Is the Ooh!Media Share Price Signalling a Buy? (ASX:OML)
Ooh!Media Ltd [ASX:OML] is down 67% year-on-year. But if we look at the OML share price from April onwards, it is up nearly 50%.
So, is the share price on the up?
Before you rush out and place on order on OML, read this…
Ooh!Media went into a trading halt on 20 March. Then on 25 March it requested a further suspension.
OML then announced a pretty sizable capital raising.
With Macquarie Capital underwriting the deal, which was done at 53 cents a share, representing a 37% discount at the time.
At the time the offer raised approximately $167 million.
The new funds were to be used to strengthen OML’s balance sheet, as it battled a coronavirus-driven drop in earnings.
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So, how has OML performed since then and what are their prospects?
Who is Ooh!Media Ltd?
Ooh!Media is an advertising company.
They call themselves an ‘out of home and online media company’.
The company works with outdoor billboards in both digital and print formats.
Think about those billboards you see as you drive down the freeway…or even those located around your local shopping mall.
There’s a high chance Ooh!Media operates them.
It’s fair to say that the future of OML could be a bit shaky.
That had already come to light when founder Brendan Cook withdrew the company’s 2020 earnings guidance on 16 March.
But OML’s half-year results came in on 24 August, things started to look up.
What’s next for the OML share price?
Take a look at the share price action below:
It’s been a shaky recovery for OML, but it looks now to have comfortably retaken the $1 per share level.
Investors seemed pleased with their half-year results.
That is despite massive losses of revenue.
Half-year ending 30 June 2020 saw revenue decline by 33% to $205 million.
Earnings before interest, tax, depreciation, and amortisation came in at $10.8 million, compared to $56 million in the prior corresponding period.
Which meant a net loss after tax of $27.5 million.
So, why the boost in share price with such bleak results?
Well, despite the loss in earnings, OML managed to create a solid financial foundation on which to rebuild.
The capital raising in April strengthened their balance sheet.
And along with a strong focus on cash management, OML has got their debt obligations under control.
Operational expenditure declined by $12 million and capital expenditure was reduced by $19 million compared to the prior half-year.
But OML does have a long way to go before it fully recovers, and with the current economic conditions still weighing down on the business it is difficult to speculate how quickly this will happen.
In my books, the share price could hover around the $1-mark until there are more positive signs in the macroeconomic outlook.
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For The Daily Reckoning Australia