1 | BBGI | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
2 | Current Price $2.07 | Target $7.00 | Worst $1.00 | R/R 1 to 4.6 | BUY | |||||
3 | Updated on: 13-Oct-20 | Entry Price $10.00 | Win % | 40% | Kelly 52% | |||||
4 | The Story | |||||||||
5 | Feb/19 | Nov/19 | ||||||||
6 | Why the Stock is trading where it is | |||||||||
7 | ||||||||||
8 | The Catalysts | Risks | ||||||||
9 | - Any radio or spectrum transactions that give more data points - Beasly family entering the reverse auction (if possible) - Positive radio industry sentiment | Medium Term | - Beasley family does starts using the company for self interest - Bad industry sentiment - WORST CASE SCENARIO based on worsening margins and shrinkage of industry, will trade at 6x times EBITDA | $1.00 | ||||||
10 | What has changes since the last STORY? | |||||||||
11 | - Increased SG&A 2019 to 8.2% to reflect extra effort to ramp up the digital team - Increased D&A from 2.6% to 2.8% more inline with actuals YTD 2019 - Increased capex 2019 from 1.8% to 3.6% more inline with actuals YTD 2019 - Changes AR and AP more inline with 2019 YTD - Increased traditional revenues in 2019 by acquired radio station - Increased digital revenues to 2023 mre inline with new estimates | |||||||||
12 | The Assumptions | |||||||||
13 | Figures in USD | Base year | Year 1 to 5 | Year 6 to 10 | After year 10 | |||||
14 | 0 | 2020 | 1 | 5 | 6 | 10 | 11 | |||
15 | Revenues | 221 | -14.0% | 1.8% | 0.4% | 0.2% | #N/A | industry growing from 15.9 in 2018 to 16.0 in 2022, but radio online ad cagr 7.9 till 2022 | ||
16 | EBITDA Margin | 7.1% | 7.1% | 18.1% | 19.6% | 22.3% | #N/A | Back to historical levels | ||
17 | Tax rate | 0.0% | 0.0% | 21.0% | 21.0% | 21.0% | #N/A | |||
18 | Capex Intensity | 3.8% | 3.8% | 3.6% | 3.6% | 3.6% | #N/A | Back to historical levels | ||
19 | Cash Cyle | 55 | 17 | 57 | 56 | 57 | 58 | No indication of change in policy | ||
20 | Dividends | 5 | 5 | 5 | 5 | 5 | 5 | No change in dividend policy | ||
21 | ROIC | #REF! | 1.2% | 4.9% | 6.6% | 7.3% | 7.3% | The accumulation of cash will deteriorate ROIC but ROCE will continue to b in the high double digits | ||
22 | Net Debt / EBITDA | 5.3 x | 13.7 x | 6.4 x | 4.8 x | 2.7 x | 2.2 x | Unless the payout ration is increased, start to buy back shares or redeploy in broadcasting, leverage will continue to decrease | ||
23 | Historical Figures | |||||||||
24 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | ||||
25 | Revenue growth | 79.7% | 29.2% | 69.3% | 10.8% | 1.6% | -14.0% | |||
26 | Gross Margin | 28.3% | 29.2% | 24.6% | 23.7% | 23.0% | 12.0% | |||
27 | EBITDA Margin | 17.0% | 50.4% | 29.7% | 16.7% | 15.2% | 7.1% | |||
28 | ROIC | 4.9% | 22.6% | #REF! | 5.4% | 5.9% | 1.2% | |||
29 | FCF / Equity | 10.8% | 10.5% | 11.8% | 7.0% | 4.4% | 13.7% | |||
30 | Capex Intensity | 0.0% | 2.2% | 1.7% | 1.6% | 3.4% | 3.8% | Low capex business but lately has been under investing. | ||
31 | Net Debt / EBITDA | 4.1 x | 3.4 x | 2.9 x | 5.3 x | 5.8 x | 13.7 x | Leverage higher than peers | ||
32 | Prices | WACC | ||||||||
33 | Asset | $7.11 | 0.0% | U. beta | Link | 0.51 | Broadcasting Damoradan | |||
