- Ads boom in the Baltic states
- Cash conversion allows debt reduction
Online advertising can be a notoriously volatile market, as the ups and downs of Meta and Google testify, however where there is a niche, there is the opportunity for profit and Baltic Classifieds (BCG) seems to have struck a rich vein in targeting the growing Baltic states advertising market. The company, which is in its second full year of being listed, is taking advantage of the need for local knowledge (including marketing in some of the most grammatically difficult languages spoken in Europe) plus the fact that Lithuania, Latvia, and Estonia have emerged as some of the economically brightest of the former Soviet satellite states.
There were signs in these results that the natural operational gearing that comes with a fixed cost and high sales growth is starting to have a real impact on BCG’s performance. For example, the company’s cash conversion rate averaged 99 per cent for the year, despite cost inflation of 19 per cent. Its best performance came in Auto, where sales grew by 22 per cent to €22mn (£19mn).
Interestingly, the growth seems to be consumer led as more citizens use smart phones to access online services and adverts. For example, the dealership base on the business-to-consumer side of the business was largely static at 3,586 – with more dealerships switching over to subscription-based advertising, rather than placing individual ads themselves – while consumer-to-consumer ads were up by 24 per cent.
BCG trades on a forward consensus price/earnings ratio of 21 for 2024. That looks slightly undervalued for software services and its performance deserves recognition. Buy.
Last IC View: Hold, 129p, 7 Jul 2022
BALTIC CLASSIFIEDS (BCG) | ||||
ORD PRICE: | 168p | MARKET VALUE: | £833mn | |
TOUCH: | 168-169p | 12-MONTH HIGH: | 180p | LOW:120p |
DIVIDEND YIELD: | 0.9% | PE RATIO: | 41 | |
NET ASSET VALUE: | 67ȼ * | NET DEBT: | 13% |
Year to 31 Mar | Turnover (€mn) | Pre-tax profit (€mn) | Earnings per share (ȼ) | Dividend per share (ȼ) |
2019 † | 29.1 | 15.0 | na | na |
2020 † | 34.3 | -2.50 | na | na |
2021 † | 42.3 | 1.78 | na | na |
2022 | 51.0 | 2.44 | 0.22 | 1.40 |
2023 | 61.0 | 26.3 | 4.68 | 1.70 |
% change | +20 | +978 | +2027 | +21 |
Ex-div: | 07 Sep | |||
Payment: | 13 Oct | |||
*Includes intangible assets of €387mn, or 78ȼ a share £1=€1.15. † Pre-IPO |