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Matomy embraces advertising's future

The Israeli advertising group is poised to grow strongly, yet its shares trade cheaply
Matomy embraces advertising's future

The rapid transition from display to mobile advertising has caught many marketing outfits off-guard, but, at the cost of a profit hit this year, Matomy Media (MTMY) has had the foresight to position itself to take full advantage of the changes. The Israeli group has made several shrewd acquisitions and ploughed money into mobile, video and 'programmatic' or automated ad trading, while strengthening its range of services. Yet, despite its recent progress and robust growth prospects, its shares trade at an unwarranted discount to those of peers. The recent launch of a strategic review shouldn't deter investors.

IC TIP: Buy at 129p
Tip style
Growth
Risk rating
Medium
Timescale
Medium Term
Bull points
  • Earnings set to rally
  • Shares are cheaply rated
  • Bolstering offering through acquisitions
  • Targeting fast-growing markets
Bear points
  • Advertising industry remains in flux
  • Weakness in display and social

Matomy's growth bets paid off in the first half of 2016. Soaring advertiser demand in North America fuelled a 95 per cent rise in video sales, while technology improvements underpinned a 144 per cent increase in mobile in-app revenue. Mobile-related offerings generated 38 per cent of total turnover, up from 28 per cent a year earlier, and management intends this to reach 50 per cent in 2017. Moreover, programmatic ad sales grew 41 per cent to account for more than three-quarters of total turnover. And the group's focus on more lucrative technologies helped its underlying gross margin, which ignores a marked rise in amortisation linked to recent deals, rise by 0.5 percentage points to 27.8 per cent.

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