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Outdoor Media Growth Robust, But Slowing

Australia | Jun 06 2017

This story features OOH!MEDIA LIMITED, and other companies. For more info SHARE ANALYSIS: OML

Outdoor media has grown strongly in recent years, supported by the expansion of digital products, but growth is slowing from the heady heights.

-Data implies digital revenue growth versus decline in static
-Outdoor sector likely to outpace broader advertising market
-oOh!Media well-positioned with breadth of category and geography


By Eva Brocklehurst

Outdoor media has grown strongly in recent years, supported by the expansion of digital products, but growth is slowing from the heady heights. The Outdoor Media Association data in May revealed revenue for the five months of 2017 is up 6.7% versus the same period in 2016.

Total industry bookings for outdoor grew by 9.6% in May following a revised 6.0% increase in April. Year-to-date, growth of the total market is now 6.6%. The main advertisers for April were automotive brands followed by food/produce/dairy and then domestic banks.

Digital as a proportion of total outdoor revenues was 44.7% in May versus 36.8% a year ago. This implies digital revenue growth through to May of 3% and a -4% decline in static revenues. With the amount of digital inventory coming on line, UBS suspects slower digital yield growth will be forthcoming.

Macquarie has observed outdoor advertising is growing at a healthy rate, albeit at a slower pace. This is also against the backdrop of a broader slowdown in total media expenditure, as well as the tapering of growth in some segments of the outdoor market. The broker expects the sector to grow and outpace a broader advertising market because of ongoing investment in digital and data platforms.


Divisional analysis suggests roadside billboard revenues lifted 18%, which Canaccord Genuity notes is the second best monthly performance of the year and a strong rebound from April's weakness. The broker suspects the performance of digital formats in the month was linked to the solid result.

Roadside other, which includes street furniture, taxis and bus/tram externals was up 11%. On a 12-month rolling basis, the category has experienced 6.2% growth in revenue.

Transport, comprising railway stations and airports, was down -3% in May, suggesting revenue in the first five months of the year is down -3.2% versus the prior comparable period.

Retail, where revenue growth in April was subject to a substantial downward revision to 2%, posted 13% revenue growth in May.


Canaccord Genuity notes there has been a general de-rating of stocks in the sector, consistent with the trend for declining revenue growth rates. The broker flags the notable recent decline in valuation for APN Outdoor ((APO)), with its one-year forward price/earnings ratio falling to 13.4 from 17.5 at the end of 2016. QMS Media ((QMS)) and oOh!Media ((OML)) have also de-rated but at a less exaggerated rate.

Canaccord Genuity believes the data is, overall, benign for the sector and each listed entity appears to benefit from its particular strength. In the case of APN Outdoor, oOh!Media, and QMS this is billboards, while oOh!Media is also strong in retail and HT&E ((HT1)) strong in roadside other. The negative readings on transport affect APN Outdoor and oOh!Media the most.

The broker, not one of the eight monitored daily on the FNArena database, has Hold ratings for APN Outdoor and oOh!Media, with targets of $6.00 and $5.00 respectively. The broker has Buy ratings for HT&E and QMS, with targets of $3.25 and $1.25 respectively.

UBS observes APN Outdoor has a large exposure to the roadside billboard segment, at 50% of revenues, while it does not have retail exposure. The broker factors in 8% year-on-year revenue growth, with around 200 basis points of that emanating from acquisitions.

APN Outdoor and oOh!Media have abandoned merger plans recently because of concerns by the ACCC regarding competition. The distraction to its business from pursuing a merger against the consumer regulator's concerns was unwarranted, oOh!Media has asserted. The company did not want to spend months parleying with the ACCC or in the courts, considering the media market is changing so quickly.

Macquarie suspects alternative acquisitions will be considered and, given the company's scale and developing digital platform, expansion into existing outdoor sub-sectors or new ones such as street furniture is a probability. The broker considers the company well-positioned, with a breadth of products across sub-sectors and geographies and ongoing investment in digital.

Credit Suisse was not overly surprised about the decision to pull the plug on a merger, given the ACCC's preliminary view. The broker also noted at the time of the announcement that the market had largely written off the chance of a successful transaction.

Credit Suisse believes oOh!Media compares well against a very weak broader media sector and, while growth is pared back, notes the outdoor category is under-penetrated relative to global benchmarks.

There are three Buy ratings for oOh!Media on the database and a consensus target of $4.92, suggesting 10.7% upside to the last share price. The dividend yield on FY17 and FY18 forecasts is 3.6% and 3.9% respectively.

There are three Buy ratings and one Hold for APN Outdoor, with a consensus target of $6.31, suggesting 35.3% upside to the last share price. The dividend yield on FY17 and FY18 forecasts is 4.5% and 4.9% respectively.

HT&E Ltd ((HT1)) has five Buy ratings and the consensus target is $3.21, suggesting 34.3% upside to the last share price. The dividend yield on FY17 and FY18 forecasts is 4.8% and 4.2% respectively.

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