34 | Adj. EV/EBITDA | $12.30 | 0.0% | Cost of Equity Adj. | 2.00% | 100bps liquidity, 100bps governance | ||||
35 | DCF | $8.10 | 0.0% | Long-term debt rate | 7.00% | Right now debt hoovers 6.5%-7% | ||||
36 | Propierty MULTIECON | $7.01 | 100.0% | Optimal Debt to Capital | 50.0% | |||||
37 | Target | $7.00 | WACC | 8.30% | ||||||
38 | DCF Valuation | Top 13 Questions | ||||||||
39 | Discounted terminal value | 279 | Need to find out more detail about the land | |||||||
40 | NPV Cashflows | 161 | ||||||||
41 | Enterprise value | 440 | are they and are they allowed to switch the use from fm to DAB? | |||||||
42 | (+) Cash | 27 | how is you app usage , do you have podcasts | |||||||
43 | (+) Investments | what are the "other" revenues 19mm? | ||||||||
44 | (-) Debt | -243 | ||||||||
45 | (-) Minority Interest | 0 | ||||||||
46 | (-) Preferred Stocks | 0 | ||||||||
47 | (-) Other | |||||||||
48 | Market Cap | 225 | M USD | |||||||
49 | Number of shares | 27.5 | mm shares | |||||||
50 | Fair share price | $8.10 | ||||||||
51 | Multiples | Base | -$4.60 | |||||||
52 | Current | Avg. 5 yr | DCF | Fair impl. | EBITDA | 1.40 | ||||
53 | P/B | 0.2 | 0.6 | 0.9 | 5.0 | Capex | -0.20 | |||
54 | P/E | -5.4 | 6.7 | -52.1 | 7.6 | Tax | 1.90 | |||
55 | EV/EBITDA | 17.4 | 9.5 | 19.1 | 7.5 | WACC | 0.10 | |||
56 | EV/FCF | 7.2 | 17.1 | -27.8 | ||||||
57 | EV/IC | 0.5 | 0.8 | 0.9 | 0.6 | g | 13.70 | |||
58 | Asset Aproach | Sep-19 | Adj. | Recovery | ||||||
59 | Cash | 11.9 | 100% | 11.9 | 3 | |||||
60 | Short term Investments | 0% | 0.0 | 4 | ||||||
61 | Account Receivables | 49.1 | 88% | 43.4 | Increased doubtfull accounts from 3.7% to 15% to be more conservative in liquidation | 5 | ||||
62 | Inventories | 100% | 0.0 | 6 | ||||||
63 | Other current assets | 8.9 | 0% | 0.0 | Prepaid expenses recoverable, rest at zero. | 9 | ||||
64 | PPE | 98.0 | 67% | 65.9 | Increased value of land by 20%, buildings and equipment at 75%, rest at zero | 11 | ||||
65 | Other Long Term Assets | 572.0 | 64% | 366.1 | Increased spectrum valuation to reflect recent acquisitions | 17 | ||||
66 | Total Assets | 739.9 | 66% | 487.3 | ||||||
67 | Account payables | 13.8 | 100% | 13.8 | 19 | |||||
68 | Note Payables | 100% | 0.0 | 21 | ||||||
69 | Debt and capital leases, current | 100% | 0.0 | 22 | ||||||
70 | Other current liabilities | 28.5 | 67% | 19.1 | 25 | |||||
71 | Long term Debt | 245.2 | 100% | 245.2 | 27 | |||||
72 | Other long term liabilities | 170.9 | 8% | 13.7 | Reduced by deferred liabilities tax | 29 | ||||
73 | Total Liabilities | 458.4 | 64% | 291.8 | ||||||
74 | Minority | 100% | 0.0 | 38 | ||||||
75 | Equity | 281.5 | 69% | 195.5 | ||||||
76 | Equity per share | $10.24 | $7.11 | |||||||
77 | EV/EBITDA Aproach | 4Q18 | Adj. | Proforma | ||||||
78 | EBITDA Margin | 7.1% | 430 bps | 11.4% | ||||||
79 | Capex Margin | 3.8% | 40 bps | 4.2% | ||||||
80 | Tax Rate | 0.0% | -4,570 bps | -45.7% | ||||||
81 | WACC | 8.3% | -10 bps | 8.2% | ||||||
82 | g | 0.0% | 80 bps | 0.8% | ||||||
83 | EV/EBITDA | 5.6 x | 6.8 x | 12.4 x | ||||||
84 | Adj EBITDA | 15.7 | 184.2% | 44.6 | ||||||
85 | Fair share price | -$4.60 | $12.30 | |||||||