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As the advertising landscape continues to shift and fragment, the two fastest growing channels are digital and out-of-home (or billboards).

That’s pretty good news for QMS Media (ASX:QMS) whose business model blends the two by deploying digital campaigns across a network of screens in transit, airport, stadium and street locations.

More than 70 per cent of the company’s screen inventory across Australia and New Zealand is digitally enabled — well above the industry average of 45 per cent.

Last financial year, another 30 digital billboards were brought on stream taking the company’s local portfolio to 75.

In turn that drove a 40 per cent uplift in underlying EBITDA and the company is well positioned to continue delivering such impressive growth rates.

Last year the company invested almost $50 million into its screen network and its technology, compared with less than $30 million in operational cash flows.

It also executed a $20 million equity raising and although its net debt rose to $46 million that was only 1.3 times EBITDA or just under 23 per cent of shareholders funds.

Before long, the company may reach an inflection point where its cash flows reach and then surpass its cap-ex.

At the heart of the company’s technology suite is the QMS DigiLab which allows real-time ad serving and content management plus operational intelligence and data analytics across the digital screen network.

A poignant example of how DigiLab enables live and relevant advertising was a campaign that the company ran for The Gold Coast Bulletin last year.

QMS Media (ASX:QMS) shares over the past year.
QMS Media (ASX:QMS) shares over the past year.

Combining its network of digital street furniture, remote URL hosting and File Transfer Protocol technology, QMS brought  the local newspaper to life by broadcasting the latest news headlines live at bus stops as the day evolved.

Digital screens can also be integrated with social media platforms. A recent example was the integration of social media feeds into a prize-driven competition to promote Universal’s release of the Despicable Me 3 movie.

The acquisitions of Out and About Media and Live Docklands have allowed the company to launch QMS Sport, a multi-platform offering around sports codes, stadia and clubs.

It now has an impressive array of contracts across soccer, AFL, Rugby Union, netball, boxing, cricket and supercars.

There’s also a geographic dimension to the company’s expansion programme as it rolls out in Indonesia.

With a current year PER in the mid teens, the fundamentals are far from stretched.

And since most mainstream media groups will be struggling all the harder for growth, QMS could well shape up as an attractive acquisition target.

 

Tim Knapton is the founder and CEO of online tech research and finance marketplace TechVoyage.   Its video/financial database and digital broadcast platform provide a more efficient way for investors to appraise listed and unlisted tech companies and for entrepreneurs to finance, acquire and exit them.   

Previously Tim was Head of Corporate Broking at Deutsche Australia and before that ran a research department for a leading broking house.  Tim has also been a freelance tech/finance journalist for more than 20 years and a columnist with The Australian Financial Review, The Bulletin, BRW, Shares and Australian Business.

 

This content does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.