oOh!media (ASX:OML): Talk of its demise has been greatly exaggerated!

See a massive billboard on an arterial road, and there is a good chance that oOh!media (ASX:OML) was behind it. It is great to have a dominant market position, but this has not prevented shares sliding over 25% in the past 12 months due to cost blowouts and a difficult position with the advertising market. Can this company rebound?

About oOh!media (ASX:OML)

This company is pronounced Oh-media and began in 1989. The company says,’ We exist to make public spaces better and brands unmissable, proudly leading the market with innovation, creativity, data and results. We have over 35,000 assets across our national digital and classic network that reaches over 98% of metro Australians and 72% of metro New Zealanders every week’.

OML began in 1989 as Outdoor Network by Brendon Cook, who served until 2020 and was replaced by current CEO Cathy O’Connor. It had a previous stint on the ASX that began in 2004 and ended in 2012, being taken over by CHAMP and WPP – only to relist two years later when those entities wanted to sell some of their shares. When it listed for the second time, it had $243.5m in annual revenue, $33m EBITDA, a $5.6m profit and an indicative market cap of $289.3m. At that time, it was diversifying into digital billboards (i.e. think the ads you see in office tower lifts or in shopping centres) as well as ‘digitising’ physical billboards (i.e. using technology such as QR codes to find out more).

The trouble is that outdoor advertising may not be relevant to everyone (not everyone may like beer or be in the market for a car – just putting it out there) and quantifiable metrics aren’t as opaque as Facebook ads for instance. With Facebook ads, you can look at metrics like clicks and conversions, but with billboards…well, you could say sales increased because of that campaign, but there could be other reasons too. At the same time, some ads can be hidden, and you don’t have the same power to ‘hide’ physical ads.

Why shares fell in 2024

All things considered, the company has fared reasonably well. In 10 years, it more than doubled its revenues and more than quintipled its profit. Plus, the company is capitalised at over $600m, even with the decline of over 20%. The company boasted contract wins including the Sydney Metro which was about to open.

Here’s some interesting data, revenue from ‘Street Furniture and Rail’ rose by 2% and 1% respectively. But revenue from airports grew 29% and road spending increased 14%. It is the latter that generated the most revenue. OML has a policy of paying 40-60% of adjusted NPAT as dividends and paid 5.25c per share.

But the first half of FY24 (which is the calendar year) saw a 3% decline in revenue and a 10% drop in profit with some contract losses (Vicinity being one) and cost increases. This was not due to a decline in the Out of Home advertising market – it grew by 8% and captured a record 15% of advertising agency spend. Still, the company anticipated securing at least $38m in incremental annualised revenue across commercial contracts including the Melbourne Metro Tunnel, in addition to $30m incremental revenue from previously announced contracts that would only take effect in CY24.

OML promised that in its full year results, it would have a similar gross margin, minimal one-off external costs and that there would be opex growth at or below inflation. Capex would be $45-55m, subject to development approvals. The company is due to release full year results in February 2025 (on Monday the 24th), but indicated $633-638m in revenues and $125-128m in adjusted EBITDA. It promised it would reduce its cost base by >$15m in response to challenging market conditions, as part of a restructure.

Potential if it gets its act together

OML’s results in a few weeks time may not be ideal. But if the cost management program works, there could be an opportunity here. Consensus estimates agree with OML’s estimates for CY24 and then expect 8% revenue growth and 15% EBITDA growth in CY25, followed by 6% revenue growth and 9% EBITDA growth in CY26. The mean target price is $1.66, up 45% from the $1.14 it traded at on February 3, 2025. It is at a P/E of 9.9x for CY25.

This is before you consider some of the growth opportunities available – for instance, OML is looking to sell in-store and online advertising on behalf of major retailers – it has pitched it work to Metcash according to the AFR, and Metcash has told its investors it could deliver $30m in earnings by the end of this decade. The decline of FTA TV can help too, because its current advertising revenue is 4x what billboards are – that revenue has to go somewhere, right?

So whilst we think investors should hold off OML for a few weeks, there could be opportunity thereafter.

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