Agora is a capital group operating in the following industries: cinema, Internet portals, Internet advertising, outdoor advertising, press and radio. The latter, after taking over the second broadcaster in the country, will develop significantly, increasing the balance between the basic pillars of the company.
Taking control over the Eurozet Group
The most important event since the last update of our recommendation, and at the same time expected from February 2019, was the acquisition of control over Eurozet. This became possible thanks to the judgment of the court of second instance, which revoked the objection to the transaction on the part of UOKiK. Thus, the Agora Group became the second radio broadcaster in Poland with an audience share of nearly 22%. RMF FM remains the market leader with a market share of approx. 35%. Eurozet Group's revenues in 2022 amounted to PLN 217.5 million, while the EBITDA result, according to our estimates, amounted to PLN 57.6 million. Referring to the revenues of the Radio segment in the Agora Group of PLN 116 million for 2022 and EBITDA of PLN 15.7 million, this means that after simple addition, the revenues of the segment will increase 2.9 times, and the EBITDA result will increase by 4.7 times. It is also worth noting that the profitability of Eurozet is much higher than in the Radio segment in Agora.
Current results
Agora presented the results for 4Q22, which contained a number of positive elements, but as a whole they were not satisfactory. Out of the 5 basic business segments, 4 recorded a deterioration in the operating result compared to the corresponding period of the previous year. Only in the case of the Outdoor Advertising segment, an improvement can be said, although it has still not been possible to return to the results from before the epidemic. In turn, unallocated costs increased by 5% y/y, which for the first time exceeded the combined operating result of all segments. As a result, the operating loss for the entire 2022 amounted to PLN -64.8 million, and after excluding the impact of IFRS16 and the effects of one-off events, this result amounted to PLN -51.1 million.
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Long-awaited changes
The aforementioned high costs not assigned to any operating segment have been a problem for the Agora Group for years. On the one hand, they made it very difficult to assess the condition of enterprises, and on the other hand, they created an unfavorable impression as to the quality of management. Fortunately, the Management Board undertook work, supported by shareholders' decisions, aimed at separating individual businesses into separate companies and assigning the costs in question to them. We hope that this will have a positive impact on the effectiveness of the entire Group.
Valuation and recommendation
We updated the DCF and comparative valuations taking into account changes in: base year, decrease in interest rates (compared to the last update), valuations of comparative companies and our forecasts. As a result, the valuation of one Agora share increased to PLN 7.7, which means that the buy recommendation was maintained.
Adam Zajler adam.zajler@bankmillennium.pl
April 7, 2022
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