The disposal of the exhibitions business has prompted Citigroup to downgrade its forecasts for Ascential PLC (LON:ASCL), the company formerly known as EMAP.
The group completed the disposal of Ascential Exhibitions to ITE Group last week for a total cash consideration of £300mln.
The US finance house said its forecasts for the slimmed down market research group had been revised down by 18-23%.
READ: Ascential reports dip in first-half earnings amid restructuring to focus on digital
Citi sees some scope for the company to offset some of the earnings dilution arising from the disposal of the exhibitions business through ploughing the sale proceeds back into the business and has stuck with its 475p price target, based on its reckoning of the sum value of the parts of the business.
With the shares trading at 431p – down 2.4p today – Citi reckons the share price is up with events and has downgraded the stock to ‘hold’.
“One of the most attractive characteristics of Ascential in the recent past has been the systematic way in which the group has used active portfolio restructuring to enhance growth. Because of its repeated success in selling off legacy assets at a high multiple and redeploying capital into faster-growing areas, we have historically had a high level of comfort in the ‘chronology’ of news flow. With almost £300mln of proceeds to redeploy, this optionality is still there but the issues at MediaLink undermine confidence in the visibility on further revenue acceleration. This, coupled with all-time high absolute and relative valuation (24.9x 2019E P/E), leaves risk/reward more balanced,” Citi said.
MediaLink provides advisory and business services to brands, media platforms, technology companies and agencies that are seeking to drive growth through better marketing. In its results statement on Monday, Ascential said a deliberate shift in product mix towards brands and reduced revenues from professional digital publishers and adverting-technology companies had resulted in MediaLink’s half-year revenue being down 6% year-on-year.