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Buy DCD Media at 36.5p Last week I covered the recruitment sector as one that I think could have significant upside if investors are willing to hold their stocks for the long term. Another such sector that is currently unloved by the market is media, where fears over advertisers cutting their budgets have worried investors that production companies will see fewer programme commissions should an economic downturn take hold. My top pick in the sector is DCD Media.(DCD) The independent production company makes over 600 television programmes a year for a raft of broadcasters worldwide. Some of its most popular recent productions include Daily Cooks, starring celebrity chef Antony Worrall Thompson, for ITV, reality show Bridezilla's for channel Five and HIV and Me starring Stephen Fry for the BBC. Within the DCD group there are 6 separate production companies which cover a range of genres including factual, entertainment, drama, music and arts. Complimenting the business model are also 2 distribution companies which has a large portfolio of drama, children's, rock/pop music, entertainment, and documentary programming. The catalogue also includes entertainment, film and arts documentaries as well as a large selection of classic feature films. The sector has been experiencing a period of consolidation for some time now and DCD has been very active on this front. Recently DCD had to release an announcement to the stock exchange confirming rumours that it was in talks with the Welsh independent Boomerang Plus. This would almost be a merger of equals and I can see some great benefits for the group as a whole if any deal goes through. While DCD would be exposed to an economic slowdown in some respects, it does have an incredibly wide range of both customers and programmes to offset this risk. The company has well over 200 broadcast clients around the world and is not dependent on any one for a major proportion of revenues. No single client accounted for more than 10% of turnover in the 2007 financial year. If any particular genre falls out of fashion the company has a broad range of others to fall back on. DCD has grown its revenues by over 20 times in the past four years and I fully expect that strong growth to continue in the current financial year to 30th June 2008. Boosted by three recent acquisitions revenues for the period should amount to £53.1 million, with profits before tax, amortisation and exceptional items of £4.7 million creating earnings per share adjusted in the same way of 6.9p per share. At 38p the shares trade on a lowly multiple of just 5.2 times. This seems to be more than pricing in the effects of an economic downturn and with DCD expected to continue growing rapidly over the coming years I recommend a BUY.Key Data EPIC: DCD Scarlett Moore pens a weekly share tip for users of Sharecrazy Supermarket. It costs just 3.99 pounds a month to access Scarlett's tips. The supermarket also offers an in depth sector report each quarter worth £15 (this quarter's report is 6 Oil stocks you must buy NOW!), the rumour mill (read the latest rumours and stories on stocks and shares every day), a 20% discount on top investment books and websites and discounts on top English wine plus much more. To access this premium product for the equivalent of less than a quid a week click HERE.
*The value of your investment and the income from it can go down as well as up and you may not get back a significant proportion of your investment. Past performance is not a guarantee of future performance. If you are in any doubt as to the suitability of an investment, you should seek independent financial advice. |
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