North Media: Huge investment gain in Q1e - ABG

- Q1e: sales +41% y-o-y, ~10% EBIT margin (SDR now consolidated)
- Raising '24e EPS by 22% on huge unrealised Q1e investment gain
- Paper prices still high, but Salling deal lifts '25e-'26e EBIT by 1-3%

The first quarter with SDR included
North Media will report its Q1 on 16 May, which will be the first quarter with SDR consolidated. We forecast Q1e group revenues of DKK 339m, up 41% y-o-y (but only up 1% if we exclude SDR). Our Q1 EBIT estimate of DKK 33m corresponds to a margin of ~10%, down some 8pp y-o-y, as SDR will be a drag on group margins. Despite recently divesting parts of the investment portfolio to fund the acquisition, we still estimate an unrealised gain of DKK 144m in Q1e (equivalent to a return of 22%) driven particularly by Novo Nordisk and NVIDIA.

Salling deal lifts '25e-'26e EBIT 1-3%; paper prices still high
With the exception of lifting EPS by 22% on the unrealised Q1e investment gain, we make only minor changes to our '24 group estimates. We thus remain slightly above the mid-point of the FY'24 revenue and EBIT guidance. Beyond '24, we leave our estimates unchanged for SDR, BoligPortal, Ofir, and BeKey, but raise '25e-'26e group EBIT by 1-3% on the back of FK Distribution's recent contract extension with the large Danish grocery retailer group Salling Group. North Media says the extension implies unchanged to slightly increased volumes in '25-'27. With Salling Group's ~34% Danish market share, according to Retail Institute Scandinavia, we consider this extension clear proof that physical leaflets remain a vital part of retail advertising. However, we still have limited insights into the contract dynamics (e.g. pricing and volume flexibility). On a slightly negative note, paper prices appear to have stabilised at a relatively high level in recent months, down ~35% from the peak in '22, but still around 25% above the average in '03-'21 (see chart on page 2).

FVR of DKK 60-100 (58-97)
Our '24e-'26e revisions drive the adjustment of our FVR to DKK 60-100 (58-97).

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/north-media/Equity-research/2024/4/north-media---huge-investment-gain-in-q1e/