Following a quarter that featured “lacklustre” organic growth, Echelon Wealth Partners analyst Amr Ezzat has lowered his twelve month price target on Mediagrif (TSX:MDF), though the analyst still thinks the stock is a buy.
On Tuesday, Mediagrif reported its Q4 and fiscal 2018 results. In the fourth quarter, the company earned $2.1-million on revenue of $20.5-million, a topline that was up 2.5 per cent over the same period last year.
Ezzat summarized the quarter.
“Sales and EBITDA came in below our estimates, challenged by lacklustre organic growth. We went into the quarter calling for flat organic growth (~$20M in revenues) + ~$1.5M contribution from Orckestra,” he notes. “We estimate organic top line growth was circa -5% y/y (organic growth was flat last quarter on a y/y basis). Overall sale dynamics continue to be hampered by legacy and consumer platforms (the latter platforms were down $1M y/y), while the Orckestra acquisition contributed $1.6M (up from $1.2M last quarter). As we pointed out the last few quarters, the Company is actively reinvesting into the business to revive top line growth, as evidenced by the increased opex intensity in the last few quarters. This is also supplemented by the recently closed Orckestra acquisition, which while unprofitable, has great potential to add to top line growth and profitability in F2019. Together, these factors impacted EBITDA, which came in at $5.6M (down 12% y/y). Post adjustments, we estimate EBITDA was down 5% y/y. The Company’s FCF (ex-M&A) came in at $6.1M for the quarter ($6.9M last year), and $14.2M for the year ($19.7M last year), implying a 9% FCF yield, and we believe providing the Company with limited downside from current levels.”
In a research update to clients today, Ezzat maintained his “Buy” rating on Mediagrif, but lowered his one-year price targetr from $16.00 to $15.00, implying a return of 39.4 per cent at the time of publication.
The analyst thinks MDF will generate EBITDA of $24.8-million on revenue of $83.5-million in fiscal 2019.