Treasure Chest | May 10 2016
By Eva Brocklehurst
Media monitoring service iSentia ((ISD)) could benefit from the longest Australian federal election campaign in 50 years. Moelis contends high volumes of media content will be created and monitored by both government and corporate clients. Current polling on the election suggests the race its tight and, therefore, the news media will be in overdrive for the next eight weeks.
Despite the fact that around 60% of the company's Australasian clients are fixed-fee payers, iSentia can charge additional items for some clients, if usage is above a 10% volume threshold.
Moelis, not one of the eight stockbrokers monitored daily on the FNArena database, upgrades to a Buy rating from Hold, with a $4.04 target. The broker expects a number of positive catalysts to surface in the near term – besides higher volumes from the election – such as price rises and Asian acquisitions.
The company has implemented a 10% price increase in May for media portal clients. This price increase, Moelis observes, more than offsets the new copyright agency agreement. The main benefits from the new copyright agreement include real time access to content versus 4am embargoes on some publications, and an increase in the number of licensed people allowed to access the content within a company.
iSentia has a strong pipeline of M&A opportunities, for gaining entry to markets such as in South Korea or expanding its existing presence in South East Asia. The broker expects a 15% increase in Asian revenue is likely to result. The company's sales are seen trending in a range of $155-158m in FY16 with earnings in a range of $50-53m.
iSentia is a media intelligence service based in Australia and leads the market in media monitoring and analytics. The stock offers exposure to a high margin, high growth business, Moelis maintains, with a strategy to build out capabilities and geographic reach.
The main downside risks include changes in existing content arrangements, or providers moving behind digital pay walls. The broker also notes falling print content is being offset by growth in online media and iSentia is migrating towards its fixed fee offering, which reduces the impact of lower print contributions.
On the database iSentia shows two Buy ratings and one Hold. The consensus target is $4.42, suggesting 22.3% upside to the last share price. Targets range from $4.25 to $5.00.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.
