Downgrade of FY’22 guidance not unlikely
Unlikely to raise dividends and initiate share buybacks
FY’22 guidance downgrade not unlikely
North Media reports its Q3 results on 2 November. We expect group revenue of DKK 236m (vs. DKK 260m in Q2), as we note that Q3 has historically been a weak quarter in the important Last Mile segment. With a gloomy macroeconomic outlook and high inflation, we expect weaker demand in both the Last Mile segment and Ofir. Conversely, BoligPortal may benefit from a recession encouraging rental housing. With the Danish CPI up 10% y-o-y in September, however, we expect cost inflation to weigh on all four segments, but particularly the Last Mile segment where our estimates are 2% below the lower end of the company’s FY’22 EBIT guidance range. On the group level, we expect FY’22 revenue of DKK 1,018m and an EBIT margin of ~19%, which are both in the lower end of the FY’22 guidance range.
Sustained portfolio losses, likely no increase in dividends
On top of the weaker demand and cost inflation, Q3 is likely to have seen sustained losses to the company’s equity portfolio (we estimate a loss of DKK 94m in the quarter). This results in a negative pre-tax profit of DKK 50m in Q3, forcing FY’22 EPS into negative territory. Adjusting for the portfolio loss yields a positive pre-tax profit of DKK 44m. In light of management’s firm view on the company’s payout policy, we do not expect a raise to the planned annual DPS of DKK 5.0, nor do we expect the company to initiate share buybacks given the uncertainty ahead.
Lower one-year fwd. FVR of DKK 49-111 (56-137)
Our DCF yields DKK 111 (137) per share on lower estimates and a higher discount rate. The lower end of DKK 49 (56) per share is derived from an assumption of zero cash flows post ’23 following a complete ban to printed matter in Denmark and no future cash flows from the Digital Services segments; note that we consider both scenarios unlikely. The company’s net cash position of DKK 551m at YE’22e corresponds to DKK 29 per share. We lower our one-year fwd. FVR to DKK 49-111 (56-137) per share.
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