Mediagrif CEO departure is a stepping stone, Echelon says

Yesterday, Canadian e-commerce company Mediagrif announced that President, CEO and Chairman Claude Roy will be retiring for health reasons as of March 31, 2019, with CFO Paul Bourque taking on an Acting President and CEO role along with his CFO responsibilities. Current Lead Director Gilles Laporte will become Chairman.

Roy became CEO in late 2008 and grew the company through numerous acquisitions while expanding its margins and initiating a dividend. Ezzat pegs the company’s downturn in recent years on a number of issues: underperformance from its consumer platform Jobboom, margin contraction due to the company’s reinvestment in its business and the absorption of unprofitable acquisition in Orckestra. At the same time, the analyst thinks the company’s B2B platforms are not fairly valued and have high visibility and are growing at healthy rates.

“While we believe there is limited downside from current levels, owing to a healthy FCF yield, a catalyst is needed to resurface value in the stock. For an investor’s perspective, we believe the CEO’s departure is a stepping stone needed to rejig the business model after years of stagnation and perhaps a first step in resurfacing value,” says Ezzat in a special situations update to clients.

“Our target of $13.50 per share reflects our continued belief in the underlying value of the Company’s ‘crown jewels’ (namely, InterTrade and the e-procurement platforms) but our cautious stance vis-à-vis the company’s recent capital allocation decisions and the continued underperformance of its legacy and consumer verticals,” he says.

Ezzat is estimating 2019 revenue and EBITDA of $83.3 million and $22.7 million, respectively, and 2020 revenue and EBITDA of $84.7 million and $24.8 million, respectively. His $13.50 target represents a projected return of 29.8 per cent at the time of publication.