DMGT – added to GrowthRater model portfolio at 704p

DMGT – added to GrowthRater model portfolio at 704p

The shares have been off my radar over the last couple of years after having broken above the top of my GrowthRating range (of +2.6-4.1% CAGR) and as organic revenue momentum dropped below this as the structural decay in print advertising continued, falling oil prices impacted the the group’s sizeable interests in Events and B2B and after a series of delays to the RMS (One) launch.

Revenue momentum however may be turning. Print advertising prospects remain bleak, but everyone and their dog already know this and while endless articles on the gluteus maximus of some reality star is not going to win a pulitzer, it seems to pack the viewers into MailOnline, with the accompanying improvements in advertising income. The key sentiment driver however will be the pick-up in RMS organic revenue growth now that the first product releases from RMS(One) have finally been released. This together with the stabilization in oil prices around $45-50/bbl and we are now perhaps passing the inflection point in the groups revenue trough (see the below charts)

What this means is that organic revenue growth for the forthcoming year (Sept 2017) could well top +3%, which could put it ahead of the implied growth being priced into the shares at current levels (with an OpFCF yield approaching 7%) while also at the lower end of my GrowthRating range.

For those that want to find out more for themselves, please click here – https://app.growthrater.com/

Otherwise I have folded some relevant charts and the last investment summary below.

For those wanting an audit and evidence that this works, I’ve also attached a couple screen shots of old notes of mine which may well be lurking somewhere on the web,
- A SELL note at 752p back in July 2007 when I was at SocGen

and a

BUY note I wrote in December 2011 when the shares were at 379p.

Don’t overpay for growth or buy on a declining revenue momentum

From the GrowthRater dashboard –

Last comment update on: 2016-07-22

Q3 FY16 (IMS): Passing the trough

DMGT: While Brexit has added to some of the B2C print advertising uncertainties, the Mail Online operations are now large enough to provide a more meaningful offset while the more recent softening in the GBP will provide an fx translational kicker from the Q4 and into next year. Underlying these movement however has been signs of a bottoming out in some of the energy exposed areas as well as for RMS as it now prepares to launch its “Exposure Manager on its RMS(one) platform. As we pass this inflection point for B2B, the modestly improving underlying trading momentum combined with the undemanding valuation makes for an improving investment proposition. On our forecasts, we have the prospective OpFCF yield for the forthcoming year (FY17) rising towards 7% to discount growth of around +3% against our growth rating target of +3.4% (and range of +2.6-4.1%). This range assumes a broadly zero growth rating for the B2C activities and a market average growth outlook for the B2B operations.

Last trading update – Q3 FY16 IMS (sales): ……. blah, blah blah – more at https://app.growthrater.com/

DMGT – added to GrowthRater model portfolio at 704p

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