QMS Media Limited’s (ASX: QMS) shares uplifted by 1.622 percent on 29 November 2018 after the company announced that it has entered into a Heads of Agreement for a proposed merger of its New Zealand out-of-home, digital media, and production business with MediaWorks to create the largest multi-media group in New Zealand.
Mediaworks is New Zealand’s leading independent radio, TV and digital company and this merger could create maximize the revenue synergies and deliver strong cash flow to the group.
Once the merger gets through, QMS Media Limited won’t be getting the controlling share. However, it would still be having the material share in the enhanced business of Mediaworks. Further, the funds will be managed by Oaktree Capital Management.
According to the Chairman of QMS Media Limited Mr. Wayne Stevenson, New Zealand is an important country for the business of QMS, and the management of the company is very excited about this potential opportunity of creating a largest multi-media group that could change the New Zealand advertising industry.
As per the announcement, the proposed merged group is expected to deliver compelling value for advertisers through an expanded sales network and complementary cross-stream revenue synergies. CLSA and Chapman Tripp have advised QMS on this transaction.
In FY 2018, the Statutory group revenue was $204.2 million which is 21 percent higher than the FY 2017. The company reported an Underlying EBITDA of $45.8 million in FY 2018 which was 22% higher than the previous year and it was at the upper end of the management’s revised financial guidance range. Further, the Underlying EBITDA margin of the company remained strong at 22 percent.
The board declared a Final dividend of 1.2 cents per share which brought the full year dividend to 2.2 cents per share which is 10 percent higher than FY17. The dividend represents a payout ratio of 40 percent of full-year NPAT, and it is in line with the company’s target range of between 30% to 50% of NPAT. In FY 2018, the Australian media revenue grew by 35 percent which was more than four times the industry growth of 9%. In FY 2019, the company is expecting the EBITDA to be in the range of $56 million to $58 million, including the impact of the international sports acquisition.
In the last six months, the share price of the company decreased by 18.14 percent as on 28 November 2018 and traded at a PE ratio of 16.520x. QMS’s shares traded at $0.940 with a market capitalization of circa $301.36 million as on 29 November 2018.
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