I’m sure that I am not the only one to endure that moment of frustration when a stock you have had your eye on, suddenly releases positive news resulting in a share price spike.
Such has been the case for me recently with DigitalBox (DBOX) which recently announced a very positive pre-close trading update to the market which as a result saw the shares move sharply northwards.
As for its operations, the company is a digital media business that is at present focused on three specific publication arms, those being Entertainment Daily, The Daily Mash and The Tab.
Looking at the titles, it perhaps isn’t too difficult to conclude that there is a strong focus on, or targeting of, a younger demographic with a specific leaning to the likes of celebrity news and showbiz.
Whilst that perhaps doesn’t overly appeal to me, it certainly does to a wide and increasing audience, which in turn brings in participation and mobile advertising generated revenue for DBOX.
The company has already been making progress over the last year or so and had previously caught my eye, but the most recent news, along with a bullish broker note from Panmure Gordon suggests that DBOX is now on the cusp of really delivering both in the near term and in coming years.
Regular visitors here will no doubt be aware that I spotted the highly successful and now major digital company Future at its lowest point and although doing well on my return there, exited far too early.
Although I am not going to suggest DBOX is going to be another Future in the making, there are nevertheless some similarities and given the commitment for further bolt-on buys, the shares could be in for a positive and sustained run.
Since the spike, the shares have eased a little and I decided to pick some up, somewhat biting the bullet on my previously intended entry point.
That said, with positive news out in the market the shares do look very attractive at the current 11.25p which gives the business a market cap of just £13m.
Looking at the expectations for the full year 2021 which will be announced at the end of March the broker is forecasting full year revenue of £3.6m with EBITDA of £1m and a pre-tax profit of £952k giving EPS of 0.7p.
Although revenue is understandably small, putting the company firmly in the micro cap bracket, the expectations are for accelerating growth and that is without further additions which could positively skew the numbers upwards.
With an expected £2m net cash balance forecast with the forthcoming results, Panmure Gordon has pencilled in an increase to £2.8m next year with revenues expected to move to £4m and a £1.160m pre-tax profit and earnings per share moving to 0.8p.
That sees the stock trading on a forward PER of 14 which given the progress being made and the increasing cash position doesn’t look expensive for a growing business with an ambitious management team.
Indeed, the board looks to be a solid one that was last year further strengthened with the appointment of Marcus Rich as Chairman, where having been at TI Media he oversaw specific titles being sold to Future.
Rich was also previously Commercial and Managing Director of The Mail On Sunday, so brings with him a wealth of experience.
Out of its three offerings, Entertainment Daily https://www.entertainmentdaily.co.uk/ is the lead and revenue here should come out at £2.4m against a previously expected £2.1m demonstrating good progress through last year.
TV and celebrity news continues to gain traction and with ever more streaming and the like, the appetite appears to be increasing which would suggest plenty of interest and advertising growth ahead.
Daily Mash which is a satirical digital publication is smaller but should contribute around £290k whilst the much more recent addition to the group, the Tab is expected to deliver close to £900k.
The latter was actually born in Cambridge out of the University and through targeting and serving students, now covers some 80 Universities across the UK. Impressively, DBOX will have completely covered its purchase costs on this arm in the coming months which will have been achieved in less than a year.
Further deals look nailed on and with cash on hand to support that, it seems likely that investors here shouldn’t have to wait too long for another addition.
The CEO has said that they have been actively eyeing prospects and that ranges from other profitable digital publications to those that perhaps need some tweaking in order to maximise potential.
Whilst many will no doubt point out that mobile and digital traffic and advertising revenue has burgeoned as a result of the pandemic, industry watchers anticipate continued ongoing demand and an increasing of the trend moving forward.
On its own news front, DBOX had previously delivered and indicated further positive progress back in September prior to the recent significant upgrade, so that suggests the forthcoming results are going to make for pleasant reading and should be accompanied by an update on the start to the current year.
The board here has clear ambitions to grow the business and beef its shareholder register with Institutional names which would accompany Downing Strategic Micro Cap which currently has 21% of the company.
At present DBOX is too small to attract many of the well known names, but that could change if the news flow continues in a positive vein and the numbers increase as anticipated.
A raise for further firepower to accelerate and execute on its strategy could also perhaps be on the cards further ahead but I suspect would be undertaken at a higher level than at present if that route was decided upon.
All in all, this looks an interesting play to me at the smaller end of the market that looks well placed to go on and further deliver.
I’ll cover this one again with a more in-depth write up on results day and hopefully arrange a call with management to support that.
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