I read the below as part of an interview with Liam Donohue from Lennox Capital which featured in the AFR ‘We think oOh!media is materially undervalued by the market. Most people would know the company or have seen their billboards around the country. They’re probably the biggest outdoor media owners in Australia, and it’s no secret the company has been through a tough period lately. What has us excited is the work oOh!media has put into cost management in recent periods, which should provide some solid operating leverage for earnings when the advertising market rebounds. On our numbers, when we look a few years forward, we have the company trading on sub-10 times price to earnings and think the share price could realistically near-double from here.’
My view is this- fund managers such as Lennox Capital are starting to identify the economic precursors for massive share price gains ( tight cost management + advertising market rebound = massive operating leverage and profits)
Purchasing SWM at 15 cents a share represents 1.5x mid cycle earnings ($155m NPAT) which means that the upside is multiple times greater than that of ASX:OML even factoring in the different growth profiles of the two businesses. We saw this during the Covid ad market recession when OML reached about 3 times its Covid lows and SWM meanwhile delivered returns in excess of 10 times its Covid lows.
Seems straight forward to suggest that any intelligent investor would prefer a Disallowed instead of a 3 bagger but fund manager group think doesn’t always allow others to see this obvious fact until its too late.
SWM Price at posting:
16.0¢ Sentiment: Buy Disclosure: Held
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