RNTS Media — Taking its divisional name, Fyber

RNTS Media — Taking its divisional name, Fyber

Reflecting the closer integration of its assets, RNTS will rename to Fyber. Revenue growth of 17% in Q1 falls short of full-year targets but is expected to accelerate as the year progresses and management has reiterated its full year targets of revenues over €280m and EBITDA over €3m. Putting in place additional financing would lift a significant overhang on the shares.

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RNTS Media

Taking its divisional name, Fyber

Q1 update

Software & comp services

2 June 2017

Price

€1.75

Market cap

€201m

Net debt (€m) at 30 September 2016

111

Shares in issue

114.7

Free float

61%

Code

RNM

Primary exchange

FRA

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(12.4)

(0.2)

(12.1)

Rel (local)

(13.6)

(6.3)

(28.5)

52-week high/low

€3.4

€1.5

Business description

RNTS Media (renaming to Fyber) has two complementary mobile ad tech platforms at its core: Fyber and Inneractive. Their supply-side platforms help app developers and publishers overcome the challenges of a fragmented ecosystem by consolidating a wide range of advertising demand onto one platform. RNTS is one of the world’s largest independent groups in this space.

Next events

FY16 results

26 July 2017

H117 results

20 September 2017

AGM

28 September 2017

Q317 results

22 November 2017

Analysts

Bridie Barrett

+44 (0)20 3077 5700

Dan Ridsdale

+44 (0)20 3077 5729

RNTS Media is a research client of Edison Investment Research Limited

Reflecting the closer integration of its assets, RNTS will rename to Fyber. Revenue growth of 17% in Q1 falls short of full-year targets but is expected to accelerate as the year progresses and management has reiterated its full year targets of revenues over €280m and EBITDA over €3m. Putting in place additional financing would lift a significant overhang on the shares.

Year end

Revenue
(€m)

EBITDA
cont (€m)

EBIT
cont (€m)

PBT
cont** (€m)

PBT
reported (€m)

EV/sales
(x)

12/14

64.0

0.7

(1.5)

(2.0)

(10.8)

4.7

12/15

81.1

(13.7)

(15.2)

(18.6)

(40.3)

3.7

12/16e

170.0/218.1*

(10.9)/(5.8)*

(14.4)

(24.4)

(33.6)

1.5/1.8*

12/17e

285.0

3.9

(0.5)

(4.2)

(11.2)

1.2

Note: *Pro forma assuming Heyzap and Inneractive acquired as of 1 Jan 2016. **PBT is normalised, excluding amortisation of acquired intangibles, discontinued operations, exceptional items and share-based payments.

Decent Q1 but must accelerate to hit FY17 targets

Pro forma Q117 revenues increased by 17% to €49.7m. While this falls short of the c 30% growth rate targeted by management for the year, Q1 is typically a seasonally small quarter and management believes it is on course to deliver its full year targets. Gross margins at 29.4% were down y-o-y (Q116: 31.0%), due to the strong growth of lower-margin Fyber RTB and margin pressure in Inneractive which is sacrificing some margin in the short term as it expands its position in China. Despite this, gross margins are tracking ahead of our forecasts due to continued expansion at Fyber RTB which is now close to the group average. RNTS moved back into adjusted EBITDA loss of €5m in Q1, a function of seasonality with operational expenses only slightly up on Q416, reflecting the expansion into China.

Becoming Fyber

RNTS continues to focus on the technical integration of the Fyber and Inneractive platforms which should help it to fully leverage its increasing scale; this could be accelerated if additional funding is put in place to enable the advanced payment of the Inneractive earnouts. With the integrations proceeding, the holding company structure is no longer appropriate and the group plans to rename to Fyber. It will also convert the form of the shares from bearer to registered, a further step in improving transparency. Near term, RNTS needs to put in place additional financing to satisfy earnout obligations in relation to Heyzap and Inneractive as well as ongoing working capital requirements; within Fyber it has added a €7.5m working capital facility and negotiations on other facilities are progressing.

