Offers Growth Momentum Potential and Valuation Appeal
The author is an analyst of NH Investment & Securities. She can be reached at hzl.lee@nhqv.com. -- Ed.
Raising our TP to W50,000, we upgrade our investment rating on Nasmedia from Hold to Buy. Building on its stable core business earnings, Nasmedia is adding new growth drivers. This year it plans to: 1) start up a media commerce platform (The Barun, already in operation as of February); 2) launch a text-based commerce business; 3) adopt a CPS model; and 4) introduce addressable TV advertisements. Given such, the firm’s shares offer valuation merit.
Offers both growth momentum potential and valuation appeal
We upgrade our investment rating on Nasmedia from Hold to Buy. This year, earnings growth momentum is to strengthen via the: 1) start of a media commerce platform (The Barun; in operation as of Feb); 2) launch of a text-based commerce business for parent company (KT) subscribers; 3) adoption of a cost per sales (CPS) model by upgrading the firm’s existing mobile platforms (1H21); and 4) introduction of addressable TV advertisements (2H21). Nasmedia’s shares are currently trading at a 2021E P/E of 17x, a level around 60% of that for its rival Incross. Building on its stable core business (number-one domestic media rep in terms of M/S), Nasmedia’s fundamentals are to strengthen on its securing of new growth businesses, in turn reducing its valuation gap with Incross.
We raise our TP by 35% from W37,000 to W50,000. Although our valuation method (SOTP) remains unaltered: 1) we boost our target P/E multiple (17x → 20x) as the firm does no longer deserve to receive a discount given that the full-scale start of new businesses should strengthen its earnings growth momentum; and 2) we upwardly adjust our earnings estimates in light of efforts to streamline operating costs. Equity value for PlayD is little changed from our previous estimate.
4Q20 review: Core business continues stable
Nasmedia announced consolidated 4Q20 sales (operating revenue) of W32.0bn (+4% y-y) and OP of W10.5bn (+13% y-y), with both figures exceeding consensus
Headquarters: Nasmedia logged 4Q20 sales of W24.2bn (+9% y-y) and OP of W10.2bn (+29% y-y), helped by: 1) execution of commercials for clients benefiting from Covid-19 (eg, game and home appliance players) at the online display ad (DA) division; and 2) greater billings and contract structure changes at the IPTV division. But, mobile platform sales fell on decreased demand side platform (DSP) billings.
Subsidiary (PlayD): PlayD booked 4Q20 sales of W7.5bn (-13% y-y) and OP of W0.5bn (-71% y-y). While PlayD’s recruitment of new advertisers and its commerce business earnings growth are both encouraging, it continued to be burdened by a reduction in major advertisers’ online search ad (SA) budget execution.