Analysts expecting Agora price to fall at high end of range
"I think the shares will be sold at the maximum possible price," said Robert Sobieraj, an analyst at COK Banku Handlowego. "We expect the company will have even higher profit this year and growth at the same pace in the next two years."
Subscriptions for the new share offering, representing a 22% capital increase, will begin later this week for both retail investors and institutions in Poland and abroad who can purchase shares or Global Depository Receipts (GDRs).
Agora is expected to post a net loss for 1998 on a consolidated basis, making price-to-earnings comparisons difficult. However, at the high end of the range, on a price-to-EBITDA (earnings before interest, taxes, depreciation and amortization) ratio, Agora would trade at 9.2 times 1998 results. This, the company said, compares to an average price-to-EBITDA ratio of 6.88 for Western newspaper groups.
"I think there will be significant demand for the stock," said Georg Hotar, an analyst with ICE Securities in London. "Even though people are saying it's pretty expensive, it is a strong brand name and has a very effective modular system of operations."
Agora's offering is fairly straightforward with the company selling up to 8.43 million new shares to investors. This includes an over-allotment option of 1.35 million additional shares. It will also place 1.12 million new shares with existing shareholder Cox Poland Investments so its stake is diluted to only 12.5%. Following the offering, Agora will have 56.75 million shares outstanding.
At the same time, the reason behind the offer is also straightforward: to provide cash so that Agora can continue to bulk up its dominance in the print media market through Gazeta Wyborcza and to increase its existing share of the radio market. Although print readership is declining globally, this phenomenon is not expected to take hold in Poland for some time. This means Agora can continue to look to Wyborcza, its flagship publication, as the core of its money-generating business, analysts said.
Currently, the company's print base is solid with advertising revenue at Wyborcza accounting for 7% of total national advertising revenue, according to its prospectus.
"For the next few years, Agora will concentrate on print, since the revenue from newspaper ads are the highest," Sobieraj said. "If other media will turn out to be more profitable, such as the internet, the company will be able to go in that direction as well."
For the moment, though, Agora has not indicated any plans to go into new media. The company had taken a 22.5% stake in Telewizyjna Korporacja Partycypacyjna (TKP), which operates Canal+ Polska and new digital platform Cyfra+. However, its shareholding has been diluted to 20% and this could decline further.
Although Agora is expected to post a loss for 1998, this is largely due to the repayment of funds to its minority shareholder Cox Poland Investments and the write-down of its interest in TKP. Despite the losses due to financial considerations, the EBITDA margin remained firm at about 31%, only off slightly from 1997's 33%.
Analysts expect that in 1999 the company will return to profitability, although the company has not made any forecasts for this year. In 1997, Agora posted net profit of zl. 62.8 million ($23.6 million), a 55% increase over the previous year. During 1997, the company had a return on average assets of 25% and a return on average equity of 41.9%.
Over the first nine months of 1998 Agora generated unaudited consolidated revenue of zl. 385.64 million ($104.2 million), with zl. 295.23 million ($79.8 million) coming from advertising in Wyborcza. During that period, average daily sales amounted to 433,000 with net revenue per page of the paper amounting to zl. 124. It sells approximately 58.4% of its pages. The paper is sold in 55,000 retail outlets and derives 90% of its circulation revenue from actual copy sales.
According to estimates by AGB Polska, McCann Erickson and Agora, total ad revenue in Poland at the end of September last year amounted to zl. 4.16 billion ($1.1 billion) with the press being just slightly below the television, with zl. 1.3 billion ($0.4 billion) and zl. 1.9 billion ($0.5 billion) reported by the two media respectively.
Gazeta Wyborcza accounts for 59% of the nation's press revenue with the exclusion of classified ads, the prospectus said.
"Our priority will be the further development of the existing paper, as there is plenty of space for growth here," Wanda Rapaczynski, president of Agora's managing board said at a press conference debuting the company's prospectus. "But we also plan expansion in other media."
Agora plans to invest almost zl. 180 million ($48.6 million) to develop its existing printing infrastructure plus zl. 54.4 million ($14.6 million) toward its new businesses, including existing and new radio stations. Over the last year the company launched four new radio stations and plans to launch an additional five this year.
Currently Agora holds stakes in 12 radio businesses, including 11 companies already operating or in the process of establishing a radio station as well as a radio station management company that collects advertising revenue from three Poznan-based radio stations. According to the company, so far the only revenue-generating radio business is Warsaw-based Radio Pogoda.
The company's strategy of developing a network of locally formatted stations is seen as a result of its five-year-old affair with Cox Poland, an indirect subsidiary of U.S.-based Cox Enterprises. The company, together with affiliates, publishes 16 daily newspapers and operates 11 television stations, as well as more than 50 radio stations in the United States. Cox received $10 million last year from Agora in exchange for know-how. In return, it will not invest in enterprises that would compete with Agora, Sobieraj said.
"In general this cooperation should be perceived positively, despite that tribute. Agora gets knowledge of new technologies that are totally unknown in Poland, such as interactive TV," he said. "It may be some alternative for the company, in case the press market changes drastically. Already the circulation of newspapers is falling."
