1 | BBGI | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
2 | Current Price $3.14 | Target $10.20 | Worst $1.00 | R/R 1 to 3.3 | BUY | |||||
3 | Updated on: 28-Feb-19 | Entry Price $13.20 | ||||||||
4 | The Story | |||||||||
5 | Read Story here. | |||||||||
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 | ||||||||||
12 | The Assumptions | |||||||||
13 | Figures in USD | Base year | Year 1 to 5 | Year 6 to 10 | After year 10 | |||||
14 | 0 | 2018 | 1 | 5 | 6 | 10 | 11 | |||
15 | Revenues | 257 | 0.7% | 1.1% | 1.1% | 0.3% | 0.2% | industry growing from 15.9 in 2018 to 16.0 in 2022, but radio online ad cagr 7.9 till 2022 | ||
16 | EBITDA Margin | 16.7% | 20.2% | 20.7% | 20.8% | 21.3% | 21.5% | Back to historical levels | ||
17 | Tax rate | 66.7% | 21.0% | 21.0% | 21.0% | 21.0% | 21.0% | |||
18 | Capex Intensity | 1.6% | 1.8% | 1.9% | 1.9% | 2.0% | 2.0% | Back to historical levels | ||
19 | Cash Cyle | 152 | 153 | 153 | 153 | 153 | 153 | No indication of change in policy | ||
20 | Dividends | 5 | 1 | 5 | 5 | 6 | 5 | No change in dividend policy | ||
21 | ROIC | 9.8% | 7.2% | 6.5% | 6.4% | 5.9% | 5.8% | 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 | 4.0 x | 2.4 x | 2.0 x | 0.4 x | 0.0 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 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | ||||
25 | Revenue growth | -44.0% | 5.4% | 79.7% | 29.2% | 69.3% | 10.8% | |||
26 | Gross Margin | 33.9% | 32.2% | 28.3% | 29.2% | 24.6% | 23.7% | |||
27 | EBITDA Margin | 19.6% | 13.6% | 17.0% | 50.4% | 29.7% | 16.7% | |||
28 | ROIC | 2.8% | 2.8% | 4.9% | 22.6% | 9.8% | 5.4% | |||
29 | FCF / Equity | 20.5% | 15.1% | 10.8% | 10.5% | 11.8% | 7.0% | |||
30 | Capex Intensity | 5.4% | 5.1% | 0.0% | 2.2% | 1.7% | 1.6% | Low capex business but lately has been under investing. | ||
31 | Net Debt / EBITDA | 8.5 x | 10.3 x | 4.1 x | 3.4 x | 2.9 x | 5.3 x | Leverage higher than peers | ||
32 | Prices | WACC | ||||||||
33 | Asset | $7.13 | 0.0% | U. beta | Link | 0.51 | Broadcasting Damoradan | |||
34 | Adj. EV/EBITDA | $6.90 | 0.0% | Cost of Equity Adj. | 2.00% | 100bps liquidity, 100bps governance | ||||
35 | DCF | $11.50 | 50.0% | Long-term debt rate | 7.00% | Right now debt hoovers 6.5%-7% | ||||
36 | Propierty MULTIECON | $9.05 | 50.0% | Optimal Debt to Capital | 50.0% | |||||
37 | Target | $10.20 | WACC | 8.20% | ||||||
38 | DCF Valuation | Top 13 Questions | ||||||||
39 | Discounted terminal value | 261 | Need to find out more detail about the land | |||||||
40 | NPV Cashflows | 287 | Need to find out more about the FCC licenses | |||||||
41 | Enterprise value | 549 | are they and are they allowed to switch the use from fm to DAB? | |||||||
42 | (+) Cash | 13 | how is you app usage , do you have podcasts | |||||||
43 | (+) Investments | 0 | what are the "other" revenues 19mm? | |||||||
44 | (-) Debt | -243 | ||||||||
45 | (-) Minority Interest | 0 | ||||||||
46 | (-) Preferred Stocks | 0 | ||||||||
47 | (-) Other | |||||||||
48 | Market Cap | 319 | M USD | |||||||
49 | Number of shares | 27.5 | mm shares | |||||||
50 | Fair share price | $11.50 | ||||||||
51 | Multiples | Base | -$2.50 | |||||||
52 | Current | Avg. 5 yr | DCF | Fair impl. | EBITDA | 0.10 | ||||
53 | P/B | 0.3 | 0.7 | 1.0 | 5.0 | Capex | -0.10 | |||
54 | P/E | 4.0 | 8.1 | 14.3 | 8.6 | Tax | 7.80 | |||
55 | EV/EBITDA | 5.6 | 7.1 | 9.9 | 9.4 | WACC | 0.10 | |||
56 | EV/FCF | 7.2 | 17.1 | 12.5 | ||||||
57 | EV/IC | 0.5 | 0.8 | 0.9 | 0.8 | g | 1.50 | |||
58 | Asset Aproach | Dec-18 | Adj. | Recovery | ||||||
59 | Cash | 13.0 | 100% | 13.0 | ||||||
60 | Short term Investments | 0.0 | 0% | 0.0 | ||||||
61 | Account Receivables | 52.0 | 88% | 45.9 | Increased doubtfull accounts from 3.7% to 15% to be more conservative in liquidation | |||||
62 | Inventories | 0.0 | 100% | 0.0 | ||||||
63 | Other current assets | 6.0 | 0% | 0.0 | Prepaid expenses recoverable, rest at zero. | |||||
64 | PPE | 58.0 | 114% | 65.9 | Increased value of land by 20%, buildings and equipment at 75%, rest at zero | |||||
65 | Other Long Term Assets | 552.0 | 64% | 354.0 | Spectrum valuation | |||||
66 | Total Assets | 681.0 | 70% | 478.8 | ||||||
67 | Account payables | 10.0 | 100% | 10.0 | ||||||
68 | Note Payables | 0.0 | 100% | 0.0 | ||||||
69 | Debt and capital leases, current | 0.0 | 100% | 0.0 | ||||||
70 | Other current liabilities | 19.0 | 101% | 19.1 | ||||||
71 | Long term Debt | 243.0 | 100% | 243.0 | ||||||
72 | Other long term liabilities | 134.0 | 8% | 10.7 | Reduced by deferred liabilities tax | |||||
73 | Total Liabilities | 406.0 | 70% | 282.8 | ||||||
74 | Minority | 0.0 | 100% | 0.0 | ||||||
75 | Equity | 275.0 | 71% | 195.9 | ||||||
76 | Equity per share | $10.00 | $7.13 | |||||||
77 | EV/EBITDA Aproach | 4Q18 | Adj. | Proforma | ||||||
78 | EBITDA Margin | 16.7% | 430 bps | 21.0% | ||||||
79 | Capex Margin | 1.6% | 40 bps | 2.0% | ||||||
80 | Tax Rate | 66.7% | -4,570 bps | 21.0% | ||||||
81 | WACC | 8.2% | -10 bps | 8.1% | ||||||
82 | g | 0.0% | 80 bps | 0.8% | ||||||
83 | EV/EBITDA | 3.7 x | 6.1 x | 9.8 x | ||||||
84 | Adj EBITDA | 43.0 | 0.0% | 43.0 | ||||||
85 | Fair share price | -$2.50 | $6.90 | |||||||