Agora – Making a Comeback With Q3 Earnings
Shares in Agora suffered a nearly-18% drop in the last five months, indicating 20% underperformance against the WIG broad market index most likely driven by weak second-quarter results. We consider the sell-off an overreaction creating a compelling buy opportunity for investors. Firstly, Agora is set to turn earnings around from Q3 2019 with expected EBITDA ex. IFRS 16 impacts up by 41.8% on the same year-ago period after a 23.2% drop registered in Q2. Secondly, the cinema business will be a highlight of this earnings season, with Helios staying ahead of the competition thanks to its flexible pricing policy and a strong program of attendance-boosting attractions. We are confident Agora can maintain the positive earnings momentum through 2020, with EBITDA growth likely to reach 19.1% (or 12.6% on a recurring basis). At the current level, AGO is trading at 6.4x 2019E EV/EBITDA, showing a 35% discount to the peer group. The Company's growth story and a strong 2020E dividend yield at 5.3% make it a great stock to own in the near term. After updating our earnings outlook for Agora, and after fitting current peer multiples and IFRS 16 impacts into our model, we raise our target price for Agora to PLN 17.00 per share, implying upside potential of nearly 80% from the current level.
Agora principally produces and sells newspapers and carries out the Internet activity. Co. is also engaged in the cinema segment through its subsidiaries, Helios S.A. and Next Film Sp. z o.o., and in the outdoor segment through its subsidiary, AMS S.A. Co. controls radio broadcasting companies and is a publisher in magazines, periodicals and books segment. Moreover, Co. and its subsidiaries provide printing services for external clients in printing houses belonging to Co. and its subsidiary, Agora Poligrafia Sp.z o.o. Co. is also engaged in TV segment by holding shares in Stopklatka S.A. Co. and its subsidiaries also engage in projects related to production and coproduction of movies.
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