Mediagrif upgraded to “Buy” at Laurentian Bank Securities

On Tuesday, Mediagrif reported its Q2, 2019 results. The company earned $3.17-million on revenue of $20.26-million, a topline that was up a hair over the $20.03-million it posted in the same period last year.

Agostino says the company’s top line met his expectations, but there was some cause for optimism on the bottom line.

“While gross margin of 79.5% is slightly below our estimate, the EBITDA margin performance represents a notable sequential improvement over FQ1’s 25.2% margin and YoY margin of 31.3%, largely on the back of lower labour opex, offsetting an increase in COGS associated with labour costs and hosting fees,” he says. “In addition, Orckestra cost drag is tapering, reducing its negative margin impact which was prevalent post-acquisition one year ago.”

In a research update to clients today, Agostino upgraded Mediagrif from a “Hold” to a “Buy” and raised his one-year price target on the stock from $11.50 to $12.00, implying a return of 24 per cent at the time of publication.

The analyst thinks MDF will post EBITDA of $24.6-million on revenue of $82.3-million in fiscal 2019. He expects those numbers will improve to EBITDA of $26.98-million on a topline of $85.96-million the following year.

“Given the better than expected EBITDA performance on improved margin and positive organic growth in key platforms, we move to a Buy,” Agostino explains. “This is further supported by a LTM FCF yield >9% and given the ongoing strategic review process, what we estimate to be a fair takeout value in the $15 range.”