TD's Flash Notes Buybacks Continue
Event
Buyback activity for the month of April is now available, so we can see that Corus
repurchased 500,000 shares for ~$2.3 million.
Impact: SLIGHTLY POSITIVE
As shown in the table below, Corus has been steadily buying back shares since
the latest NCIB program was initiated in January. We believe this demonstrates
confidence in the FCF outlook for the company by management/board, plus it likely
signals that they believe the current valuation is too low (on our 2023 estimates, the
stock is trading below 4x EBITDA, with a FCF yield now back above 30%).
We remain confident that TV advertising revenue growth will bounce back to being
positive on a Y/Y basis in fiscal Q3/22 (we estimate +2% Y/Y for the quarter ending
May 31), versus the Omicron-induced slight dip (-0.6% Y/Y) in Q2/22. Some players
in the digital advertising space have recently missed revenue growth expectations,
but we believe Corus can buck that trend for a few reasons:
1. Digital and programmatic advertising is primarily focused on the conversion
end of the marketing funnel, as opposed to earlier stage investments by brands
in awareness and engagement. When supply chain disruptions are limiting the
availability of product to sell (in many sectors, but particularly in automotive),
then media buyers do not have much incentive to spend on ads that are trying to
encourage consumers to purchase right away. However, most of these brands
are still motivated to invest in awareness advertising aimed at stimulating future
demand, which is the primary function of TV ads.
2. While demand for brand awareness national advertising could be below normal
levels in some categories (including automotive), we suspect that this is being
at least partially offset by a recovery in the national ad categories that had
almost gone to zero during the pandemic (notably travel and cinemas).
3. Coming off of pandemic lock downs, there is likely still strong Y/Y growth in
local advertising categories (including restaurants and local retailers), which
Corus participates in via both radio and local Global TV stations.