Swift Networks Group Ltd (ASX:SW1) has made a good strategic move in its December acquisition of Medical Media, according to a report from Hartleys.
The report also notes that Swift is an attractive takeover target for a larger company focusing on similar sectors and clients and that Swift has substantial potential to grow itself through further acquisitions.
Hartleys’ new valuation of Swift at 52 cents per share includes the Medical Media acquisition and retains a speculative buy recommendation.
READ: Swift Networks to acquire Medical Media screen advertising business
The following is an extract from the report:
Monetising platform through advertising
Medical Media sells advertising in GP medical centres and has captured 25% of the target market of GP practises with two GPs or more.
Medical Media’s business, team, and technology fits well with Swift’s move into monetising its platform/footprint through advertising.
The company has indicated that the initial payment and issuance of future performance shares imply a multiple not more than six times earnings.
Swift’s share price continues to be weak despite no negative news.
[At the company’s AGM] the board reiterated that the company continues to perform as expected and they are not aware of any operational issues that would explain the recent share price weakness.
They continue to sign contracts across a number of verticals (resources, aged care, hospitality and defence and marine), remain happy with the performance of reseller agreements, are excited about the move into advertising, continue to launch innovative product and service offerings for existing customers and to target new markets.
Retain buy recommendation
We view the Medical Media acquisition as a good strategic move given Swift’s growing focus on pursuing the monetisation of its media/advertising potential.
Based on our new forecasts including the Medical Media business we continue to view fair value at 52 cents per share.
We retain our speculative buy recommendation with strong reported results in financial year 2019, upside from the Medical Media acquisition, the continued delivery of rooms from the reseller agreements and the launch of advertising the likely key news flow in the coming year.