent pcp from $100.6 million.
• For the last 24 months, there was an impressive cashflow conversion of 98 per cent
• In December 2019, WPP completed the sale of Kantar AUNZ for $158.7 million

Going forward, WPP mentions that the focus for Australia and New Zealand market will be on the following two things:

• Driving successful collaboration through one campus per city.
• A restructure of NZ business including leadership team and reporting structure.

For South East Asia, WPP states that they have a footprint in a large and growing market of the region. The two elements to their strategy are first, to expand their offerings and second, to establish an offshore hub.

oOh!media Limited gaining market share in the out-of-home sector

ASX-listed, oOh!media Limited (ASX:OML) operates in the out-of-home advertising industry in Australia and New Zealand.

oOh!media released its FY2019 annual results (period ended 31 December 2019) with key highlights mentioned below:

• Fully franked final dividend distribution of 7.5 cps with a payment date of 27 March 2020.
• Revenue grew by 1 per cent pcp, from $640.1 million to $649.6 million
• Underlying EBITDA of $139 million, a dip of 5 per cent pcp
• NPAT decreased by 32 per cent pcp, from $40.2 million to $27.2 million

Outlook for FY2020:

• OML expects a continuous gain in market share for its out-of-home service.
• Guidance for Underlying EBITDA is in the range of $140 million to $155 million (pre AASB16)
• Capex guidance is between $60 million and $70 million

Chorus Limited delivered robust half-yearly results

A telecommunication infrastructure provider, Chorus Limited (ASX:CNU) has adopted hyper fibre to provide increased capacity to unlock exponential upload and download speeds. CNU has 580,000 homes connected to fibre, and 80 per cent fibre roll-out is completed.

On 24 February 2020, CNU released its 1H FY2020 results (period ended 31 December 2019). On the results release date, the Company traded at $6.42, an increase of 5.592 per cent as compared to the previous closing price.

Mentioned below is the snippet of the results.

• Net profit after tax increased from $30 million to $31 million pcp
• EBITDA was $332 million, an increase of 4 per cent
• Operating revenue decreased by 1.2 per cent from $489 million to $483 million
• Interim dividend distribution of 10 cents per share

Guidance FY 2020: In HY20 results, specific changes were made in the guidance while a few remain unchanged.

• EBITDA guidance increased to $640 - $655 million from $625 - $645 million.
• Gross capex remains unchanged at $660 - $700 million
• Subject to no material adverse changes in circumstances, dividend guidance for FY20 remains unchanged at 24 cps.
• Increase in Fibre connections & layer 2 capex to $295 - $315 million

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