CME: Successful deleveraging topped by dividends (upgrade to BUY)
We are upgrading our rating for Central European Media Enterprises (CME) from Hold to BUY, and cut our 12-month price target (PT) from USD 4.70 to USD 4.50 (CZK 102.3/share), implying 33% upside potential (35% on the PSE). We see CME as a growth and deleveraging play that might turn into a compelling dividend story shortly, considering that its leverage has finally reached reasonable levels. Moreover, based on the still-strong macro environment and published offer price hikes, we believe the CEE TV ad markets should remain strong in 2019E, and that CME offers good exposure to this trend. On the back of the strong TV ad markets, paired with dynamically growing carriage sales, and the strict cost discipline shown by CME in previous years, we expect it to deliver 2018-20E CAGRs of 18% in NI and 5% for OIBDA. We believe the strongest trigger this year should be confirmation that it is restoring dividend payouts from 2020E. We expect CME to pay a DPS of USD 0.13-18 from 2019-20E NI (4-5% DY). CME trades at a premium vs. its peers of 39-28% on 2019-20E EV/OIBDA): in our view, however, this is justified by its growth and dividend outlook.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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