1Q17 results – 29% OIBDA growth and strong FCF

In our recent report (CEE_Media_CME_Transfer of Coverage_29Mar2017.pdf, (1 MB)), we rate CME a HOLD, but we highlight that the 1Q17 results and the publication of the company’s guidance are potential triggers for the stock. This is exactly what happened yesterday (26 April 2017): the 29% yoy OIBDA growth in 1Q17 sparked an euphoric reaction from the market and the stock price rocketed by 20% intraday. We appreciate CME’s strong top line and OIBDA evolution in 1Q17, but we point out that the growth dynamics should decelerate in the next three quarters of this year, considering the company’s FY17E guidance of 13-17% OIBDA growth in constant rates. Our 2017E forecast of 15% yoy OIBDA growth in 2017E is at the mid-range of the company’s guidance. We also point out that, even with improved profitability, the company is still heavily leveraged and, as it is guiding for <6.0x ND/EBITDA, it remains vulnerable to any changes in the market environment. Moreover, as our forecasts are in line with the guidance (a ND/EBITDA ratio of 5.8x as at end-4Q17E, 15% OIBDA growth in constant currency rates), we believe that the upside has just been consumed: currently, on our forecasts, CME trades at a 2017E EV/EBITDA of 14.8x vs. the 10.1x peer median, which seems demanding, in our view.