Why shares of oOh!Media Ltd have soared 10% today

Shares of outdoor advertising business oOh!Media Ltd (ASX: OML) have rebounded strongly today, reversing some of the heavy losses inflicted on the business during Monday’s session.

The company’s share price plunged more than 15% on Monday on the back of an earnings guidance downgrade by rival APN Outdoor Group Ltd (ASX: APO), whose shares lost more than 35% for the session. oOh!Media’s shares have regained 10.2% to $5.18 today, while APN Outdoor’s shares have rebounded 5%.

Here are some of the highlights from oOh!Media’s half-year earnings report today:

  • Revenue up 18.2% on prior corresponding period (pcp) to $146.6 million
  • Gross profit up 60.1% on pcp to $60.1 million
  • Gross margin of 41% (compared to 34.6% in pcp)
  • EBITDA (earnings before interest, tax, depreciation and amortisation) up 32.7% to $26.8 million
  • Interim fully franked dividend of 4 cents per share, up 42.9% (from 2.8 cents)

Unlike APN Outdoor, which downgraded its full-year earnings forecast on Monday, oOh!Media reaffirmed its own guidance for EBITDA of $68 million to $72 million. That suggests a considerably stronger second half, following a first-half EBITDA result of $26.8 million.

However, it did also increase the upper range of its guidance for capital expenditures from $25 million to $35 million, which it says is to accelerate opportunities for digital asset conversion. Converting static panels to digital panels has the potential to continue improving earnings margins, whilst also increasing the potential pool of customers for which outdoor advertising can become relevant.

Brendon Cook, the company’s CEO, said: “We are investing now to be the new media business of today and into the future. This is being achieved by building a diversified and unparalleled portfolio of assets to deliver a world-leading approach to audience based connections.”

Digital revenue grew 81% compared to the pcp and represented 44.5% of group revenue at the end of the period. This was well ahead of the company’s target to have between 45% and 50% of group revenue generated by digital assets by the end of the year.

oOh!Media appears to be a quality business, and any further dips in its share price could certainly warrant further attention from investors.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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