London, UK, 06 March 2017

Edison issues initiation on Reworld Media (ALREW)

Reworld Media combines leading media brands with performance marketing via its consolidated 30% TradeDoubler shareholding, providing advertisers with a strong data-driven proposition. Management has reinvigorated its brands, investing in their digital offers and driving reach, while structural profitability has improved through extensive overhead reduction. TradeDoubler (TD) reported adjusted positive EBITDA in H216 and management has indicated that group FY16e EBITDA will be roughly treble that of FY15. Medium-term earnings growth will be driven by operating leverage, along with the fast-growing digital share of global marketing spend, which should then reflect in the valuation.

A sum-of-the-parts approach based on forward EV/EBITDA and EV/gross profit (GP) multiples for global media peers and for the TD stake, suggests a valuation of around EUR2.32 could be justified. However, this only takes account of short-term projections. If Reworld could achieve an industry average EBITDA margin (c 18%) in the medium term, a DCF approach suggests a much higher price of EUR3.13, with the current price implying an EBITDA margin of just 11.7%.

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