Results Note:
Nation Media Group this afternoon announced 1H13 earnings results posting a 24.0% y/y growth in attributable income to KES 1.1bn. The good performance was driven by organic growth recorded by almost all segments and supported by increased advertising in 1Q13 ahead of Kenya’s General Election in March. The company also saw increased market share in some of their markets including NTV Uganda (50.0% market share) and K FM Rwanda (launched in 2012) which was ranked the second best radio station. The Board of Directors recommended the payment of an Interim Dividend of KES 2.50 per share which is similar to what was paid out in 1H12 but effectively 20.0% y/y higher considering the 1:5 Bonus Issue that took place last year. The following are the key highlights of the results:
· Revenue was up 10.0% y/y to KES 6.4bn as a result of improved performance in all the divisions except Monitor Publications (Uganda) which due to government interference was closed for about two weeks. The company’s flagship product Nation Newspaper (Kenya) posted a 6.0% and 14.0% y/y rise in circulation and advertising revenue respectively while Tanzania’s Mwananchi posted a 6.0% and 26.0% y/y rise in circulation and advertising revenue respectively. Broadcasting also posted remarkable results with NTV Kenya, QTV Kenya and Q FM recording 32.0%, 78.0% and 70.2% y/y rise in operating profit.
· Impressive performance by the Rwanda subsidiary (Nation Holding Rwanda Limited-NHRL) was noted with revenues surging 170.0% y/y while operating profit grew 49.0% y/y. The company moved to Rwanda in 2011 by introducing a Rwanda edition of the East African Newspaper and later on launching a radio station K FM 2012.
· Net profit margin improved 200bps y/y to 17.6% as a result of effective cost management measures derived from consolidation of the group’s operations and synergies. The company also continued to derive increased earnings from interest income on its vast cash (KES 4.2bn in cash and cash equivalents in 1H13) as well as alternative revenue from increased usage of Nation Hela, the money transfer system that Nation Media launched in 2012 in conjunction with DTB Bank (12,000 card holders currently with a short term target of 50,000 card holders).
· Going forward, we expect Nation Media to continue delivering strong shareholder returns driven by organic growth from increased Ad Spend in East Africa on account of improved economic performance as well as efficient cost management which will see the EBITDA margin strengthen 470bps y/y in FY13E, 140bps y/y in FY14F and 70bps y/y to 35.6% in FY15F.
· Nation Media is currently trading at a P/E and P/B of 21.9x and 7.1x with a 32.5% ROE.
(Courtesy of Kestrel Capital)