EVC - Entravision Communications (EVC) - The World Is Its Oyster
Plans to acquire MediaDonuts. The acquisition of MediaDonuts, which is expected to close July 1st, will establish the company as a Digital Marketing company in Southeast Asia, moving beyond its traditional Hispanic oriented media businesses. We estimate that the acquisition in total will be roughly $32 million in cash, plus earnouts, with a series of payments beginning at $15 million on July 1st. The acquisition is viewed favorably. Favorable valuation. We estimate that MediaDonuts generated roughly $50 million in trailing 12 month revenue and $4 million in trailing adjusted EBITDA. As such, the company is estimated to pay roughly 8 times trailing cash flow for a business we believe is growing revenues and cash flow strongly in the double-digits. With the acquisition, the company will move solidly to become a digital media company, representing roughly 75% of its 2022 total company revenues. Similar to Cisneros. MediaDonuts' business is similar to Cisneros Interactive's advertising rep model, whereby companies can advertise on social media platforms, with advertising credit, with MediaDonut keeping a 10% to 12% commission. Unlike Cisneros, MediaDonut is weighted to TikTok, Spodify, and Twitter, versus Facebook for Cisneros. While there are sizable growth opportunities with the existing social media platforms, there is a possibility that the company could attract Facebook to its MediaDonut platform at some point. Revising estimates upward. We are raising our 2021 and 2022 revenue and cash flow estimates to reflect the prospective acquisition. Our revenue estimate for full year 2021 is raised $25 million to $687.5 million and our cash flow (adj. EBITDA) estimate is raised $2 million to $71.3 million. We are revising our 2022 revenue estimate from $735.9 million to $805.9 million and our cash flow estimate from $71.3 million to $77.1 million. Raising price target to $8.50. Based on our upwardly revised 2022 adj. EBITDA estimate, we are raising our price target from $7.75 to $8.50. Our price target maintains a target multiple of 9.2 times EV to our 2022 adj. EBITDA estimate. We believe that the company's multiple should expand to reflect its fast growing, digital businesses, which will represent nearly 75% of total company revenues in 2022. Read More >>