http://www.theaustralian.com.au/business/wealth/isentia-set-for-r...

http://www.theaustralian.com.au/bus...d/news-story/3743e23ed5d2f7e4b2ad94dadf0db8c6

Isentia set for rebound
Isentia is a media intelligence business focusing on collecting and disseminating media content, tailored to the needs of clients.

Arguably one of the worst share price reactions from the most recent reporting season, has pushed the share price down to a level where dividend yield is starting to support its share price.

The business dominates the media monitoring space in Australia with about 90 per cent market share and it is the leader in the fast-growing markets of Asia. ISD provides time-critical and highly relevant media intelligence information to help clients (major brands and politicians) manage their image. The business model is supported by high levels of recurring revenues, solid cash flows and a strong balance sheet.

It’s no surprise the share price has more than halved in less than 12 months with the company announcing two downgrades in the past six months. The two downgrades, November’s AGM and the first-half result, mainly revolved around King Content — a business recently acquired by ISD. King Content lost four of its top ten clients, contributing half of its revenue at the start of the financial year. This resulted in the expectation of the business becoming that of an earnings detractor.

The King Content disappointment was coupled with signs of competitive erosion of its core ANZ media intelligence business. Segment revenue rose just 3 per cent, and EBITDA fell 1 per cent to $23.7m in the term, reflecting margin contraction from 45 per cent to 43 per cent. Of primary concern was ISD’s failure to avert client churn, which rose to 6 per cent.

Taking all this into account, the share price reaction appears to be pricing in much of these issues. In fact this represents an attractive entry point into a business that later this year will release a product upgrade with the release of “Storyview” — a product that will bundle an upgraded social listening product with traditional monitoring on Mediaportal. It will resemble a typical social media timeline, with media intelligence collected from disparate sources and presented on a linear feed tailored to each client. Storyview will perform analytics across every piece of content and determine which is most influential, irrespective of the source — this may well give ISD the edge it needs.

ISD pays a reasonable fully franked dividend yield of 5 per cent and is trading below intrinsic value of $1.90 with a near-term catalyst likely to see the gap between the current price and our value close.