Valuation: Adding facilities key to supporting rating

Through acquisition and strong organic growth, RNTS has grown into its valuation over the last two years. Management is now working towards widening its funding options to ensure it can continue to execute its growth strategy which is focused on mobile, programmatic and video advertising. The convertible restructuring in April was a major step forward and adding facilities should lift a significant overhang on the shares which are no longer trading at a premium to peers on an EV/gross sales basis of 1.2x (Tradedesk 1.4x, Criteo 1.5x, Taptica 1.4x, RhythmOne 0.9x).

Exhibit 1: Financial summary

 

 

€'000s

2014

2015

2016e

2017e

December

 

 

Pro-forma for Fyber acquisition

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

64,024

81,076

170,000

285,000

Cost of Sales

(39,641)

(56,739)

(121,824)

(208,653)

Gross Profit

24,383

24,337

48,176

76,348

EBITDA - continuing

 

 

685

(13,740)

(10,875)

3,885

Operating Profit (before amort. and except.)

(1,546)

(15,196)

(14,375)

(456)

Intangible Amortisation

(2,292)

(2,469)

(3,315)

(2,700)

Exceptionals

(3,439)

(2,915)

(3,373)

(1,837)

Other

(3,021)

(16,305)

(2,500)

(2,500)

Operating Profit

(10,298)

(36,885)

(23,563)

(7,493)

Net Interest

(495)

(3,397)

(9,998)

(3,750)

Profit Before Tax (norm)

 

 

(2,041)

(18,593)

(24,373)

(4,206)

Profit Before Tax (FRS 3)

 

 

(10,793)

(40,282)

(33,561)

(11,243)

Tax

215

2,348

0

0

Profit After Tax (norm)

(1,484)

(16,245)

(24,373)

(4,206)

Profit After Tax (FRS 3)

(20,173)

(37,934)

(33,561)

(11,243)

Average Number of Shares Outstanding (m)

114.5

114.5

114.5

114.6

EPS - normalised (c)

 

 

(1.3)

(14.2)

(21.3)

(3.7)

EPS - normalised fully diluted (c)

 

(1.2)

(13.6)

(18.6)

(3.1)

EPS - (IFRS) (c)

 

 

(17.6)

(33.1)

(29.3)

(9.8)

Dividend per share (c)

0.0

0.0

0.0

0.0

Gross Margin (%)

38.1

30.0

28.3

26.8

EBITDA Margin (%)

1.1

-16.9

-6.4

1.4

Operating Margin (before GW and except.) (%)

-2.4

-18.7

-8.5

-0.2

BALANCE SHEET

Fixed Assets

 

 

173,152

160,814

215,766

228,411

Intangible Assets

159,729

157,929

211,881

224,867

Tangible Assets

674

2,195

3,195

2,854

Investments

12,749

690

690

690

Current Assets

 

 

51,423

119,737

111,004

117,310

Stocks

556

408

408

408

Debtors

17,246

25,214

54,400

91,200

Cash

21,078

79,123

41,204

10,710

Other

12,543

14,992

14,992

14,992

Current Liabilities

 

 

(33,518)

(47,067)

(73,974)

(99,830)

Creditors

(24,606)

(47,067)

(73,974)

(99,830)

Short term borrowings

(8,912)

0

0

0

Long Term Liabilities

 

 

(19,042)

(89,253)

(139,253)

(139,253)

Long term borrowings

(2,869)

(88,572)

(138,572)

(138,572)

Other long term liabilities

(16,173)

(681)

(681)

(681)

Net Assets

 

 

172,015

144,231

113,543

106,637

CASH FLOW

Operating Cash Flow

 

 

(13,723)

(10,884)

(13,154)

(7,058)

Net Interest

N/A

(1,041)

(9,998)

(3,750)

Tax

N/A

(690)

0

0

Capex

N/A

(6,321)

(4,600)

(4,686)

Acquisitions/disposals

N/A

(10,455)

(60,167)

(15,000)

Financing

N/A

0

0

0

Dividends

N/A

0

0

0

Net Cash Flow

N/A

(29,391)

(87,919)

(30,495)

Opening net debt/(cash)

 

2,553

(9,297)

9,449

97,368

HP finance leases initiated

0

0

0

0

Other

(11,803)

10,645

0

0

Closing net debt/(cash)

 

 

(9,297)

9,449

97,368

127,862

Source: RNTS Media accounts (historical numbers), Edison Investment Research (forecasts)

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by RNTS Media and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by RNTS Media and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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