Ebiquity – deeper analysis will pay off for this company

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Ebiquity – deeper analysis will pay off for this company
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Marketing and media consultancy Ebiquity looks very good value well worth backing, especially before the Capital Markets Day on the 19 November, writes Mark Watson-Mitchell. 

In just over two weeks, on Tuesday 19 November, Ebiquity (LON:EBQ) will be holding a Capital Markets Day. These events are now increasing in number and I welcome them. They give investors and analysts an opportunity to meet senior management and find out much more about selected companies, at first hand and on site.

That is what this leading independent marketing and media consultancy is doing that day. It will include presentations by the company and its executives, covering the company’s business model, its strategically key growth areas, as well as knowledge of the global media market and what it could offer to the group.

Ebiquity is focused upon the media and marketing sectors. Over the last twenty years it has built up a team of very experienced experts. It has to date provided its abilities to some 70% of the world’s top 100 leading advertisers.

It works on behalf of some of the world’s top brands through its 18 offices globally. Such global brands as: VW, Jaguar Land Rover, Volvo, Mazda, Unilever, Nestle, L’Oreal, Arla, Weetabix, Direct Line, HSBC, American Express, UBS, Deliveroo, McDonalds, KFC, Wickes, Subway, Lidl, Facebook, Microsoft, Vodafone, Sony – all leaders across the auto, fast moving consumer goods, finance, retail and TMT sectors amongst so many others.

Today it is the world’s largest independent media adviser. It has market leadership and is the No. 1 agency in media benchmarking, contract compliance and agency management.

To date the company has gathered in the world’s largest pool of advertising spend data covering some $50bn in global media spend. In analytics it operates a market-leading platform and an award-winning team.

It is totally independent of any of the media who are forever seeking their income from Ebiquity’s clients. To be free of any conflicts of interest, they receive no commissions at all from the media supply chain.

For its clients the company delivers the true reaction to the data and analytics to enable them to maximise the real value of their marketing spend. As well as how to improve upon that spend to optimise the client’s return on investment.

The company challenges conventional thinking and thereby identifies and clearly articulates the objective truth to its clients.

Its marketing and media experts, some 650 of them, give the group a presence on the ground in all of the world’s leading markets.

It operates through three segments: Media Value Measurement, Market Intelligence and Marketing Performance Optimisation.

Its Media Value Measurement segment includes the company’s media benchmarking, financial compliance and associated services.

The Market Intelligence segment includes the company’s advertising monitoring, reputation management and research/insight services.

Its Marketing Performance Optimisation segment consists of the company’s marketing effectiveness and multi-channel analytics services.

Its multi-channel analytics facilitates clients’ requirements to personalise and automate their marketing communications across multiple channels. It provides its clients with competitor advertising monitoring, owned coverage, reputation analysis and communication insights.

There are 80,115,626 shares in issue, of which 4,200,000 are held in an employee’s benefit trust. The company is valued at just £35m.

Major shareholders include Artemis Investment Management (20.21%), JO Hambro Capital Management (11.49%), Canaccord Genuity Wealth Management (11.10%), Kabouter Management (9.20%), Legal & General Investment Management (6.51%), Herald Investment Management (5.72%), Fidelity International (4.89%), Business Growth Fund (4.61%), and River and Mercantile Asset Management (3.21%).

Master Investor Magazine

Master Investor Magazine Issue 56Never miss an issue of Master Investor Magazine – sign-up now for free!

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In the year to end December 2018 the company reported revenue of £69.37m and a pre-tax loss of £5.33m.

The subsequent £26m sale in January this year of Advertising Intelligence to Nielson Media Research has seen the company restructure itself and this year it has been undergoing a period of transition following that disposal.

In August it also wound down the trading of Stratigent, its Chicago-based marketing technology business.

The interim statement reported that, despite slightly lower revenue, the group was broadly on track to meet its and the market’s expectations for the year.

Estimates suggest that this year’s revenue could be around £71m, with actual pre-tax profits coming in at £5.3m, worth 4p in earnings and giving 0.85p in dividend per share.

Next year, after the various reorganisations in this year, the company could see pre-tax profits rising by 22% to £6.5m, with earnings coming in at 5p and amply covering a dividend of 0.95p per share.

At the current 43p that puts the shares out on 11 times current year earnings and just 8.8 times prospective. To me that looks very good value well worth backing, especially before the Capital Markets Day on the 19 November prompts similar reactions to those that attend the event.

I now set my target price at 75p with a view to being achieved by the end of next year.

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