tipped6 Jan 2017 10:32
by Dowgate Capital
Be Heard is a digital marketing Group that focuses on four key pillars (Media, Planning & Buying; Design, Build and User Experience; Creative and Content; Strategy, Innovation and Analytics). The company is profitable, cash generative, debt free and looking to scale rapidly. The Group’s recent acquisition of Kameleon looks to be substantially earnings enhancing which we believe the market has temporarily overlooked.
The company places itself at the crossroad of e-commerce, technology and marketing by building an agile interconnected Group of businesses. The Group’s strategy is to build a digital marketing Group in a favourable market as it seeks to exploit the gap between Small Digital Specialists and Large Holding Groups.
Key attractions:
Be Heard was founded by Peter Scott, the Group’s Executive Chairman. Peter has been in advertising for over 40 years and has grown small businesses into large, international enterprises (co-founded London agency WCRS which became Aegis Group plc, where Peter was Chairman and CEO, before being sold to Japanese Group Dentsu for £3.2 billion in 2013, now operating in 145 countries. Peter was also Co-founder and CEO of the Engine Group, which was sold to Lake Capital for £100m in 2014).
On 7 December 2016, the Group acquired Kameleon, the award winning content-marketing agency. In 2016, it is expected to generate gross revenues of £3.89m, representing 60% annual growth, with adjusted EBITDA of £0.785m. We calculate this to be approximately 30% accretive bringing the P/E down to c.13x. The share price is broadly unchanged since the announcement of the deal.
The Group is experiencing good momentum in new business wins which should continue in to 2017. BHRD won business from impressive blue chip companies including BDO, Vodafone, Domestic and General, Cazumo, Investec, Lee Cooper, SSE, Comparethemarket, Zurich, Celebrity Cruises and Allergan.
The Group’s gap in the market should exploit the large market opportunity that digital marketing and e-commerce presents. Enders Analysis estimates that consumer e-commerce could top $3,500 billion by 2020 ($1,500 billion in 2014). The demand for external expertise in the hard to successfully implement digital side of marketing bodes well for Be Heard. Enders Analysis forecasts Internet Advertising to overtake all other forms by 2019 and spending on digital marketing to exceed $250 billion by 2020.
Consensus numbers (source Proquote, pre-Kameleon deal):
2017 – Revenue: £13.2m; EBITDA: £1.7m; PBT: £1.5m; EPS: 0.20; P/E: 17.75; Net Cash: £3.4m