Ebiquity – I hope that I have got it right this time

In a couple of weeks we should be able to see a Trading Update from Ebiquity (LON:EBQ), a leading independent marketing analytics specialist.

I last profiled this company on Fireworks Day in 2019, but unfortunately the shares have been a damp squib, subsequently easing from the 43p Profile price to as low as 17p. They have since recovered slightly to the current 20.5p.

Getting 2020 out of the way

The statement that I am expecting soon will cover the group’s finals to end December last year. They will be terrible, showing the full impact of the dreaded virus upon its business.

However, I do expect some real positivity to show through after last year’s results have been discussed and assimilated.

This year should see a major profits recovery from the anticipated £0.5m pre-tax loss for last year.

But I am getting ahead of myself again

Let me tell you what Ebiquity does to make a living.

It is the world’s leading expert consultancy focused exclusively on media and marketing.

It guides its clients through an ever-changing marketing landscape, helping them optimise effectiveness and achieve business success.

It is evident that advertisers need help in navigating the ever-more complex media and marketing ecosystem.

Built up a great team globally

Over the last two decades or so the company has built up a string of 18 global offices and a team of 650 media and marketing experts. It has a presence on the ground in all of the world’s leading markets.

The team members have worked in all the relevant areas adding to their accumulated experience – client-side and agencies, platforms and publishers, advertising and marketing technology, consultancy and marketing analytics.

Not in anyone else’s pay

Totally independent of the media supply chain, it is free from any conflicts of interest.

That is very important when helping the world’s biggest brands leverage data and analytics to drive greater transparency in their marketing, to create more impactful customer experiences and to deliver greater returns on marketing investment.

It uses advanced analytics in pricing, promotions, creative, in-store retailing, or paid media, working out how they should impact sales and profit.

It also applies predictive analytics and machine learning, to improve commercial forecasting and help to understand the real drivers of sales, be they advertising, competitor activity, or even changes in the weather. 

A Top List of Top Clients

The group works with some 70 of the world’s 100 leading advertisers, it analyses over $50bn of global media spend annually.

Companies like Nestle, Sony, Mazda, L’Oreal France, Direct Line Group, Jaguar Land Rover, Subway, Britvic, Wickes, ThinkTV, Lesieur, Thinkbox, Arla, Lidl, Publiespana – they are all in the client list.

It earns its fees several times over

It helps 100 global and national brands to select and manage their agency partners each year, representing $20bn of media spend.

The company considers that its analytics work typically delivers a return on investment of between five to ten times its fees and often considerably more.

Nearly 74% in firm hands

The group has some 82.6m shares issue. Its Employee Benefit Trust holds 4.2m shares.

The larger shareholders include Artemis Investment Management (16.16%), Canaccord Genuity Wealth Management (15.74%), BGF Investment Management (12.72%), JO Hambro Capital Management (11.50%), Herald Investment Management (5.26%), River and Mercantile Asset Management (3.78%) and Legal & General Investment Management (3.63%).

Analyst estimates for 2021 show recovery

Analyst Fiona Orford-Williams at Edison Research estimates that the group last year saw revenues fall from £68.7m to £57m, with a loss pre-tax of £0.5m (£5.3m).

For the current year she is going for a £3m rise in revenues to £60m, producing £3.1m pre-tax profits, worth 2.6p per share in earnings, amply covering a 0.5p dividend for the year.

My view on the shares

This market-leading data-driven media solutions provider is looking cheap to me. I feel that its shares will react well to bullish comments subsequent to the imminent Trading Update in mid-February, its finals being published in May and then after its AGM in June.

After the awful impact of Covid-19 the group’s Management Team will be pleased to have signed off on such a ghastly year. And now they will be looking forward to getting into gear for 2021 – recovery is on its way.

So too for the price of the group’s shares, now 20.5p.

I now set an easy Target Price of 27p.

(Profile 05.11.19 @ 43p set a Target Price of 75p)