In late March, Mood Media (TSX:MM) acquired branding company DMX Holdings for $86.1-million, slightly more than one times that company’s 2011 revenues of (US) $84.6-million. Austin, Texas based DMX was founded in 1971 and boasts clients such as Gucci, Levi’s and Burger King.
Byron Capital Telecom and Media analyst Rob Goff says the DMX acquisition illustrates perfectly why he is bullish on Mood Media. Goff says the move strengthens Mood Media’s existing partnerships with brands around the world, and pushes the company’s North American market share to 66% from 52%. In a research report to clients today, he initiated Coverage on Mood Media with a Strong Buy rating, and a twelve-month price target of $5.60.
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In May of 2011, Toronto-based Mood Media (which was previously known as Fluid Music Canada) sprung to public attention when it completed the $345 million acquisition of Muzak, forming an entity that had $400 million in revenue in what is now being referred to as the sensory branding space, a term for marketing tactics now being used by giants such as Nissan, Pizza Hut and Starbucks. Shares of Mood Media, which closed 2010 at $1.90, have been on fire of late, recently topping the $4 mark. The company has been busy, signing deals with brands as diverse as Vitamin Shoppe, Hooter’s and the Puma store in Paris, where the company installed giant video walls.
Goff says Mood Media’s bottom line will benefit from cost synergies after the DMX acquisition, pointing out that the Muzak acquisition has delivered $5.1 million in operating cost savings to date and is on track for an estimated $20 million annualized. What really intrigues the Byron analyst, however, is the company’s potential in China and other BRIC nations. Goff points out that Mood Media’s existing customers alone have more than 175,000 locations in China.
Shares of Mood Media closed today up 3.7% to $3.88.