Jacques Gout-Lombard of Amiral Gestion presented his in-depth investment thesis on Clear Media (Hong Kong: 100) at Asian Investing Summit 2019.

Thesis summary:

Clear Media is the leading bus shelter advertiser in China, with more than 70% market share in top tiers cities, trading at a low double digit P/E, with an attractive balance sheet and significant upside catalysts from potential special dividends and takeover. The company operates over 54,000 panels in 24 cities across China, a unique asset in the country. As a result, Clear Media managed to grow revenues and EBITDA most years since 2000.

The company has an attractive balance sheet with a net cash position of USD 70 million; this is compared to the high leverage of most its peers (avg. 4.8x Net Debt/EBITDA). Therefore, it can continue its long term track-record of distributing meaningful dividends to shareholders. The company experienced some issues (now resolved) last year that partly explain the low valuation. The valuation is cheap compared to listed peers, trading at an average of 11.8x EV/EBITDA and 19.7x P/E compared to 3.8x and 13.8x for Clear Media, respectively.

iHeartMedia ( ultimate parent company) will emerge from bankruptcy in 2Q19 with shares of Clear Channel Outdoor (direct parent) distributed to debt holders who might want to monetize their investment by selling the assets. In this likely case, the transaction multiple in the sector imply a valuation for Clear Media at 2-3x current market cap providing an interesting upside catalyst.

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About the instructor:

Jacques Gout-Lombard has a Master II diploma in Financial Engineering from IAE Gustave Eiffel (Paris). After completing his studies, he joined Amiral Gestion in 2014.