North Media
North Media - Leading print ad distributor plans to digitalise (ABG Sundal Collier)
2019-12-04 06:46
A leading media company protected by high entry barriers
Decreasing volumes, but moving to digital solutions
Price range of DKK 33-52, based on scenario analysis
It’s all about tailoring volumes to householdsNorth Media is the market-leading distributor of print and digital commercial leaflets in Denmark. The company operates four segments: FK Distribution, North Media Newspapers, North Media Online and BEKEY. FK Distribution (~84% of revenue) operates mainly as a distributor of physical commercial leaflets for chain stores to ~2.2m Danish households twice a week. Its main competitor, state-owned PostNord, exited the market in May 2017 due to price pressure. This has resulted in better margins for North Media as prices have begun to normalise. Print-commercial volumes have and are decreasing. To diversify its offering, North Media is investing in various digital platforms. North Media’s other three segments publish and print local newspapers, operate rental and job market websites, and provide digital key solutions.
Volumes are declining, but a transformation is pending
North Media has a strong position in the offline advertising market, and the number of physical commercial recipients in Denmark remains high. Moreover, we are seeing consolidation among chain stores, and increasing marketing expenditure per store. Therefore, we believe that FK Distribution can leverage its position to increase prices. In addition, North Media has a strong net-interest bearing surplus of DKK 425.1m, which can be used for developing its digital offerings, and also to pay a high dividend yield in the near term.
We set a price range of DKK 33-52 based on a DCF analysis
We provide a SOTP price range based on a DCF analysis. We have also included trading statistics for ten peers (six offline) to give an indication of the underlying market sentiment. Physical volumes of print leaflets will decline, but to what extent is uncertain. Household preferences in terms of who wants to receive advertisin
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