If the offering is at the high end, Cox's stake in Agora would be valued at about $63 million. It is not known how much it paid for a 14% stake in the company in 1993.
Subscriptions for the new share offering, representing a 22% capital increase, will begin later this week for both retail investors and institutions in Poland and abroad who can purchase shares or Global Depository Receipts (GDRs).
Agora is expected to post a net loss for 1998 on a consolidated basis, making price-to-earnings comparisons difficult. However, at the high end of the range, on a price-to-EBITDA (earnings before interest, taxes, depreciation and amortization) ratio, Agora would trade at 9.2 times 1998 results. This, the company said, compares to an average price-to-EBITDA ratio of 6.88 for Western newspaper groups.
"I think there will be significant demand for the stock," said Georg Hotar, an analyst with ICE Securities in London. "Even though people are saying it's pretty expensive, it is a strong brand name and has a very effective modular system of operations."
Agora's offering is fairly straightforward with the company selling up to 8.43 million new shares to investors. This includes an over-allotment option of 1.35 million additional shares. It will also place 1.12 million new shares with existing shareholder Cox Poland Investments so its stake is diluted to only 12.5%. Following the offering, Agora will have 56.75 million shares outstanding.
At the same time, the reason behind the offer is also straightforward: to provide cash so that Agora can continue to bulk up its dominance in the print media market through Gazeta Wyborcza and to increase its existing share of the radio market. Although print readership is declining globally, this phenomenon is not expected to take hold in Poland for some time. This means Agora can continue to look to Wyborcza, its flagship publication, as the core of its money-generating business, analysts said.
Currently, the company's print base is solid with advertising revenue at Wyborcza accounting for 7% of total national advertising revenue, according to its prospectus.
"For the next few years, Agora will concentrate on print, since the revenue from newspaper ads are the highest," Sobieraj said. "If other media will turn out to be more profitable, such as the internet, the company will be able to go in that direction as well."
For the moment, though, Agora has not indicated any plans to go into new media. The company had taken a 22.5% stake in Telewizyjna Korporacja Partycypacyjna (TKP), which operates Canal+ Polska and new digital platform Cyfra+. However, its shareholding has been diluted to 20% and this could decline further.
Although Agora is expected to post a loss for 1998, this is largely due to the repayment of funds to its minority shareholder Cox Poland Investments and the write-down of its interest in TKP. Despite the losses due to financial considerations, the EBITDA margin remained firm at about 31%, only off slightly from 1997's 33%.
Analysts expect that in 1999 the company will return to profitability, although the company has not made any forecasts for this year. In 1997, Agora posted net profit of zl. 62.8 million ($23.6 million), a 55% increase over the previous year. During 1997, the company had a return on average assets of 25% and a return on average equity of 41.9%.
Over the first nine months of 1998 Agora generated unaudited consolidated revenue of zl. 385.64 million ($104.2 million), with zl. 295.23 million ($79.8 million) coming from advertising in Wyborcza. During that period, average daily sales amounted to 433,000 with net revenue per page of the paper amounting to zl. 124. It sells approximately 58.4% of its pages. The paper is sold in 55,000 retail outlets and derives 90% of its circulation revenue from actual copy sales.
According to estimates by AGB Polska, McCann Erickson and Agora, total ad revenue in Poland at the end of September last year amounted to zl. 4.16 billion ($1.1 billion) with the press being just slightly below the television, with zl. 1.3 billion ($0.4 billion) and zl. 1.9 billion ($0.5 billion) reported by the two media respectively.
Gazeta Wyborcza accounts for 59% of the nation's press revenue with the exclusion of classified ads, the prospectus said.
"Our priority will be the further development of the existing paper, as there is plenty of space for growth here," Wanda Rapaczynski, president of Agora's managing board said at a press conference debuting the company's prospectus. "But we also plan expansion in other media."
Agora plans to invest almost zl. 180 million ($48.6 million) to develop its existing printing infrastructure plus zl. 54.4 million ($14.6 million) toward its new businesses, including existing and new radio stations. Over the last year the company launched four new radio stations and plans to launch an additional five this year.
Currently Agora holds stakes in 12 radio businesses, including 11 companies already operating or in the process of establishing a radio station as well as a radio station management company that collects advertising revenue from three Poznan-based radio stations. According to the company, so far the only revenue-generating radio business is Warsaw-based Radio Pogoda.
The company's strategy of developing a network of locally formatted stations is seen as a result of its five-year-old affair with Cox Poland, an indirect subsidiary of U.S.-based Cox Enterprises. The company, together with affiliates, publishes 16 daily newspapers and operates 11 television stations, as well as more than 50 radio stations in the United States. Cox received $10 million last year from Agora in exchange for know-how. In return, it will not invest in enterprises that would compete with Agora, Sobieraj said.
"In general this cooperation should be perceived positively, despite that tribute. Agora gets knowledge of new technologies that are totally unknown in Poland, such as interactive TV," he said. "It may be some alternative for the company, in case the press market changes drastically. Already the circulation of newspapers is falling."
If the offering is at the high end, Cox's stake in Agora would be valued at about $63 million. It is not known how much it paid for a 14% stake in the company in 1993.
