55cent target

DES was recommended by wise-owl investments as a strong buy this morning. Their 12 month target was 55 cents which is unusually aggressive for wise-owl.
Quote:
Destra offers a unique mix of steady as she goes, cash flow positive businesses as well as ‘blue sky’ opportunities. The group uses its business units that are generating solid earnings to inject funds into these online blue sky opportunities that are central to Destra’s long term growth strategy. Destra’s online earnings model is built around a simple three step strategy. First, acquire and digitise intellectual property like music and movies. Second, build an online community or large audience around this content. Third, ‘monetise’ this audience by selling content and advertising space. Adding weight to this strategy is that many of Destra’s sites are widely visited by the generation X and Y demographics. Advertisers find this demographic notoriously difficult to access through traditional advertising methods, making Destra’s sites a desirable place for promotions.

Destra is also strengthening its ability to generate cash and further build its online presence via acquisitions. Perhaps the most strategic of these was the recent purchase of advertising agency Brand New Media (BNM). BNM will not only increase Destra’s exposure to the rapidly growing online advertising segment, it will also allow Destra to more easily promote its own products and services.
Destra recently released its full year results which showed a strong performance on the financial front. Operating revenue rose 111% from $15.62mn in financial year 2005 to $32.9mn in FY 2006. EBITDA was up 81% from $1.22mn to $2.21mn and earnings per share was up 275% from $0.32mn to $1.18mn over the same period. The most recently announced cash at bank as at 30 June 2006 was a comfortable $4mn. The company raised $4mn by issuing shares at 25c on the 5th of May 2006 which was well below the market price of 33c at the time. Issuing of shares has been more responsible since this time and in the case of the Payless acquisition was done at a premium to the stocks market price.
Destra is Australia’s fifth largest record label after industry majors SonyBMG, Universal, Warner and EMI. As more and more consumers are purchasing their music online, the playing field is changing to Destra’s advantage. Destra has already established a strong online presence and boasts Australia’s largest independent music website with 100,000 tracks from 17,000 artists.

Destra has been on an acquisition spree of late for businesses that can further cement its online presence and ability to generate online revenues. These include Rajon Distribution, Visual Entertainment Group, Payless Entertainment, Music Point Services and Brand New Media. All of these companies are already generating profits and have been acquired on favourable terms. For example, Visual Entertainment group was purchased for $4mn and generated an EBIT of $1mn in FY06, and Payless Entertainment cost $8.7mn and generated an EBIT of $2.5mn in FY06. The strategic Brand New Media acquisition generates most of its revenues through pay TV and Virgin Blue inflight entertainment. Most importantly, BNM has a rapidly growing online business which Destra will be looking to grow.

All in all, the Destra group of companies is positioned to grow rapidly. They expose Destra to the three rapidly growing segments of digital music, online advertising and pay TV advertising.