Positioned to catch up

by **Cals** Fri 19 Apr 2013, 13:22

Positioned to catch up
Business & Markets 2013
Written by theedgemalaysia.com
Friday, 19 April 2013 10:33

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Catcha Media Bhd
(April 18, 44.5 sen)
Upgrade to buy (from neutral) at 44 sen with a target price of 65 sen: We believe the media sector is poised for a recovery in the second half of the year, once the uncertainties and risks associated with the general election are lifted, compelling advertisers to spend again. The second half is typically a stronger period for advertising expenditure due to the many festivities such as Hari Raya Aidilfitri, Deepavali and Christmas, and not forgetting the mega sales carnivals.

We are of the view that Internet advertising could catalyse the media sector’s next wave of growth as the region is seeing a stream of upgrades on broadband infrastructure. Catcha Media is well positioned to tap the vast potential for online advertising in the region, especially in Malaysia where Internet adoption is accelerating on the back of higher data adoption and the proliferation of smartphones and tablets.

Compared with its Australia Stock Exchange-listed sister company, iProperty, Catcha Media’s performance has been disappointing, prompting us to take another look at the group. We believe it is the norm for Internet-based companies to bleed in the initial three to five years. So long as its revenue continues to grow and gearing stays low, the group could still generate meaningful earnings in the very near future.

As we expect Catcha to continue incurring losses over the next two financial years, our earlier valuation based on price-earnings ratio would not be meaningful. As such, we are switching to a sum-of-parts valuation. Taking into account the market value of 29.2% owned iCar, we derive a new fair value of 65 sen. Accordingly, we upgrade Catcha Media to a “buy”. — RHB Research, April 18

This article first appeared in The Edge Financial Daily, on April 19, 2013.